PLM solutions have been around for decades. Historically they have been considered as large investments, with long implementation projects caused by heavy customization, and slow return on investment.
This is no longer the case with many solutions being provided via software as a service, which reduces cost of ownership. Your selected vendor should also have an out-of-the-box offering which limits the level of configuration required to reduce implementation investments.
You will still need to prove that there is a return on investment. For this you need to assess your current product development and maintenance KPI’s so that you can present a financial case to your leadership and justify the purchase.
Before selecting a PLM vendor you need to review what cross functional departments the solution will support. In the case of Trace One the focus is the following:
1. Category and product development teams
2. Product quality and supplier compliance teams
3. Packaging and sustainability teams
In this blog series we will tackle four key areas of return and how these can be estimated. Let’s take a sample mid-sized retailer with an existing private brands portfolio of 3000 SKU and 300 suppliers. They want to expand their product range by 10% per year and recognize that spreadsheets and PDF documents won’t support the growth objectives.
Please note: the figures used are just examples and the formula would be adjusted based on an analysis of the retailer’s private brands business and their strategic objectives.
Reduce the time to transition to a new supplier
Vendors change often due to QA issues, inability to meet SLAs, or through re-bidding projects to reduce costs. Recent supply chain and availability problems have only added to the frequency of vendor transitions.
Onboarding and assessment. The result is a reduction in time to onboard and assess new suppliers.
New vendors are invited into current specifications within seconds and existing data is maintained which drastically reduces time to update specifications with new supply chain data or formulation adjustments.
Overall, your current sales revenues are impacted less by the transition to a new vendor which means we can estimate the return on investment if we know the current supplier onboarding and specification completion time. Let us use 22 weeks as an assumption.
A. Number of new suppliers onboarded per year = 30 suppliers
B. Average number of products per new supplier = 10 SKU
C. Average weekly sales per product = $2,500
D. Average product margin = 20%
E. Reduction in supplier transition using Trace One PLM @ 30% = 6.6 (weeks)
A x B x C x D x E = $990,000 additional profits per year
Additional factors affecting return on investment
There are several factors that will affect how much of this potential return on investment a retailer will gain through use of a PLM solution. Commitment from the internal team to use the solution, and high levels of supplier adoption are required. Processes may well need to be changed to ensure the solution is being used to its strengths, otherwise inefficiencies could creep in reducing the ability to quickly change suppliers. A strong PLM solution provider with expertise in the private brands arena will be able to advise on these topics to ensure customer success.
About Trace One
We spearhead a powerful global retail community at the heart of the industry ecosystem. Unified on one platform, our systems connect, streamline, and organize data, teams, and networks. This allows brand owners to overcome complexity and grasp the opportunities at every stage of the product lifecycle.