Creating and Updating Complex BOMs
Agile Software makes software that helps companies create and update
complex bills of materials. This is a small niche, but one that
delivers very high ROI. Agile dominates the niche in high-tech,
but is a marginal player in industries like automotive where a similar
ROI is available.
About Agile
Agile Software was founded in March, 1995, by Bryan Stolle, who
had previously the director of product and strategic marketing for
Sherpa Corporation. His original aim was to write a PDM product
for high-tech electronics companies; Agile Configurator was shipped
to beta customers in 1996.
Ever since that shipment, Agile has been able to find a market,
growing by a factor of 10 since 1998. It has done less well in the
earnings department, reporting net losses each year. This last year,
it has grown significantly once again, but once again, it lost money
($5 million in the most recent quarter, hurt in large part by the
acquisition of Digital Markets for $103 million in 1999).
Agile has always been an underachiever, having difficulty positioning
itself and difficulty breaking out of its niche.
But it has also always been a company of great promise-and not
just because Stolle is one of the most interesting and vocal CEOs
around. On January 9, 2001, Ariba bought the promise and the company
for what would then have been a purchase price of $2.55 billion.
Unfortunately, the dot bomb exploded, and what had been a sweet
deal for both parties was buried in the wreckage. On April 2, they
called the deal off; the Ariba stock had lowered so much so that
the acquisition was only worth $414 million.
Customers
Agile has licensed products to at least 500 customers, including
users in 36 countries. A few of the more well known clients include:
AMD
Dell Computer
Flextronics International
GE Medical Systems
Hewlett-Packard
Honeywell
Lucent Technologies
Texas Instruments
Verifone
Industries
Agile has announced industry solutions in high tech, semiconductor,
medical devices, and textile and apparel. But over 90% of their
customers are in high tech, and some of the medical device customers
use the product primarily for electronic devices.In textile and
apparel, they have only two, small customers.
Theoretically, the product should appeal to any industry where
there are high amounts of product change or high amounts of obsolescence.
The fact that Agile has not been able to penetrate automotive or
aerospace and defense is therefore significant.
High Tech
Dell Computer
ADIC
AMD
Flextronics International
FSI International
Hewlett-Packard
Jabil
Circuit
Philips
Precor
RadiSys
Redback Networks
Sycamore Networks
Texas
Instruments
Semiconductor
ADC Telecommunications
Lucent Technologies
Metawave
Communications
Paradyne
Medical Equipment
GE Medical Systems
FUJIFILM
Electronic Imaging
GE Medical Systems
Sonic Innovations
Textile and
Apparel
Chantelle
Choromat
The Product
In many industries, the work of creating a new product falls to
two separate engineering groups: the design engineers and the industrial
engineers. Design engineers create the design for a product (think
drawing!). Industrial engineers take the drawing and figure out
two things: how it will be made and what components it will be made
out of.
Essentially, the design engineers think it up, and the industrial
engineers make it manufacturable. Or, to put it another way, the
design engineers come up with a prototype, and the industrial engineers
come up with an end product that they can be made at a certain rate
of speed, for a certain cost.
Agile Software makes software that supports the work of industrial
engineers. The software helps the engineer create a list of components
(called a bill of materials) and a method of manufacture (called
a routing) from the drawing or prototype. It helps them figure out
how they're going to get the components. And it helps them manage
the bill and routing whenever there are changes.
ERP companies theoretically manage a bill of materials and routing
and manage replenishment. But ERP systems work much better when
the bill changes very little and when supplies are reliable. In
many industries, the bills really are stable, and companies don't
need anything more than an ERP system to do this.
But in industries with frequent model changes, high rates of new
product introduction, or continuous engineering "improvement,"
the ERP system's clumsy and manual methods of managing change are
a positive barrier to progress.
In a medium-size high-tech manufacturing firm, for instance, a
single bill of materials might have 10,000 changes a year. Each
change must be manually created, the timing must be set, if possible,
old components used up, the change coordinated with other component
changes, and both the old and new supplier notified.
In these environments, software that helps manage the change is
an operational necessity. What do people use? A custom system, Excel,
or Agile.
The Agile software consists of a core bill of materials manager
plus support for interaction with the manager. The interaction comes
in three forms:
- The bill of materials is created. For this, Agile
has the Design Integration Server, which allows you to import the
design from most CAD systems and use it to create the bill of materials.
It also has a list of authorized component vendors, which can be
used for sourcing.
- The bill of materials is changed. For this,
Agile has software that supports the internal Change Control Board
and change initiated by partners.
- The bill of materials system
is integrated with other systems, such as an internal ERP system.
For this, it has systems for integrating with internal ERP software,
for broadcasting change out to the supply chain, and for integrating
with external systems.
Agile calls its suite of products Agile Anywhere, which accurately
reflects the products' B2B orientation. Though the product was originally
written to support internal change management, it has been rewritten
so as to serve an extended manufacturing chain. The modules themselves
are in HTML, JavaScript, and Java (on the server), so that all information
is accessible via browser. All BOM information is in principle available
to suppliers; in addition, suppliers can participate in the change
processes, even initiating change. Agile also has several different
software facilities for broadcasting changes to suppliers and for
integrating supplier servers with their BOM server.
In all its software, Agile's focus is on smoothing out and speeding
up what is typically a very complex and unevenly-paced process.
It does not try to automate the key decisions in that process; for
instance, it does not automatically convert drawings into a BOM.
There are also limits to what it tries to do, even within this
area. A key decision in managing change, for instance, is the timing
of the change order. One wants to change the product quickly, but
one doesn't want to be left with a lot of obsolete inventory. There
are optimization techniques available for helping to manage this
change, but Agile does not employ them. Another key decision involves
use and authorization of substitutions-another area where Agile
is not terribly helpful.
Even with these limitations, Agile is widely recognized as the
standard within its niche, because what it does do provides significant
value, as described in the next section.
Value
Anyone who has worked with products that change frequently has
an intuitive feel for the kind of havoc that frequent product change
wreaks. The value of Agile is in lessening that havoc.
Broadly speaking, if Agile is installed correctly and insightfully,
a company should see the following benefits over what they had when
they used Excel and an ERP system:
- Reduced time to market. The
total time it takes to introduce a new product or get changes from
conception to consumer should go down.
- Reduced industrial engineering
cost. The amount of effort involved in performing mechanical tasks,
such as assigning part numbers, should go down, and time spent on
things like reconciling simultaneous, but conflicting changes should
go down.
- Reduced obsolescence. A major cost of frequent change is
that there are old products or old parts left over after the change
is made. Accurate management of that change makes ordering more
accurate, which reduces inventory. Within an organization, the cost
all three (long time to market, high process cost, and high cost
of obsolescence) can be significant barriers to success.
Within industries where this is true, being in the top quartile
in component engineering can produce significant competitive advantage,
and all those other "soft" benefits that software vendors
are so fond of.
In industries like high-tech electronics, however, product change
is not just an internal phenomenon. Companies with new products
must manage the change along an extended supply chain. In these
industries, product change is significantly more difficult to manage,
and consequently, the benefits in all three areas (time to market,
process, and obsolescence) are significantly greater, when change
is managed effectively.
The fact that these benefits are clearly perceived and widely accepted
in high-tech electronics is the reason why Agile has been so successful
in this industry.
Assessment
POSITIVE: The underlying design of the product shows a very good
understanding of the processes involved in making new products manufacturable.
Each step in the process has been addressed by what appears to be
serviceable functionality. The attention to extended business processes
(Agile Anywhere) is particularly noteworthy for companies that must
manage an extended supply chain.
Many manufacturers would instinctively think that they can get
along with just an ERP system; however, when there are several changes
per day in a BOM, the extra effort involved in running a separate
system is dwarfed by the effort saved by having a management system
that works.
NEGATIVE: Companies in many industries with high obsolescence and
frequent product change feel the need for a BOM manager, but Agile
has not had the impact in these industries that it has had in high-tech
electronics. We therefore believe that adaptability to other industries
is an issue.
The product is most useful when there is a well-defined workflow
for creating and modifying products that is supported by its software;
if the fit is poor, it will not be helpful.
The product may end up requiring integration with multiple systems.
We have not assessed the integration tools, but they should be looked
at with care.
In order to do collaborative BOM management, it is important to
have a supplier dashboard, which can give information about the
supplier, its personnel, its products, etc. The dashboard is particularly
necessary when the workflow manager needs to move processes between
companies. Agile's product in this area is not as strong as some
of its nominal competitors (see below).
BOTTOM LINE: Companies that use Excel and ERP to manage frequent
product changes have a good chance of getting positive ROI from
Agile's software.
Competitive Landscape
The competitive landscape in this area is among the most confusing
in the entire business application area.
In most analyses, Agile is lumped in with Matrix One and Parametric
Technologies as a collaborative product design company. These analyses
ignore the fundamental difference between design engineering and
industrial engineering.
Matrix One and Parametric Technologies support design engineering
with Product Data Management and visualization software. Essentially,
they let people store data (especially drawings) about a new product
and help people manage the approval of the new product within engineering.
Agile comes in later in the process. Their software helps people
create and manage the bill of materials, that is, the list of components
used in the product as manufactured.
Neither Matrix One nor Parametric Technologies makes a product
that competes on a level playing field with Agile in its core area,
electronics.
In the area of communication with suppliers, particularly in the
area of supplier portal management, authorized vendor lists, etc.,
there is some competition. Matrix One has quite a good product in
this area; so does i2 (Aspect). SAP is in the processing of developing
one.
For other PLM company assessments, see our archive.
|
