The Price of Outdated Processes: Calculating the Cost of Not Having a PLM Solution

When considering investing in a PLM (Product Lifecycle Management) solution, it's crucial to assess the current processes in place and the potential costs of not having a PLM system.

By choosing the right PLM solution, businesses can experience significant improvements in time to market, cost reduction, productivity acceleration, and overall operational savings of up to 30%.

To accurately determine the costs associated with outdated procedures, it's essential to identify the processes that generate expenses when a company does not utilize a PLM system.

Cost-Generating Processes

1. Managing product data through numerous Excel sheets becomes challenging, hindering team alignment with the latest information.
   
   
2. Redundant information processing across departments is time-consuming, resulting in delays and extended time to market.
   
   
3. Searching for information in employees' local folders wastes time and slows down workflows due to restricted access, hindering efficient knowledge sharing.
   
   
4. Data errors are prevalent and can lead to significant business problems, such as ordering the wrong materials or failing to meet minimum order quantities.
   
   
5. Communicating with suppliers via email creates workflow bottlenecks, impeding efficient collaboration.
   
   
6. Excessive administrative tasks limit team productivity, leaving less time for core responsibilities and stifling creativity.
   
   
7. Marketplaces and e-commerce platforms require product and marketing data in specific formats, causing time-consuming efforts to deliver and format the data according to their requirements.
   
   
8. Inaccurate communication of tech packs leads to supplier miscommunication, costly errors, and additional work.
   
   

Sometimes, the need for a PLM may not be apparent due to a lack of data on the actual cost of not having a PLM solution. To address this, let's quantify the costs associated with current processes.

Calculating the Costs of Not Having a PLM

To estimate the costs accurately and evaluate the benefits of investing in a PLM solution, follow these steps:

1. Determine the number of hours spent annually per employee on the following activities

    

• Searching through emails for specific information
• Tracking the latest updated Excel sheets
• Rectifying information errors
• Preparing reports
• Communicating with suppliers via email
• Dealing with paperwork and organizing information
• Sharing redundant information across departments
• Fixing mistakes caused by inaccurate communication of tech packs
• •  

Engage design, sourcing, technicians, and back-office teams to quantify these time expenditures. A rough estimate will suffice.

The sum of hours spent on these tasks represents the annual number of wasted hours.

Example

Two technicians estimate wasting 6 hours per week, while three designers report wasting around 6-8 hours each week. A rough estimate would be 7 hours per week, multiplied by 40 weeks a year, resulting in 280 hours wasted per employee annually.

2. Calculate the value of one hour

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   • Divide the average employee's salary by the annual number of working hours to determine the hourly rate cost.
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Example

Assuming the average monthly salary is €4,500, and the monthly work hours are 160, the hourly rate cost would be €28.

3. Quantify the value of wasted hours

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   • Multiply the annual number of wasted hours by the hourly rate cost to determine the cost per employee.
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Example

280 wasted hours multiplied by €28 per hour equals €7,840 wasted per employee.

4. Calculate the total cost

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   • Multiply the cost per employee by the number of applicable employees to obtain the overall cost.
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Example

If five employees each waste hours worth €7,840, the total waste amounts to €39,200 per year, encompassing activities such as searching for information and ensuring up-to-date work processes.

Generate Operational Savings with a PLM

Implementing a PLM platform eliminates the cost-generating activities mentioned above, providing efficient tools to manage these aspects.

While there are numerous benefits of utilizing a PLM system, evaluating the cost-generating activities can help determine if investing in a PLM is a viable business case. Typically, companies achieve operational savings of up to 30% of their overall operational costs by implementing the right PLM solution.

Example

Based on the previous example with five employees, a PLM platform can potentially improve their efficiency by an annual value of €39,200. Implementing a PLM platform for five employees can cost as little as €10,000 per year, which is less than 25% of the value of the efficiency improvement.

Numbers provide valuable insights. Schedule a demo consultation with us, and together, we can assess your current processes and analyze whether investing in a PLM solution will yield a profitable business case for your company.