Next Generation Plm an Integrated Approach for the Product Lifecycle Essays

Next Generation Plm an Integrated Approach for the Product Lifecycle Essays Next Generation Plm an Integrated Approach for the Product Lifecycle Essay Next Generation Plm an Integrated Approach for the Product Lifecycle Essay Proceedings of ICCPR2007: International Conference on Comprehensive Product Realization 2007 June 18-20, 2007, Beijing, China Next Generation PLM an integrated approach for the Product Lifecycle Management Julius D. Golovatchev 1 Oliver Budde 2 1) Detecon International GmbH, Managing Consultant for Enterprise Effectiveness PLM, Bonn, Germany 2) Research Institute for Operations Management at RWTH Aachen University, Germany Abstract: Consistent definition, categorization and operation of products (e. g. extended products, bundles, etc) delivered to global markets and customized for ifferent buyer segments is one of the major challenges for the Lifecycle Management. Each lifecycle encompasses the processes, information, support systems and people involved in delivering the related business functions. It can be argued that process supporting technologies/solutions like WFMS, PDM-System etc exist today for the creation of a seamless environment for accessing, ma nipulating and reasoning about product information that is being produced in fragmented and distributed environment. A holistic approach that is suitable for aligning the Product Lifecycle Management (PLM) business requirements (like process flexibility, horter time to market etc) to the potentials of new technology driven concepts in the information management like SOA is nevertheless still missing. The authors give reasons why the holistic view on the product lifecycle management as well as the link between an inter-company wide information management is critical for an efficient PLM and present an integrated approach taking these aspects into account. In this paper four building blocks of Next Generation PLM are introduced. The PLM Meta Model makes up the first building block. It defines the constraints and rules for decomposing the roduct functionality into meaningful modules. The PLM IT-Architecture represents the second part and describes the IT-components and their interrelat ion utilized for the purpose of PLM. A PLM-Process methodology as a basis for describing the relevant activities is attached in the third building block. The final building block is constituted by the Lifecycle Value Management concept for steering the PLM- process on a strategic level like, among other things, by considering portfolio effects. The paper closes with the presentation of a short case study validating the proposed concept for a company in the ervice industry. Keywords: PLM, product lifecycle management, extended product, integrative approach, lifecycle value management 1. Motivation As Shark (2004) postulates, Product Lifecycle Management (PLM) is the activity of managing a company’s products across the complete lifecycle, from the early stages of conception to the final disposal or recycling of a product. From this definition, a strong interrelation between the value creation process and the PLM of the company can be deduced. Taking the current globally changin g business environment into account the PLM can be considered as a strategic weapon for enabling he company to provide an additional value to customers and thereby gain a competitive advantage over their competitors. Especially in the telecommunication industry, which experienced a significant change in its environment during the last five years, PLM is considered to be essential for facing ever shorter innovation cycles (Wohler-Moorhoff et al. , 2004). In the following two sections, we introduce the main business drivers, which currently have the most impact on a company’s business model and are expected to do so in future. For each business driver specific PLM-relevant challenges can be derived. These challenges will be pointed out in detail in the last section of this chapter and will serve as motivation for our integrated PLM- approach in chapter 2. The validation of this approach is the goal of chapter 3 by introducing a case study. (1) Business Drivers Business Driver One: Management of the Extended Product The dichotomy between tangible goods and immaterial services is subject to change according to Saaksvuori (2004). In the service industry as well as in the traditional industries like manufacturing this development towards a hybrid or extended product can be observed. (Figure 1) Fig 1: Extended Product according to Thoben et al. , 2001 Following the argumentation of Mateika (2005) a critical success factor in the manufacturing industry is the ability to provide more profitable services in addition to the tangible good. But this combination of tangible and intangible attributes in terms of the extended product increases the complexity in managing the Product Lifecycle. (Saaksvuori, 2004) Another concomitant phenomenon of the so-defined extended product is the focus-shift to a horizontal integration along the value chain (Teresko, 2004), which can be achieved by considering product modularization oncepts. Business Driver Two: Globalization Global markets result in global competition that every company is confronted with. This barely new business driver forces companies to follow either a cost-leadership strategy by standardising their products or a differentiation strategy on a global scale by individualizing their products. In order to perform in the cost-lea dership role, companies have to implement efficient processes regarding the development of complex products and to handle the order management process. Simultaneously companies have to cooperate with numerous business partners, which results in a high effort or coordination. A product differentiation strategy implies processes that ensure short time-to-market on one hand and an effective degree of freedom in the process definition for staying innovative on the other hand. Business Driver Three: Legal Frameworks Increasing regulations such as safety, environmental and product reliability will influence company’s PLM- process. Especially the resulting effort for ensuring traceability will have an impact. Traceability has two dimensions in the PLM-context. First of all it is related to the PLM process itself. Effective measures have to be in lace in order to ensure the flow of transactions to identify where material misstatements due to error or fraud could occur (Sarbanes Oxley Act). Further, traceability in the order-delivery process is about tracking of an individual product units or even components. Legal frameworks like TREAD Act for the automotive industry in the USA or REACH for the chemical industry in EU can be subsumed under this dimension. Companies that need to respond to this kind of regulation must ensure that the implementation and the integration in the existing processes happen to be simple and at the least possible lifecycle costs. 2) Challenges Based on the outlined business drivers, challenges for companies can be derived for the strategy, the processes organization and the IT. An overview of these challenges is given in the following table. Tab. 1 PLM-relevant challenges Strategy Impact Impact on Processes Impact on IT Business Driver 1 Less vertical integration, more horizontal integration of the value chain Focusing on product modularization and utilisation of product platforms to enable the re-use of components Collaborative PLM-pr ocess with defined interfaces Process readiness for the management of complex products Data exchange standards IT-representation of complex products Integration of business applications Business Driver 2 Commitment to either a product individualisation or product standardisation strategy Improvement in the process automatisation Inter-company wide process standards Enterprise Application Integration with external business partner Workflow Management System Business Driver 3 Comply to regulations e. g. (Sarbanes Oxley Act, TREAD Act Support for traceability of products by standardised and well documented processes Support for traceability of processes Safeguarding data consistency Storage concepts for long-time archiving PLM is an essential component to support the value chain process in the company. In Aerospace industry, for instance, taking six month out of the development cycle can increase market share as much as 8% (Teresko, 2004). Due to the complex and multilayered challenges, that companies have to face, an isolated, non-integrative PLM-approach is not promising. Instead we recommend a more integrative approach that addresses the relevant dimensions of the PLM and thereby ensures an effective implementation. 2 Integrated PLM- Approach The integrated PLM- Approach consists of four components, depicted in figure 2. PLM-IT- Lifecycle- Value Management 4 Meta Model PLM Architecture PLM- Process Building Blocks Fig. 2: Four components constituting the integrated PLM-approach In the following paragraphs the different components are described further. (1) PLM Meta-Model Many present quality deficiencies in the product development (esp.. n the service industry) originate from a diffuse definition of products as well as from the inconsistent view on the object â€Å"productâ€Å". The product (or service) should be clearly and precisely defined to be developed, commercialized and to be understood from the customer. There should be a constant product definition ith the overall product lifecycle and for all business processes. The product as the main subject of the process needs to be defined and this definition should be taken from the customers? perspective. A product is an entity the customer perceives in its entirety and is characterized by being offered to a market place. It includes physical products, services and information (compare figure 1). The precise definition of the complete product range and their categorization still remain a problem especially in the service industry (eg. telecommunication, energy, finance industry etc. ). For example, in the elecommunication industry essentially four categories of products can be differentiated: market product (service), standard solution, customized (individual solution) and bundle. All offered products and services can be assigned to one of the mentioned categories. Product definition is not simply a reflection of the engineering design. It also includes the entire set of information that defines how the product is designed, manufactured, operated and managed on the market and finally withdrawed from the market. Product definition should be furthermore detailed by the company-wide specific PLM Meta-Model to decrease complexity costs. Such Meta-Model defines the product on an even more detailed level for the optimization of time to market and decreasing of resembling components PLM Meta-Model is the basis for standardization and modularization of products. Modular product data structure as core element of PLM Meta-Model ensures linking the sales perspective to the internal (production) perspective in relation to the offered products and services. The main aim of introducing a modular product structure is the optimization of the product development. and market Internal Portfolio branch Modules Components cat I Module cat †¦ in well management systems Realization systems and management Sales view production view Product Modules Module II †¦ †¦ Realization PLM as as stock in production order IT architecture: Product realization: PLM-Process Transfer payments Controlling: cost / revenue, product success accounting Production service: demand assessment, Marketing Portfolio invoicing target and regional resource planning and advance performance mgmt: structure Billing: Processes: input/ output, process quantities Fig. 3: Definition and requirements on product data structure The unique PLM Meta-Model and the corresponding processes should be implemented by considering the xisting processes, company structures, and cultures. Requirements from the affected functional areas flow into the definition of the product data structure. One master product data management fits all needs of the main processes and its interfaces. Using PLM Meta-Model leads to simplification and cost optimisation of â€Å"product engineering† throug h the re-use of the production modules, shorten â€Å"time-to-market†, avoiding overlaps in development and reduce technical variance, availability of the product modules range of all service lines (factories) for all division of the company etc. . (2) PLM IT-Architecture The foundation for moving a product through its complete lifecycle beginning with the product idea and ending with the product removal from the market is a solid PLM IT-Architecture, that is customized for the company-specific PLM- requirements. In our perspective, such a PLM IT- Architecture must support the PLM- process in the dimensions: (1) Decision support, (2) Operational support and (3) integration of supplemental business applications. A standardized off-the-shelf PLM-System is therefore not the tool of choice as Ausura and Deck (2007) point out. Instead we suggest to rely on a PLM IT- Architecture that re-uses, respectively ustomizes existing IT- components as far as possible. In the next paragraphs a description of the essential IT-components is given that build up the PLM IT- Architecture. Decision Support System (DSS): The main purpose of a DSS is to gather and consolidate data from operative systems in order to provide the senior management with aggregated information re garding the product lifecycle. The Computer Aided Selling (CAS) module provides functionality for the product configuration 1 and product pricing. The component Strategic Resource Management focuses on the long-term resource capacity planning on a strategic level. Product ortfolio management aspects are covered with the last Value Management component. Operational Support System (OSS) On the operational level the PLM- process execution is supported by the OSS. The Workflow Management Systems (WFMS) enables a higher degree of process automation. Especially in the context of distributing and releasing unstructured content like a product specification in cross-functional teams, the WFMS plays an essential role through a strong link to the Product Data Management System (PDM). The Product Modelling System and the PDM are closely coupled. The former defines the product structure, in which types of modules he product is decomposed into 2 . In the database context this functionality is sim ilar to the schema definition. The PDM-systems stores all product relevant data according to this definition and provides different views for each stakeholder e. g. marketing and engineering. The Multi-Project Management System as well as the Collaboration Tools are instruments for managing the product in different phases in a collaborative environment. Integration of supplemental business applications: A PLM IT- Architecture is supposed to hold the promise of seamlessly integrating and presenting all information roduced throughout all phases of a product’s life cycle to everyone in an organization, along with external business partners. For ensuring this functionality, an EAI-approach has to be implemented. According to recent research activities a Service Oriented Architecture (SOA) is most suitable to integrate the business applications from external partner e. g. suppliers as well as integrating the own business applications like ERP, CRM etc. in order to fulfil the promi se of seamless integration for becoming a real-time enterprise (Abramovici, 2002). Product-Marketing Management Exit Management CAS Strategic Resource Management Value Management Applications Supplier) Multi-Project- Tools Workflow- Product System Applications CRM CAD Decision System PLM- Process Business Customer) layer (Development Product Operational Support System Business (Management System Product-Data-Management System Collaboration Management Modeling System Business SCM ERP Support Applications (Integration-SOA) 1 The CAS module is also essential in the operative context for the order management. In our understanding CAS goes beyond the operative support and helps to steer the variant management in order to cope with the increasing product complexity nowadays. .For example hierarchies of assembly groups can be defined. Additionally constraints and rules can be modeled constricting the combination of specific modules. Fig. 4: PLM IT- Architecture building the IT-foundation of the PLM- approach (3) PLM-Process and Structure In this section the PLM-Process description will be introduced. The main design goals of this approach is to facilitate the execution of this collaborative process (efficiency goal) and equally important to align the activities with the strategic goals of the company (effectiveness goal). Our PLM-Process approach is based on three principles: Stage Gate Approach, Multi-Perspective, Metrics based Management. These principles are subject for further explanation in the following paragraphs. Principle One: Stage-Gate Approach The Stage-Gate Approach is both a conceptual and an operational model for the development, marketing and removal of a product during its life cycle. The PLM- Process consists of seven stages. This structure is oriented on the life cycle of the product and has been validated in several projects by Detecon Inc. primarily in the Telco-Industry. Every stage consists of a distinct number of activities (organized in perspectives, refer to the next ection), which have to be accomplished by specific process stakeholders at the given phase. The entrance to each stage is a gate; these gates control the process much like quality control checkpoints. Each gate is characterized by a set of deliverables as input, a set of exit criteria and an output. Gates are manned by senior managers that form the so-called Product Board. The Product Board acts as a gate-keeper that evaluates the results from one stage by a given set of criteria. Based on this evaluation, the product board can either decide whether the product idea proceeds to the next stage, e-starts at the previous stage or is archived. Principle Two: Multi- Perspective Product Lifecycle Management has always to cope with the conflict of objectives between the product marketing and the technical side. Several case studies have documented that this conflict often results in product failure in the market. Either because the product specification is too much technical driven and therefore far from the market demand or the product marketing has defined product specifications without collaborating with the technical department about technical feasibility beforehand. For solving that conflict of objectives three erspectives on the process have to be taken into account in order to ensure an efficient coordination and collaboration of the relevant d epartments or business partners. In the market perspective all activities are assigned to that relate to the product marketing. Referring to the service industry, typical tasks like the definition of product specifications and the management of the product on the market-place belong into this category. By contrast the technical perspective subsumes all technical or production- oriented activities. Additionally the financial implications of moving the product through the life cycle re grouped in the financial perspective. Principle Three: Metrics based Management In addition to the process definition the organisational component must not be neglected. Since products, and consequently the PLM-process, become more complex and involves internal as well as external partners along the value chain, there is a greater need to balance top- management control with the empowerment of self-managed, cross functional teams. As a prerequisite for achieving this balance, the company has to implemen t a metrics-based management approach in which teams are measured on strategic performance indicators such as evelopment cost, time to market and customer satisfaction. The definition and selection of the indicators is critical for the successful implementation of the PLM-concept. By setting the weights properly the teams will self-steer to the greatest short- and long-term profit, which results in less coordination effort and efficiency gains especially in the context of for cross- departmental teams. Evaluation Implementation Marketing Management Perspective Perspective Business Plan Implement Plan Technical Implementation Launch Product Go-Live technically Business Case Monitor Manage KPIs Monitor Ensure Product Process Controll Business Case Delivery Finalize 1 3 4 5 6 7 Gate 1 Gate 4 Idea Paper Description Report by Board Innovation- Management Planning Launch Exit Market Technical Financial Perspective Market Capabilities Analysis Technical Evaluation Financial Rating Market Roll-out Planning Develop technical concept Detailing Business Case Market Adjust Business Case Monitor Innovation-Market Exit Technical Exit Business Case 2 Gate 2 3 Gate Gate 5 6 Gate Detailed Design Product Launch Report Mgnt. Approved the Product Fig. 5: PLM-Process based on three principles (4) Lifecycle Value Management Life cycle oriented product planning is a necessity for companies on the competitive market and requires a robust and systematic process combined with the right organizational environment. Enterprises use Lifecycle Value Management to support the management of the product after launch through the growth, maturity, and decline stages of the product life cycle. In the overall value chain, Lifecycle Value Management ensures that the products and services which are developed and implemented fulfill the market requirements and reflect the market demand. Lifecycle Value Management requires permanent attendance for analysing and planning or ensuring the customer benefits and the alignment to all company functions. There are three different but supplementary building blocks of Lifecycle Value Management. PLM and Lifecycle Management Value Reporting Controlling Customer Needs Management Value Oriented Portfolio Management Fig. 6: Three building blocks of Lifecycle Value Management Value orien ted portfolio management (incl. IT-supported portfolio database) Increasing complexity of the product marketing without an appropriate and efficient data foundation will result in a lack of business transparency and low synergies in the value network. The modular structure of the portfolio promotes the use of common parts in the production processes, increasing the ratio mass production to overall production. Strategic alignment and value based product portfolio management enable an effective product lifecycle management. Focusing on clearly defined products makes a significant contribution to effective portfolio management. The products can be positioned without overlaps and in accordance with market demand. Value oriented portfolio management helps to prioritize product investments. Sales and marketing departments benefit from the increased transparency of the product range and he improved comprehensibility for the customers. Reporting and controlling process regarding the product lifecycle management process The referencing of different divisions (sales, resources and production planning; cost/profit accounting, etc. ) to a standard product definition lays the foundation for the application of important controlling instruments (e. g. product success accounting). The unambiguous correlation of the basic data to business management indicators along the lines of a standard product structure provides staff and management with precise and timely information about all of the critical success factors that elp staff and management to make the right decisions at the right time. Customer Needs Management Customer Needs Management incl. Requirement Management builds interface between PLM and Customer Relationship Management (CRM) and gives input for the collaborative product design. The effective Customer Need Management ensures that product content matches customer requirements and allows delivering more personalized products by facilitating mass customization Implementation of these three building blocks combined with a modular product data structure ensures the â€Å"state-of-the art† Lifecycle Value Management: Individual product performance information available at real-time. Product Manager retains product accountability throughout life cycle. Strategy for product growth, maturity, and withdrawal stages is defined up front. Product replacement strategy also considered. Systematic (e. g. annual) review and clean-up/optimization of product portfolio. Supplier and customer are involves in the high collaborative integrated PLM 3 Case Study A renowned company in the telecommunications industry carried out an extensive restructuring program which would enable it to maintain its position in a deregulated market environment. The objective was on the one hand to convert the previously technical driven approach for the product design (i. e. , their orientation towards technical performance features) to an approach focusing on the customers’ needs and requirements. On the other hand, the aim was to develop and implement the integrated management approach, Next Generation PLM. In the initial situation the PLM and the platform was not â€Å"state-of-the-art† (e g. no withdrawal phase, missing of decision gates, long â€Å"time-to-market† etc). A portfolio management process was not designed and implemented. The current portfolio structure was oriented on the rganizational or technical structure and not organized from the customer’s point of view. The product portfolio was characterized by a large number of product variants and features. All these products needed to be handled individually from an IT management perspective. This broad variety of products needed to be realized and im plemented within all operative processes, IT-applications and –systems as well as sales information tools. This led to an enormous complexity that impedes the maintenance of IT-landscape and the management and optimisation of the processes. No integrated IT-solutions ere available at company and at its affiliates. During the project the integrated PLM approach valid for the company and its affiliates was developed. Implementation of Next Generation PLM at this company showed the valuable benefits for solid product development, marketing and strategy: PLM Meta-Model: Easier know how exchange and using of the â€Å"same language† during product development as well as fast and efficient communication between international partner Introduction of the harmonized product definition and product portfolio for all national and international affiliate companies The product portfolios across all of the company ere to be reduced by 50% and integrated into a modular structure. Adop tion of the product data platform at all international subsidiaries PLM Process and Structures Acceleration time-to-market up to 25% by several product groups Efficient cost savings along the PLM process by using standard support system and re-using of modules and components (process costs saving up to 170 m USD/year in the product realization phase) Effective and similar procedure of innovation and market management projects execution PLM IT-Architecture An implemented shared platform for document and project management. One physical server is used to support separate product lifecycle management processes in all divisions and subsidiaries Lifecycle Value Management Sound marketing strategy due to the early recognition of market needs and standardized information More detailed input for controlling for exactly allocation of revenue and costs to products Simpler allocation at cost centres and cost unit Introduction of the harmonized product portfolio for all national and international affiliate companies References [1] Abramovici, M. ; Sieg, O. C. (2002): Status and Development Trends of Product Lifecycle Management Systems. In: Proceeding of International Conference on Integrated Product and Process Development, Wroclaw, Poland, p. 2122. [2] Ausura, B; Deck, M (2007): The new product lifecycle management systems: whar are these PLM systems? and how can they help your company do NPD better? Visions Magazine. Online available at pdma. org/ visions/jan03/plm. html, last visit 26. 01. 2007. [3] 5 Mateika, M. (2005): Unterstutzung der lebenszyklusorientierten Produktplanung am Beispiel des Maschinen- und Anlagenbaus. Essen: Vulkan-Verl. [4] Porter, M. E. (1985): Competitive advantage: Free Press New York. [5] Saaksvuori, A. ; Immonen, A. (2004): Product Lifecycle Management: Springer. [6] Teresko, J. (2004): Auto Report: Information Technology The PLM Revolution. In: Industry Week-CLEVELAND OHIO-, Vol. 253, Nr. 2, p. 32–38. [7] Thoben, K. D. ; Jagdev, H. ; Eschenbaecher, J. (2001): Extended Products: Evolving Traditional Product Concepts. In: Proceedings of the 7 th International Conference on Concurrent Enterprising: Engineering the Knowledge Economy through Co-operation, Bremen, Germany, p. 27–29. [8] Wohler-Moorhoff, Falk; Dieter, Stephan; Schwill, Matthias (2004): Telco 2010. Telekommunikation im Wandel: Die Karten werden neu gemischt. Published by Detecon. Bonn

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Ancient Greece: A Time Of Great Cities And Lives Ancient Greece was an interesting time and place with huge markets in which people could sell items of every kind. Strict laws with even stricter penalties if broken, a place where women were did not have as many rights as they do today, and along with the most outstanding army in their time. A quote that goes along with this time is; "I have killed one I have killed two -- the vampire who said he was youo." - Sylvia Platts. Likewise in the Ancient Greeks so called modern civilization, which has often been compared with the Nazi Germanies ethics of male domination. very cruel and yet enticing time to be alive. "Get your pots and pans..." Compared to today Ancient Greece was a city far ahead of its time and possibly the time in which people now live. Down in the streets of there was always someone willing to buy, trade or sell anything that you had or desired. With Ancient Greeks booming economy it's no wonder that it attracted almost one quarter of the worlds businesses and various smiths. These included bronze smiths, tanners and potters. It is no wonder that Ancient Greece was in its time considered the beginning of the of a new era that would be recognised as the centre of the worlds economy and was to be home to more than twice as many shops and people than the city already held. Although women in the world today are always talking about women and their rights and how they deserve to be equal in everything that they do and receive, it was not a problem to Greeks in their society which has been described as a place where women's freedom was restricted and their lives were restricted to that of a slave in some cases but was really no different than a women's freedom in today's society. In Greece it was a mans world in which a man could do what he pleased to a certain extent of the law. Which is better than today due to women's rights movements and decency laws that have been implemented in the past years. It also would have been interesting to see how the women really were treated instead of from books and and assignments. Along with all of the amazing feats that Greeks accomplished it is of no surprise that they had one of the strongest and most feared armies in all of the world in its time. Of all the battles and wars that the Ancient Greeks army had Ancient Greece: A Time Of Great Cities And Lives :: Ancient Greece Essays Ancient Greece: A Time Of Great Cities And Lives Ancient Greece was an interesting time and place with huge markets in which people could sell items of every kind. Strict laws with even stricter penalties if broken, a place where women were did not have as many rights as they do today, and along with the most outstanding army in their time. A quote that goes along with this time is; "I have killed one I have killed two -- the vampire who said he was youo." - Sylvia Platts. Likewise in the Ancient Greeks so called modern civilization, which has often been compared with the Nazi Germanies ethics of male domination. very cruel and yet enticing time to be alive. "Get your pots and pans..." Compared to today Ancient Greece was a city far ahead of its time and possibly the time in which people now live. Down in the streets of there was always someone willing to buy, trade or sell anything that you had or desired. With Ancient Greeks booming economy it's no wonder that it attracted almost one quarter of the worlds businesses and various smiths. These included bronze smiths, tanners and potters. It is no wonder that Ancient Greece was in its time considered the beginning of the of a new era that would be recognised as the centre of the worlds economy and was to be home to more than twice as many shops and people than the city already held. Although women in the world today are always talking about women and their rights and how they deserve to be equal in everything that they do and receive, it was not a problem to Greeks in their society which has been described as a place where women's freedom was restricted and their lives were restricted to that of a slave in some cases but was really no different than a women's freedom in today's society. In Greece it was a mans world in which a man could do what he pleased to a certain extent of the law. Which is better than today due to women's rights movements and decency laws that have been implemented in the past years. It also would have been interesting to see how the women really were treated instead of from books and and assignments. Along with all of the amazing feats that Greeks accomplished it is of no surprise that they had one of the strongest and most feared armies in all of the world in its time. Of all the battles and wars that the Ancient Greeks army had

Lincoln: One of America’s Best Film

Both President Clinton and House Speaker Newt Gingrich have referred to Lincoln Electric as an example of an American firm that is one of the best in the world. This statement may be bold, though holds truth in many respects and Lincoln managers like George Willis, who was the CEO in the late 1980s and early 1990s adds to this statement: â€Å"†¦ I believe that we are the best manufacturing company in the world. Lincoln Electric is best known for its productivity incentive program, which has been widely cited over the years, and has attracted thousands of managers to company†s headquarters in Cleveland, Ohio to learn about one of the country†s oldest and most radical pay-for-performance systems. Founded in 1895 by John Cromwell Lincoln to manufacture electric motors and generators, The Lincoln Electric Company shifted its resources into manufacturing arc-welding products in 1911. Today, welding products account for more than 90 percent of net sales and range from basic units for light manufacturing to highly sophisticated machines used in robotics applications and high-production welding and fabrication. The remaining income is generated by electric motors and oxy-fuel and plasma cutting tools. The company is also the leading producer of self-shielded cored-wire electrodes and currently holds ninety percent of the world market in this area. With its over a 100 year existence, Lincoln Electric has had a successful past with a few downtimes, like the one during the 1991 recession because of an ill-conceived foreign-acquisition spree. Even during this time, the company kept its promise to its U. S. workers to pay their bonuses and went to extremes such as borrowing $100 million in 1992 and 1993, even though it lost $84 million in those years. The retired CEO Donald F. Hastings quoted saying: â€Å"We can†t break our trust with this group because of management mistakes and recessions elsewhere. From this unique example, we can understand the company†s genuine commitment to its compensation system. However, some argue that, after the 1995 sale of 40% of the company†s equity to public, this traditional close-knit relationship between management and the workers got affected. Lincoln Electric employs 5,700 workers worldwide and operates 16 manufacturing sites and 17 distribution centers in 11 countries. In 1995, the company celebrated its centennial year by posting record sales of $1. 03 billion. With increasing sales every year after 1995 – $1. 09 in 1996, $1,159 in 1997, the company is holding its leadership position in the manufacture of arc welding equipment and consumables. Lincoln†s longstanding commitments to linking pay to both individual productivity and the profitability of the corporation makes it an ideal case study for any business student. In this paper, I will explain the unique pay-for-performance compensation system of Lincoln Electric as well as investigating this system in our class context, also explaining the international expansion of the company. Incentive Performance System: its strength and weaknesses It was James E. Lincoln, John Lincoln†s younger brother, whose philosophies and beliefs about workplace relations shaped Lincoln Electric†s unique culture during his long term as head of the company from 1914 to 1965. The firm has had only a handful of leaders in a century of operation, which are mostly promoted within the company. Likewise, jobs at Lincoln Electric plants are highly prized and employee turnover is low. I think it is impressive that no one has been laid off since 1948, and the turnover rate is less than 4% among those with at least 180 days on the job. â€Å"There isn†t any other place to work like Lincoln Electric, they take care of you. † says Kathleen Hoenigman, an 18-year veteran. In today†s competitive markets, it is important to have dependable highly skilled workers and Lincoln Electric clearly is a great employer according to some employees like Mrs. Hoenigman. Companies like Lincoln Electric can afford to provide consistent employment, no matter what, by working and managing better. Thinking ahead and having creative solutions for when there is a downturn is what management is all about,† Hastings said. It really makes sense when one thinks about this statement: if no one worried about losing their job, then employees would create change instead and this kind of an ideology would definitely have a great impact on productivity. High wages, high productivity, and a high level of trust between management and workers characterize the laborer-employee relationship and this culture at Lincoln. Policies such as the â€Å"open-door† policy helps build this trust and while encouraging the employees to bring suggestions for improvement also helps the management to have non edited, raw data from their workers. It is true that millions of American workers, from sales representatives to truckers, are paid on a commission basis or according to their output. Many others collect annual bonuses tied to their employers† profits and revenues. But Lincoln is nearly unique among large American companies, paying all shop-floor workers according to a formula based on how much they produce and how much the company earns. Lincoln Electric†s compensation package for factory workers consists of a piecework system for base wages and a year-end bonus. The piecework system however is probably the major part of the total incentive system at Lincoln Electric. With this system, a worker can make more per day or per week or per month during the year with or without a bonus. The workers are paid on the quality of what they produce. Thus, in a way, Lincoln†s 3,400 U. S. employees are supposed to be self-managing entrepreneurs. Each employee is accountable for the quality of his or her own works and is rated twice a year on quality, output, dependability, cooperation and ideas. The ratings determine how much of the total corporate bonus pool each worker will get, which comes on top of his or her hourly wage. There†s minimal supervision and employers only get paid when they work, and there is no sick or holiday pay, which created some problems for Lincoln Electric in their foreign subsidiaries. â€Å"How much money you make is in your own hands,† says Thomas Gadomski, a painting-crew leader. All 3,400 Lincoln Electric shop-floor workers do well, with wages averaging $58,000 in 1995 (the last year for which company would provide data), not counting the value of their decent package of medical, vacation and retirement benefits. On the other hand, the programs developed 40 years ago at Lincoln to boost the production are helping contain workers compensation costs. Gil Frey, director of employee benefits and relations, said the company saves about $44,000 per month as a result of its return-to-work strategies. Despite all the incentives and high salaries, the company, which is publicly traded in NYSE, hardly operates as a charity. 1997†³s net income of $85 million represented a 20 percent return on shareholder equity in a very competitive industry. Donald Hastings who is strong defender of the piecework system argues against the people, who consider the piecework system as a type of 19th Century pay system that was designed to take advantage of the worker, and he adds that it is what killed the piecework system in the U. S. Thus, he believes that the piecework system at Lincoln has fairly set rates. However, very few manufacturers have taken the pay-for-performance route, and the reasons are not actually hard to comprehend. For one thing, it is difficult to sustain large differences in pay for the same job category also measuring individual productivity in industrial settings can be a challenge all by itself, unless if you have a well established system like Lincoln. Yet I am sure that, at times inevitably there is ambiguity at Lincoln too, but clearly it is very minimum. These are some of the reasons why it would be difficult to replicate Lincoln†s success, because it also requires highly disciplined and motivated labor. Moreover, in addition to piecework bonus system, guaranteed employment up to 30 hours and the annual bonus system where employees are paid once a year up to an average of 50% to 60% -recent years† average- of the base pay created a sense of ownership among the employees. Lastly, as a result of all these incentive systems, the high productivity and high output rate with less defects, and innovation gives Lincoln Electric the competitive edge in the market. One manufacturing manager explained it perfectly: â€Å"We strive for high productivity based on employee effort, continuous improvement in production processes, and a seven-day-a-week utilization of equipment. By passing on cost savings to our customers, we generate very high demand that allows you to send everything you make straight out the door. † These are the main strengths of Lincoln Electric, but just like any other organization, Lincoln Electric have some weaknesses too. Unfortunately, the Lincoln incentive model is not quite the smashing success it once was. Problems started with the recession in 1991, and in 1995, after management stumbles forced the family-controlled manufacturer to sell more shares to the public. From that point on, Lincoln started looking more like a public company. With new shareholders, and new board members came new ideas, which had impacts on some of the core values of the company, and the worker bonuses has started getting smaller. At the same time, management was readying itself for an expansion to remain globally competitive, putting even more pressure on the balance sheet. Even though that very same year, the company celebrated its centennial year by posting record sales of over $1 billion and record earnings, this was a year of change for the workers. All those factors I listed above crimped bonuses. For workers who expect high bonuses if they deliver in output, this shift must have hurt their morale. As new global markets are emerging for Lincoln†s business, the company has started questioning and reviewing their one-of-a-kind pay system. The company is by no means ready to completely change or get rid of the incentive plan, which once paid employees 100% of their annual wages in annual performance linked bonuses. But now with the new markets that the company is in too, the executives are considering ways to move toward a more traditional pay scheme and away from the regular percentage-bonus formula, or may be a mixture of the two. â€Å"The bonus program is a good program, and it has worked well, but it†s got to be modified some,† says director David C. Lincoln, whose father John C. Lincoln founded Lincoln Electric. So, the question is for how long more Lincoln†s pay plan can survive rapid growth of the company and globalization? Also the wide range of wages cause some problems within the company. The average Lincoln factory worker earns $16. 54 an hour, vs. the $14. 25 average manufacturing wage in the Cleveland area. With a 56% average bonus in 1995 – the lowest in years – production employees came out ahead of workers elsewhere even after paying for health-care benefits. But unlike at other companies, Lincoln has huge variations in production-worker pay: from roughly $32,000 to more than $100,000 for the most hard-driving. There is also a tremendous pressure to produce, but an employee board meets regularly with the top management to report workers† concerns. And Lincoln guarantees work to employees with three years† experience. Still, it gets harder and harder everyday to live up to the old deal. Even though, the company has bounced back from stumbling overseas, it has yet more problems to overcome. During this period, Lincoln had financially weakened. To make better acquisitions and expand further, Lincoln made its first public offering in July 1995, pushing outsiders† stake to 40%. It also slashed total debt by 40% to $130 million, and paid a lower bonus per person, though the total bonus pool was a record $64 million. Naturally, slimmer bonuses somewhat changed employees† attitude towards the system and the company. In November of 1995, some employees protested outside headquarters after they learned of the bonus size. Also again during this period, the turnover among the new hires was high, and the disparate pay upset the veteran Lincoln employees. â€Å"If an individual shows he can handle the workload, he should be rewarded with full pay† commented Joseph Tuck, an inspector with 18 years at Lincoln. Because of the protests, CEO Hastings eliminated the two-tier wage on December 1, 1995. This was a dilemma for both the company and the workers, both of which had never experienced this kind of a situation before. To edit the pay system without causing any resentment, the company set up a committee to study the bonus program and had even hired Price Waterhouse to study productivity. Even though, Hastings pledged at the time that the incentive system would remain the same, over time, he wants employees to focus on the overall earnings, not just the percentage bonus they receive. And that should be a tough job to do, to implement this kind of an ideology in employees† mind, who has worked so many number of years in a fixed, particular system. Lincoln Electric†s International Expansion On other hand, as I have mentioned earlier in the paper, because of both legal and cultural issues, Lincoln†s basic systems like the incentive system and annual bonus pay system did not work in many of the overseas operations in the long run, even though at the beginning it was successful. And, I think Lincoln Electric had especially a hard time understanding that operating and international business calls for a lot more than just technological skill. Also, I believe that the company didn†t truly understand the cultures of those countries where it expanded. The general assumptions made, such as the belief that everybody in the world would be willing to work a little harder to enhance their lives and their families and their homes didn†t turn out to be true for everyone. It was an inaccurate assumption and this was one of the main reasons why the company had to pull out of Germany. The underlying reason for this was mainly because Lincoln Electric executives didn†t know how to manage an international operation, nor did they have the international experience. Furthermore, the way Lincoln had gone about expanding internationally was too rapid an unstructured. Also, there were other barriers such as high tariffs, high manufacturing costs, highly unionization and misconception of Lincoln Electric†s incentive system. After closing down plants in Germany, Brazil, Japan and Venezuela, and reporting losses from these operations in 1992 and 1993, I am sure Lincoln Electric is going to be very careful about not starting another acquisition spree. During these losses however, the company expanded the number of employees in the United States, but I am sure that the firm will be going back to overseas in the future. This time though, they want to be very careful in selecting the region for the new facility, as well as the managers and the workers. One of these new markets that Lincoln has interest in is the Asia-Pacific area, including mainland China, and the company is already in the process of getting some alliances in Indonesia and Malaysia. These new interest regions may shape the future of Lincoln Electric. If we were to make a cost-benefit analysis for Lincoln Electric, we would find out that the company has a lot of pluses. Even after all these charges against it, Lincoln†s pay system is likely to remain innovative than most. But as it tries to hire more outsiders, expand further abroad and modernize, â€Å"we†re getting to be a more normal company,† says Director Frank L. Steingass. That may not be quite what eager visitors to the headquarters in Cleveland, who want to learn the secret of incentive system expect to hear. But if Lincoln can adapt to new times without sacrificing employee good will, another model pay plan may yet emerge out of this company. The over century long history and tradition, along with great organizational and pay systems, Lincoln Electric has a very strong organizational culture, especially in the United States. However, with the new emerging markets around the world today, Lincoln Electric can not afford to stay out of the global competition. Finally, I believe that its employees will always move Lincoln Electric to greater heights, no matter what. The former CEO Donald Hastings states this idea in a very profound way: â€Å"It†s a two-way street at Lincoln. We look after our people and they look after us. â€Å"

Develop a marketing plan for Wayfair - Free Essay Example

Sample details Pages: 7 Words: 2214 Downloads: 8 Date added: 2019/10/10 Did you like this example? EXECUTIVE SUMMARY Samsung is a very vibrant company which has reputed in the field of electronics and also software business. The company’s earlier products were calculators, television and they also provided refrigerators to their market. Samsung developed and launched its first mobile phone in market which led to the expansion of the target market. Don’t waste time! Our writers will create an original "Develop a marketing plan for Wayfair" essay for you Create order Samsung started with very inferior products just like any other company which led to very poor sales. The company later started doing exceptionally well by selecting the strategies to design their components. Samsung heavily invested on technology which pushed the company to forefront in globe of electronics to be able to compete with other companies like Sony. The developed technology led to the inventory of new products and developing the existing ones leading to products which caters several generations and also satisfies different people with different needs. Within the time the company has produced high quality products that appeal to a wide market. The Samsung has joined and created a store where the customers can test the newest products and also offering training in the company concerning mobile products. The company also has qualified experts who deal with all the problems the customers experience while using their products. Samsung also put into place strategies to examine its suppliers to make sure that products are of a good quality. Samsung emerged not only in making batteries which could be used by digital devices but become the global leader and also can deliver products which are truly changing by using several approaches in innovation. The company has learned the secret in use of improved technology in innovation which leads to a great boost in demand leading to high profit in the Samsung Company.   SITUATION ANALYSIS Market summary Samsung at first came up with the idea of a retail trader and developed and established the experience shop (Song Lee, 2014). Samsung produces and sells products like phones, computers, and music players. The Samsung has improved sales by emerging new markets like the middle east were handsets where very cheap and popular. (Song Lee, 2014) Compared to the past there is a wide positive change in Samsung consumers where the targeted group is the teenagers and the adults since they have a more spending power. (Song Lee, 2014). Market demographics Samsung has different products which make it easy for the company to target a wide range of demographics. The company advertises its products to the market and also trains its customers on how to use their products which help in reaching the most suitable demographic (Song Lee, 2014). Samsung also motivates their customers to buy their products and also they have many distribution channels for example retail, online, and whole sale which helps in targeting a wide demographic. This is why many consumers of electronics use the Samsung products. Market needs Samsung has extensively on its research for consumer needs and preferences. Through the use of new technology Samsung develops new products yielding high benefits to the consumers. Samsung also invests more in technology this is reflected on output which is more than normal which makes sure Samsung products are very available anytime the consumers require (Song Lee, 2014). Market Trends The Samsung Company has employed the latest technological advancement in its latest devices so as to remain viable in the market (Kim Mauborgne, 2014). The South Korea based company has expanded its innovation in its mobile devices to give their customers the best products. It has gone further to ensure that water and dust is no longer a threat to its mobile device customers (Kim Mauborgne, 2014).   It has gone an extra mile to produce a water and dust resistance device in their latest release in the market which is Samsung S8. Samsung through its wearable devices have enhanced the fitness and general well-being of their customers. It has come up with mobile wearable devices which enables customers to keep track of their health such as blood pressure and heartbeats (Kim Mauborgne, 2014)). This Samsung wearable device compliments their present customers need since people have become more conscious with their health. Samsung has tried to advance in its business analytics. It has tried to come up with devices which relies customer feedback for any further improvements. Samsung is offering the best fusion technologies in multi-chip packages. â€Å"It has incorporated different memory die within a single chip† (Kim Mauborgne, 2014). Samsung has produced devices with new biometric authentication access method. The latest devices make use of iris scanners to access the device apps. Market Growth The Samsung company has been growing at a very high rate through is faces a very stiff competition from Apple Inc. Samsung has extensive worldwide market reach because of its online selling of its products(Kim Mauborgne, 2014). Through the use of third party networks such as wholesalers, suppliers as well as retailers in reaching the entire world market. The rapidly growing market owes to the production of high quality and user friendly products. SWOT Analysis Strengths Samsung company enjoys a wide range based on its products portfolios such as Tablet, Mobile phone, TV/Audio/Video, Home appliance, Camera, Pc, Printer, Memory cards, Camcorder and other accessories. However, it holds a great significant market share in almost all the product categories. Specifically, people like this company because being the best in terms its features, design, and technology (Ying, 2016). It becomes the first company to introduce the dual screen mobiles. Additionally, due to low production cost, the company allows providing its products to the customers at a lower price more than its competitors. Moreover, Samsung has been achieving strong reputation brand by offering products which are of quality and at a low price. The company has highly skilled employees all over the globe and also has the strongest intelligence based on market capabilities. Samsung really enjoys the first of its mover advantage based in terms of the introduction of advanced features in a refrige rator, LCD, Air conditioner, as it introduced the smallest MP3 player in the world. Weakness Samsung Company always keeps the low-profit market as there are a lot of competitors based on this industry. However, there has been damaging to image due to infringement. This is from the few of recent incidences that affected its image brand in a negative way. There is a lot of work taken by the company when the product portfolio is a large one (Ying, 2016). Apple is seen to be doing much better than Samsung when it comes to quality. However, there is dependence based on the customer’s electronics as it is higher compared to other manufacturers. Samsung has been trying so hard in order to make a more qualitiful Android but perfection for the Smartphone still lacking. Opportunities Smartphone market is fast growing as become are becoming much more technology dependent together with if being the most communication tool currently. However, there is a high increase in demand for the smart phone. Many of the people usually use feature phones which make the switch based on the smart phone. Additionally, there is a growth of the advanced phone due to technology as demand increases (Ying, 2016). Samsung Company has been doing its business for a quite number of years and has secured a strong position financially in the market. Specifically, Samsung will be able to make some better investment based on the future. There have companies being acquired by Samsung as is to ensure for future growth (Ying, 2016). The company is planning so as to make air-condition based on the product category a stronger one having a unique technology known as ‘Triple protection proposition.’ The company Home and Mobile appliance have plans for the future in launching the customiz ed products based on the Indian market. However, this will help to improve on the market share around a rural market. Threats Samsung Company basically is known to have a wide variety based on product failures, lines of a product as it will have some impact on the other together would be resulting to brand dilution. However, some of its competitors such as Nokia seem to be focused on the basis of one segment. There are threats from the Chinese products and also the entry of foreign players into India, being likely high. Samsung has a large portfolio and this also makes it be at high risk.   However, when the products do not harm any customer, they definitely affect the brand and therefore would grow negatively and qualities others. In addition, many of the people nowadays look for better quality products (Ying, 2016). Competition Competition is very crucial for the success of a business organization. However, a company should not fall to the competition and loose its brand name (Kim Mauborgne, 2014). Competition induces the urge to come up with products of higher quality as compared to those of the competitors. Samsung top competitors in the market are Apple Inc. Microsoft as well as Google (Kim Mauborgne, 2014). To deal with this competition, Samsung ensures it produces high quality and user friendly products incorporating the latest technological advancement so as to maintain loyalty among its customers (Kim Mauborgne, 2014). The Samsung devices are relatively affordable as compared to those of their competitors such as Apple Inc. Samsung uses technology, quality and cost to deal with the stiff competition in the market (Kim Mauborgne, 2014). It makes use of user friendly android software which is highly preferred by the customers in the market than other software. People are keen with the latest technology, they are always waiting for the new release in the market. Samsung ensures that it has always the device with the latest technology in the market. This results to increased preference by customers which translates to increase in sales. For instance, Samsung Company has the only mobile device using the new SoC and Snapdragon 835 chip in the market. People tend to buy the products with the outstanding feature just like the case of SoC and Snapdragon 835 chip in Samsung (Kim Mauborgne, 2014). It also relies on the minor technologies such as display and storage to maintain brand name and differentiate it from the rest of other brands. It also has wireless charging and ability of storage expansion thus making it unique brand in the market. Macro environment. Samsung Company deals with several products which have their position in the markets greatly influenced by a number of these external forces which are uncontrollable by the company. These macro factors include; political, technological, social, legal and environmental factors (Kassem, Succar, 2017).Political factors include government regulations, set tax regulations, safety programs issuance, issuance of contracts by government and international rules like, tariffs and trade agreements which influence market supply thus demand as well. Technological factors greatly influence products markets, for instance, change of current technology either due to improvements in the technology or machinery chips and programming, or the emergence of or a new machine due to market dynamics and high investment in research and development and even desire by producers to offer varieties to customers. Samsung, therefore, must ensure that its products are modern and competitive in markets thus have to me et customer preference and specifications (Kassem et al, 2017). Demographics in a population and various lifestyles in every society make up social macro environmental forces for any product markets. For instance, the pattern of the working force plus the population structure, that is, the different composition in each age group clearly can determine products market share and needs (Kassem et al, 2017). Samsung Company to succeed in the market should properly get its target market. Legal factors compose of legislations set at local, regional and international levels thus affecting all categories of markets. For instance, the introduction of new health and safety laws may force the company to purchase new equipment or employ new supervisors. Even with labor law limits especially for minor employees can reduce the working hours, this affects production thus supply. Ecological concerns are usually important to organizations (Kassem et al, 2017). For the time being, things like cataclysmic events can hinder creation and supply, or even devastate orga nization resources. Target markets. Your target clients are the individuals who are well on the way to purchase from you. Oppose the enticement to be excessively broad in the expectations of getting a bigger cut of the market. Samsung Company offers different electronic devices enabling the company to have a wide range of customers. Including teenagers and adults; low, middle and high-earning customers, this achieved by developing products which suit the above-mentioned categories, for instance having cheaper devices favors low earners in the society (Amos, 2016). The magnificence of target advertising is that by pointing your showcasing endeavors at particular groups of purchasers it makes evaluating, and movement of your items and benefits less demanding. While market division should be possible in various courses, contingent upon how you need to cut up the pie, three of the most widely recognized sorts are: Demographic Segmentation. Demographic gathering depends on quantifiable insights, for example, sexual orientation, age, wage level, conjugal status and education race religion. Statistic Division is typically the most imperative criteria for recognizing target markets making the learning of statistic data vital for some organizations (Amos, 2016). The geographic division totally includes dividing the market in consideration of the area. Places of residence are one locality.