Integrated Rules-based Design Environments

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1 Integrated Rules-based Design Environments Brian Grogan Director, Engineer to Order Solutions Siemens PLM Software (248) Kenn Hartman Senior Analyst/Managing Director DSA, PLM Consulting Firm (216)

2 Presentation Outline Scope of Presentation Introduction Problem Statements & Industry Statistics Proposal Management & Design Engineering Order Lead Time & Order Engineering Solution Components Process Components Technology Components Requirements & Specification Management Rules-based Design Application CAD & CAD Libraries PLM (BoM, Part, Doc, Change) Value Proposition & Capability Maturity Case Studies

3 Scope of Presentation Proposal Management ETO/OEM Order Engineering ETO/OEM Intelligent Process Automation can additionally enable: Facility and/or subsystem commissioning Construction Management Plant Design

4 The Continuum of Variability Standard Products Configure-to-Order High Complexity Assemble-to-Order Engineer-to-Order True Custom Products

Proposal Review Contract Award Design Approval

Risk Assessment Design, Specifications, drawings

5 Installation Production Estimation Eng. Sales Customer An Example ETO Process Requirements Proposal Review Contract Award Design Approval Customer Acceptance Product Configuration Proposal & Risk Assessment Design, Specifications, drawings Design, CAD models & Drawings eboms, Compliance Checks & Eng. Analysis MBOM Routings Quality Data Tooling & Fixture design Cost Estimates & Markups Manufacturing Field installation

6 ETO/EPC Challenges Top Five Pressures Driving Product Customization Pressures All Respondents Top Challenges in Developing Custom Products Pressures All Respondents Increasing customer expectations for products that meet their specific preferences 57% Ensuring customer design requirements are met in the final product 40% Customer responsiveness e.g., lead time, last minute changes, etc. (brand, reputation, and relationship building) 54% Managing engineering changes across design configurations) 35% Need to increase profitability by offering customized solutions with higher margins 24% Avoiding inefficiencies created by communication barriers between departments or outsourced partners 32% Global competition 17% Need to tailor products according to market preferences in global 15% Long order turnaround (time from when the order is placed to when it ships to customer) 31% Validating every design combination / configuration 29% Top Challenges faced by ETO Companies Customer Requirements 38% Unpredictable Margins Manufacturability Accurate Quoting 29% 29% 31% Timely Quoting 17% 0% 10% 20% 30% 40% Source: Aberdeen

7 Some Key Proposal Statistics Before IPE 1. Lost opportunity a) Win/Loss ratio s for ETO/OEM respondents prior to implementation of an Integrated Proposal Environment (IPE) were reported to range between 1/7 to 1/11 b) Respondents reported 12% to 17% of RFP s in peak market periods did were not responded to due to insufficient resources c) All services business reported having service lines whose cost to propose exceeded the attainable margin for the percentage of projects won d) Excessive contingency pricing is reported to account for more than half of all lost contracts annually whereas insufficient contingency pricing contributed to more than 40% of proposal related margin erosion Contingency Kills Paradox e) Failure to incorporate new design rules to enable solution that met client requirements accounted for between 10% & 15% of all lost contracts 2. Margin Erosion a) Annual margin erosion from Proposal Stage Design Errors was reported to range between 1.3% and 5.1% of annual revenue 3. Market Share a) Market share for any given product line prior to IPE averaged 7% to 13% After IPE 1. Lost Opportunity a) Win/Loss ratio s for ETO/OEM respondents prior to implementation of an Integrated Proposal Environment (IPE) were reported to range between 1/5 to 1/7 b) Respondents reported all RFP s in peak market periods were responded to c) Annual cost to propose did not exceed annual margin for any product line/service d) Excessive contingency pricing is reported to account for less than 10% of all lost contracts annually and insufficient contingency pricing contributed to less than 12% of proposal related margin erosion e) Failure to incorporate new design rules to enable solution that met client requirements accounted for between 0% & 2% of all lost contracts 2. Margin Erosion a) Annual Project Variation resulting from cost overruns, schedule slip (labor overruns) and liquidated damages ranges between.2% and 1.2% of gross revenue 3. Market Share a) Average Market share across all product lines implemented increased on average by between 5 and 12 percentage points

8 Some Key Order Engineering Statistics Before Intelligent Order Engineering (IOE) 1. Order Lead Time a) Order lead time (receipt to delivery) prior to implementation of an intelligent Order Engineering Environment ranged 10 to 30 weeks 2. Order Throughput a) Widely varied across all respondents 3. Margin Erosion a) Part redundancy ranged between 22% and 39% and eroded margin by more than $4,400 per redundant part per year. Annual cost per part calculated by CIMData and Aberdeen b) BoM error Rates for Products with high manual design effort ranged 18% to 27%. Average cost of a BoM error could not be reported by any respondent After Intelligent Order Engineering (IOE) 1. Order Lead Time a) Order lead time (receipt to delivery) prior to implementation of an intelligent Order Engineering Environment ranged 4 to 11 weeks 2. Order Throughput a) Respondents generally agree they could turn 3x to 4x the volume of orders out to the floor with same number of staff 3. Margin Erosion a) Part redundancy was reduced to zero b) BoM Error Rates were reduced to between 5% and 8%

IPE - Technical View CRM CAD Authoring Tools CAE MSOffice ERP

Control 5. Associate Push or Pull Rulestream 1.

Automatically generate technical artifacts 3.

Search for and reuse existing parts 6. Select preferred suppliers 7.

Costs 4. Pricing 5. Lead Time 6. Mean Time Between Failure 7.

Part Management BoM Management Change Management Teamcenter Workflow

Manage Proposal Templates 4. CAD Template Library 5.

9 IPE - Technical View CRM CAD Authoring Tools CAE MSOffice ERP Requirements Management 1. Extract 2. Parse 3. Disseminate 4. Control 5. Associate Push or Pull Rulestream 1. Transform requirements to solutions 2. Automatically generate technical artifacts 3. Generate commercial artifacts 4. Trigger new part requests 5. Search for and reuse existing parts 6. Select preferred suppliers 7. Generation of engineering BoM s 1. Item Master 2. Vendor Master 3. Costs 4. Pricing 5. Lead Time 6. Mean Time Between Failure 7. Vendor Preferences PLM Platform Doc Mgt. Part Management BoM Management Change Management Teamcenter Workflow 1. Manage Technical Templates 2. Manage Legal Documents 3. Manage Proposal Templates 4. CAD Template Library 5. Associate all Proposal Data 1. Part Classification Schema 2. Search/reuse preferred parts 3. New Part Create 4. Get AML/AVL 1. BoM Templates 2. BoM Views 1. Part Release 2. BoM Release 3. Proposal Review & Release 4. CAD Release

10 Product Demonstration

11 IPE - Technical View CRM CAD Authoring Tools CAE MSOffice ERP Teamcenter Requirements 1. Extract 2. Parse 3. Disseminate 4. Control 5. Associate Push or Pull Rulestream 1. Transform requirements to solutions 2. Automatically generate technical artifacts 3. Generate commercial artifacts 4. Trigger new part requests 5. Search for and reuse existing parts 6. Select preferred suppliers 7. Generation of engineering BoM s 1. Item Master 2. Vendor Master 3. Costs 4. Pricing 5. Lead Time 6. Mean Time Between Failure 7. Vendor Preferences Teamcenter Unified Platform Doc Mgt. Part Management BoM Management Change Management Teamcenter Workflow 1. Manage Technical Templates 2. Manage Legal Documents 3. Manage Proposal Templates 4. CAD Template Library 5. Associate all Proposal Data 1. Part Classification Schema 2. Search/reuse preferred parts 3. New Part Create 4. Get AML/AVL 1. BoM Templates 2. BoM Views 1. Part Release 2. BoM Release 3. Proposal Review & Release 4. CAD Release

12 IPE Value Proposition Increased Win Rate Respond to more RFPs Shorter proposal and order lead times More complete proposals Better alignment of solution to customer requirements Improved ability to manage and execute customer change requests Increased Profitability More complete and optimized proposal stage design Fewer margin eroding errors More time for supply chain inputs More comprehensive analysis cost impact of customer change requests Better adherence to quality standards optimizes asset utilization through the supply chain

13 Best in Class Performances Best in Class: Meet Performance Targets 90% to 94% of the time Five Key Metrics that determine a companies capability to effectively & efficiently manage both the sales and development challenges of Custom Products 1. Percent of products which met revenue targets 2. Percent of products where actual costs met quoted costs 3. Percentage of products meeting operational targets 4. Percent of products meeting promised product delivery dates 5. Percentage of products meeting quality targets 100% 75% 50% 25% 90% 76% 49% 90% 75% 39% 90% 74% 37% 92% 81% 49% 94% 84% 68% Product Revenue Actual Cost to Quoted Cost Operational Cost Targets Delivery Date Performances Quality Best in Class Industry Average Laggards

Strategic Actions Top Strategic Actions by Best in Class Performers 60% 56% 45% 30% 41% 36% 41% 30% 29% 22% 19% 22% 19% 24% 0% Improve ability to capture, validate, disseminate & associate customer

14 Strategic Actions Top Strategic Actions by Best in Class Performers 60% 56% 45% 30% 41% 36% 41% 30% 29% 22% 19% 22% 19% 24% 0% Improve ability to capture, validate, disseminate & associate customer requirements Implement modular intelligent design systems Improve order engineering process and handoff to manufacturing Improve change management across the organization Improve configuration management and use of variants Improve change management within engineering Best in Class All Others

Automated Order Engineering Environment CAD Authoring Tools CAE MSOffice ERP 1.

Standards 4. Design Reviews Rulestream 1.

Generate Manufacturing Drawings 3. Generate Work Instructions 4.

Derive SOP s Semi-automatic Design Process 1. CAE 2. CAD 3. Standards PLM Platform Doc Mgt.

Manage Technical Templates 2. Manage Legal Documents 3. Manage Proposal Templates 4.

15 Automated Order Engineering Environment CAD Authoring Tools CAE MSOffice ERP 1. Manufacturing BoM Integration 2. Tooling & Routing Manual Design Process 1. CAE 2. CAD 3. Standards 4. Design Reviews Rulestream 1. Convert Engineering BoM to Manufacturing BoM including Routings, Tooling 2. Generate Manufacturing Drawings 3. Generate Work Instructions 4. Generate Test Procedures 5. Derive O&M Manuals 6. Derive SOP s Semi-automatic Design Process 1. CAE 2. CAD 3. Standards PLM Platform Doc Mgt. Part Management BoM Management Change Management Teamcenter Workflow 1. Manage Technical Templates 2. Manage Legal Documents 3. Manage Proposal Templates 4. CAD Template Library 5. Associate all Proposal Data 1. Part Classification Schema 2. Search/reuse preferred parts 3. New Part Create 4. Get AML/AVL 1. BoM Templates 2. BoM Views 1. Part Release 2. BoM Release 3. Proposal Review & Release 4. CAD Release

16 IOE Value Proposition Improved order engineering lead time (order of magnitude) Large percentage of design work completed during proposal process Faster conversion of engineering deliverables to manufacturing deliverables Manufacturing BOM, drawings, SOP, test procedures Increased requirements yield during proposal stage reduces design false starts Increased design reuse reduces unnecessary design work and cycle time to test Increased engineering accuracy Enforced adherence to best practices and standards Higher degrees of automation reduces human error Increase in available work time drives error reduction Greater organizational scalability Reduced on boarding time for engineering staff Ability to manage peak volume without sacrificing throughput and quality Improved standardization enables better assimilation of new teams

17 Call to Action Comprehensive assessment for qualified clients Process and metrics assessment Derive activity level process model Conduct initial assessment of process activities Identify relative Key Performance Indicators (KPI) What drives KPIs What constrains KPIs Assimilate findings Maturity assessment Business value assessment

18 Maturity Assessment Offering Sample Capability Maturity Models Sample Sample

19 Thank you for your attention!

IPE Value Proposition Challenge Excessive quotation response time The Rulestream Solution / Benefit IPE automates long lead time sales and sales related engineering tasks.

20 IPE Value Proposition Challenge Excessive quotation response time The Rulestream Solution / Benefit IPE automates long lead time sales and sales related engineering tasks. It ensures that products are configured to engineering and manufacturing capabilities. Reduces quotation lead times. Eliminates hand-offs. Engineering needs to be less involved in the sales process. Allows requirements to be communicated to the supply chain faster and with higher fidelity, thus increasing supplier responsiveness. Margin security IPE allows a final design to be reached within the available quotation window, providing a bottoms-up cost roll up, and thus a better understanding of cost. Automatically applies standards and best practices, eliminating margin eroding errors. Completing the design earlier in the process allows purchasing more time to source parts which can lead to lower costs. Order lead times lag competition IPE s process automation significantly reduces order engineering lead time, allowing the overall order lead time to be collapsed. By increasing the first time accuracy of engineering deliverables to the shop floor, Rulestream eliminates time consuming errors. Requirements are communicated to the supply chain faster, with higher fidelity, and less iteration, increasing supplier responsiveness. Proposals lack product data IPE rapidly generates the engineering artifacts required for high quality proposals, including drawings and 3D product images, thus allowing high fidelity product data to be included with every proposal. Customer change requests hard to manage Rapidly engineering a product to a customer specification means that last minute customer change requests can be effectively managed, in some cases within 24 hours of manufacture. The ability to ensure accurate engineering deliverables means less wasted time on errors and less need for lengthy review processes. Low win rate Lack of Scalability IPE improves win rate by: Reducing both quotation and order lead time Providing greater flexibility in product solutions Better communicating product fit through higher fidelity product data included within proposals Enabling more aggressive pricing via a better understanding of costs IPE increase the overall scalability of an ETO organization by institutionalizing common processes/methods and bringing the knowledge of senior resources to bear on every job.

Engineer to Order. Brian Grogan, Director of Product Management, 2014 Analyst Meeting

Engineer to Order. Brian Grogan, Director of Product Management, 2014 Analyst Meeting Engineer to Order Brian Grogan, Director of Product Management, 2014 Analyst Meeting Smarter decisions, better products. Outline Engineer-to-Order (ETO) within Industry ETO product configuration Customer