Measuring ROI of PLM Systems — The Ultimate KPI Checklist
Let’s begin with the good news: the global PLM market is expected to grow at a rate of 9.93% from now till 2021; and of the surveyed apparel companies, Gartner and Apparel Magazine found that 68% of businesses plan to invest in PLM technology further.
The bad news: Few know how to effectively measure PLM’s return on investment.
The benefits of PLM are difficult to evaluate because KPIs cannot be easily generated from data such as time usage, data reliability, quality of products, and other complex transformational changes that are hard to gauge in isolation.
That’s why we’ve created this checklist to be used by company executives and key stakeholders to not only calculate the ROI of fashion PLM software, but to have a comprehensive understanding of where your apparel company stands today, and to where it’s going in the future.
Creating a baseline
Composing a formal outline to assess product development at major milestones is important. Before determining ROI, it is helpful to know how the company has been operating thus far. The following are fundamental measurements to take, in order to set a baseline and cement the company’s case for fashion PLM:
- Time it currently takes to access data
- Sales figures and successful contracts
- Inventory waste
- Cost of lost user productivity
- Number of data entry errors, and their associated cost
Cost of PLM Investment
A PLM implementation should not be embarked upon without thorough preparation. PLM is a significant, lifelong investment, but it requires time and attention from a company and it’s future PLM users to implement. In order to accurately evaluate the ROI of fashion PLM, all aspects of PLM costs must be noted. This group of metrics is used to calculate the hard costs of purchasing a PLM software system, and make concrete the less tangible ones such as the impact on its users.
- PLM software price
- Upon purchase, PLM software and licenses delivered against arranged plan
- CPU and monitor spec. upgrades, if any
- Dedicated servers
- External hardware needed, if any
- Additional licenses to be included into PLM software
- Annual maintenance costs of the software
- Vendor training costs
- Cost of IT resources
- Number of users trained
- Cost of employees’ time away from daily work during training
- Implementation time duration until go-live
Quantitative KPIs (Investment)
The following are KPIs that appraise the quantifiable gains of a fashion and apparel PLM system. Using these KPIs, a company can better understand how PLM can accelerate new product creation, reduce time-to-market, and eliminate waste, and is the other factor in the ROI equation.
- Number of workflows implemented
- Quantity of legacy data migrated
- Amount of PLM software errors reported after go-live
- Time to find information
- Design time, including travel time and collaboration
- Number of design errors
- Design review process time
- Product development cost
- Response time to clients and partner companies
- Time-to-manufacturing and other relevant product development milestones
While the quantitative KPIs may seem more useful to an investor, they fail to account for every aspect of a fashion company’s business objectives. PLM holistically brings together research and development; manufacturing and assembly; the supply chain. There are a multitude of discernible advantages across the PLM sequence that are difficult to enumerate. Their impact, nevertheless, is felt throughout business operations. Rather than put a figure on PLM profits, executives and key stakeholders need to acknowledge how PLM has had a positive impact on both business processes and employees:
- Supported global collaboration and access to design information
- Supported global manufacturing as work is done with up to date information
- Achieved quality assurance which fosters the business’ reputation
- Met industry environmental, health and safety regulations
- Assured validity of data and reduced human error
- Maintained a traceable record system
- Improved enterprise communication and sped up response times to issues
- Reduced administrative tasks and automated tracking, data linking, and a unified terminology
- Reused data, making data more valuable as its reliability is increased
- Automated the transfer of Bill of Materials to ERP
- Cooperated with other PDM software in the company’s infrastructure, creating a seamless End2End system.
The above checklist is designed to serve as an inclusive list of KPIs for the fashion and apparel industry. Launching a PLM initiative leads to company-wide efficiencies and yields a markedly greater ROI than a company without PLM. PLM boosts productivity and lessens design modification time, decreases assembly errors, eliminates wasted resources and time, and upholds a collective competence that is greater than the sum of its parts.
Keep in mind, however, that no two companies will have the same objectives from a PLM system; determine yours. When investing in a PLM system, the software vendor should help set benchmarks that match your company goals. Executives and decision-makers will find that a PLM system keeps information and operations reliable, yet flexible — leading to better and faster management, ready to adapt to and adopt changes in the fashion market.