Don't lose track of the latest design updates

After several years in business, some metal fabricating shops are ready to take the next step in customer relations and become a supply chain partner instead of just a link in the chain.

At this stage, the shop is not just producing parts to prints. It is actively involved in product design discussion, offering up design-for-manufacturability suggestions that can help simplify the production process and reduce development costs.

If a shop finds itself adept at managing this type of responsibility and interactivity with large OEM customers, it could open the door to other such relationships. They have entered the supply chain big leagues.

Managing product designs and corresponding communications can be challenging even on one project. An engineering team juggling multiple projects may find the task daunting.

Cloud-based product life cycle management (PLM) software can help. It is an organization tool for a metal fabricator and its customers to keep product design revisions and engineering change orders straight. Being cloud-based means the fab shop doesn’t have to worry about hosting the software on its own servers; it can access it through an Internet connection.

The FABRICATOR interviewed Steve Chalgren, vice president of product management and chief strategy officer, and Kent Killmer, vice president of marketing, for Arena Solutions to learn more about cloud-based PLM software and why it might be attractive to metal fabricators.

The FABRICATOR: Why might product life cycle management software make sense for metal fabricators?

Chalgren: Fabricators might have a number of customers or even a few customers with a lot of different drawings and a lot of different changes as they go through the new product development process. Fabricators also might have suppliers themselves that they need to keep track of. They need a tool to keep all that stuff straight. That’s what PLM software does.

The best way to think about it is PLM manages the recipe, the ingredients, the instructions of how to put those cookies together, and where to buy the ingredients.

If they have a lot of interaction with their customers and a lot of change to the designs, this is where they can maybe end up running a wrong revision, not knowing it, and maybe it’s their fault and then they have to eat the cost.

FAB: What type of software foundation does a small to medium-size shop need to take advantage of PLM, even if it’s cloud based?

Chalgren: The type of ERP system doesn’t matter. At the end of the day, ERP or any shop management software is really tracking a transaction of material as it makes its way through the shop floor. PLM is different in the sense that it doesn’t manage any of the financial transactions in the business software. It helps fab shops keep track of what they’re building, not how many and when.

So if you ask the question, “How many should we build?” check with your ERP system. “When should we deliver them?” check with your ERP system. “How the heck do we make this thing?” Check your PLM system!

Killmer: If it’s futureware or presentware, it’s PLM. If it’s historical, looking backward at what occurred finanically, oftentimes it’s ERP. Although, you can audit through PLM.

Chalgren: It’s the “what are we building” question. That’s the easiest way to describe it. So if they’re having trouble keeping track of what they should build or how they should build it, that’s where PLM comes in. And that can stand alone in the shop.

Killmer: In fact, they may not have an ERP. They could have something as simple as QuickBooks. For instance, we have one module called Demand that helps in forecasting, because some midsized shops get put at a disadvantage with a large customer if they don’t have ERP. So this gives them better forward-looking visibility into that view and the ability to aggregate information.

FAB: How does cloud hosting change this paradigm?

Chalgren: When I think of the cloud and hosting, what comes to mind is just the simplicity of not having to deal with an IT team and the cost reduction of not having to buy the equipment as a fixed-asset investment. The company offering cloud-hosted software has a very low marginal cost to do business. It has a very efficient business model.

Killmer: It’s a rent-versus-buy scenario. They don’t have the big upfront software deployments. With a cloud-based deployment, you set it up in days instead of months, especially for a small to medium-size operation. They get on with running their business, and they don’t have to make it a big science project.

Chalgren: The other benefit of the cloud is that usually you can just start off small and expand. Small or medium fabricators might want to have only two to five licenses. Whether they buy just a few licenses or buy 5,000, it is the same process, same transaction, and same product. So sometimes there’s a big advantage where they’ll be like, “Oh, I’d like to buy something, but if I have to install it and buy a server and all that, I’d better have at least 20 people or 30 people that need to use this.” But if you want to buy cloud, you just go buy a license.

FAB: Does every person that participates on the customer side have to have a license?

Chalgren: Yes. Everyone needs a license, but there are different tiers of licenses that make sense based on how often they use the product. The reason you need a license is because the people are working with intellectual property. Because of that, fundamentally, they’ve got to have security around that data and the shop has to have an audit trail of who is accessing that data. A customer wouldn’t want their data in a system that wasn’t secure.

FAB: How is security assured?

Chalgren: We could talk about that for a long time. There are multiple layers invested in that. Our company has a dedicated security team, and all they do is work on this and make sure our product is hardened and not accessible inappropriately. There is a standard out there called SOC, which is also a third-party auditing company we use. We get audited every year to make sure we are following their policies and procedures. It’s analogous to ISO certification. That’s how you do security. You set up specialist teams, you have third-party auditors, and you have strong design processes in your products.

Killmer: We do this security all ourselves. As such, from a small or medium-sized business perspective, just by virtue of the numbers, they normally can’t go out and provide this type of security on their own. It just doesn’t make sense. They don’t have the dough.

Chalgren: When you think about it, if you bought something and put it in-house, and then you bought a firewall thing off-the-shelf, can your IT staff stay on top of it? We find that even in larger companies, IT staffs just don’t have the bandwidth to manage all the tech—the backup tech, the firewall tech—and keep their e-mail systems going and staff the help desk for their users. It’s just too much for one or two people to understand conceptually nowadays. That’s a big reason you would go to a cloud company.

Killmer: Another issue with security is the supply chain. In general, we make the ability to deal with suppliers and those suppliers’ suppliers easier, cheaper, and more secure.

FAB: In what small to medium-size fab shop scenarios would PLM work?

Chalgren: Does the company have a problem keeping their data in sync and under control? If they have that problem, this is a solution. If they’re putting all their customers’ drawings on a network drive and trying to keep them straight—such as revision A and revision B—and they’re making mistakes and producing a lot of scrap because they are making the wrong thing, they need help with operational efficiency. That would be the reason to invest in PLM.

The reason OEMs buy a PLM is they might have released an engineering change order manually, for example, and their supply chain didn’t pick it up. As a result, the OEM received a bunch of parts based on the older design of the product. The OEM can’t use them, and the mistake costs them thousands in scrap.

FAB: Do you see manufacturers becoming more comfortable with the idea of using cloud-based software?

Chalgren: Definitely. Besides the IT and security benefit, companies are recognizing the benefit on the accounting side as well.

The accounting side is really compelling. It’s the question of do you want to own your office or factory building or rent it? If you own the building, you have to treat it as an asset accounting-wise and depreciate it accounting-wise. If you lease the building, it’s an expense you can put against your product on a month-to-month basis. It also allows you to take it as an expense within the year you pay for it. From that perspective, one way to look at cloud is the same as the way you look at leasing a building. You want to focus on fabricating, not real estate.

Killmer: This type of cloud-based software also is very scalable. You can scale up or down, which is an important thing.

We all read the same periodicals and Internet, and there are some manufacturers that are shaky now and trimming staff. Because the software is so scalable, you can flip the switch and reduce your seat count. That’s convenient. You can’t always do that with on-premise software licenses.

Chalgren: If we think about small fabricators, a lot of times they don’t adopt tools because they are so big and expensive. The cloud in general allows them to tap into these huge products with a very low cost, and that has never been available before.

Arena Solutions, 650-513-3500, www.arenasolutions.com