What is the best way to measure PLM ROI in product engineering?

1 Define your PLM goals and metrics

When measuring PLM ROI in product engineering, it's important to first define your PLM goals and metrics. Outcomes and benefits from implementing or improving your PLM strategy should be identified and quantified. Common PLM goals and metrics for product engineering teams include reducing product development time and costs, increasing product quality and customer satisfaction, enhancing product innovation and differentiation, improving product compliance and sustainability, and boosting product profitability and market share. Your PLM goals and metrics should be aligned with your overall business objectives and product strategy, and they should be SMART (specific, measurable, achievable, relevant, and time-bound).

2 Establish your PLM baseline and target

The next step to measure PLM ROI in product engineering is to establish your PLM baseline and target. Your PLM baseline is the current state of your product engineering performance, based on the metrics that you defined in the previous step. Your PLM target is the desired state of your product engineering performance, based on the goals that you set in the previous step. For example, if your PLM goal is to reduce product development time by 20% in one year, your PLM baseline is the average product development time that you have now, and your PLM target is the average product development time that you want to achieve in one year. You should collect and analyze data from your existing product engineering processes, systems, and tools to establish your PLM baseline and target.

3 Calculate your PLM costs and benefits

The third step to measure PLM ROI in product engineering is to calculate your PLM costs and benefits. Your PLM costs are the total expenses that you incur to implement or improve your PLM strategy, including software, hardware, training, consulting, maintenance, and integration. Your PLM benefits are the total savings or gains that you generate from implementing or improving your PLM strategy, based on the metrics that you defined in the first step. For example, if your PLM metric is to reduce product development costs by 10% in one year, your PLM benefit is the amount of money that you save from reducing product development costs by 10% in one year. You should estimate and project your PLM costs and benefits over a specific time period, such as one year, three years, or five years.

4 Apply your PLM ROI formula

The final step to measure PLM ROI in product engineering is to apply your PLM ROI formula. Your PLM ROI formula is the mathematical equation that you use to compare your PLM costs and benefits, and express them as a percentage. There are different ways to calculate PLM ROI, but one of the most common and simple formulas is:

PLM ROI = (PLM benefits - PLM costs) / PLM costs x 100%

For example, if your PLM costs are $100,000 and your PLM benefits are $150,000 in one year, your PLM ROI is:

PLM ROI = ($150,000 - $100,000) / $100,000 x 100% = 50%

This means that for every dollar that you invest in PLM, you get a return of 50 cents. You should apply your PLM ROI formula to your PLM baseline and target, and compare them to see how much improvement you have achieved or can achieve with your PLM strategy.