Cost Considerations for Implementing PLM Software in the Apparel Industry
Product lifecycle management (PLM) software provides a big benefit to the apparel industry. One of the major reasons to make the switch is that it’ll give you a much easier-to-use platform for keeping track of every item of clothing in your catalog. From the initial design phase to the finished product, PLM software offers a way for designers to work on a piece together, even if they’re not physically in the same space.
There are, of course, some things you must consider when choosing PLM software, not the least of which is the cost of implementation. However, it’s important to remember that the cost alone is not the only thing you should focus on. Sometimes, even if one software is a bit more expensive, it might also have the specific features you’re looking for in PLM.
Understanding the Cost Components of PLM Software
There are several different cost components to pay attention to. First off, there will be a monthly fee to license the software. This typically runs between $80-$150 per month per user. Many people may think this is the total cost of using PLM software, but that’s not the case. You’ll also have to take care of:
- Implementation costs
- Integration costs
- Data migration
- Cost of training staff
- Maintenance
- Support
Although the majority of these costs will only be felt up-front, it’s still wise to factor them in when you’re deciding what PLM software to choose.
Licensing Fees and Implementation Costs
As mentioned above, you’ll have to pay somewhere between $80-$150 per month, per user, to license PLM software. Your cost to implement the software will depend on how large your business is, though. For instance, if you run a large company, you can probably expect to pay millions of dollars. On the opposite end of the spectrum would be a small company with limited staff. Businesses like this can expect to pay $10,000+.
Why is implementation so expensive? Well, that’s because it requires tech staff and/or consultants, and you have to pay for their time. However, it’s going to be worth it in the long run. Implementing PLM software is highly complex, and if you mess it up, you’ll have to pay even more money to fix the situation.
Keep in mind that you can also make your fees go up or down depending on what type of implementation you choose. If you want to save money, do not ask for on-site implementation. Instead, go with software as a service (SaaS) to reduce your total cost.
Maintenance and Support Expenses
PLM software maintenance will represent approximately 29% of your total cost. You will need to undergo annual maintenance and support to ensure your software remains up to date.
This is a piece of the puzzle that is sometimes forgotten about during the initial cost analysis, but to do so would be a huge mistake. After all, if you don’t have enough money to pay for a maintenance plan and support, your PLM software will quickly become outdated.
This isn’t like deciding whether or not to purchase an extended warranty because there is no advisable way to save money on this particular category. You’ll either pay for maintenance and support expenses, or you’ll pay for it with PLM software that isn’t fully able to meet your ongoing needs.
Calculating ROI and Long-term Cost Savings
Figuring out your company’s specific return on investment (ROI) and long-term cost savings in this article is basically impossible, so we’ve gathered information from a sample company instead.
All the following must be considered to get an accurate number:
- Salary of the employees using the PLM software.
- Percentage of time spent working on product data.
- Software license.
- Implementation and consulting services.
- Additional support.
- Total cost of having your employees work with the data manually.
- Percentage of improvement between manual and PLM usage.
Next, we must take our sample company’s annual revenue and assume a moderate increase in sales from year to year.
In this particular example, we will use a larger company to make the numbers as simple as possible. In a five-year analysis, we can see that taking all the pros and cons of using PLM software—including setup costs and the expense of continuously running it—can take a $200 million annual revenue and provide us with the following:
- Approximately $52,000 per year in cost savings.
- Gross margins increase from $1 million in year one to $8 million by year five.
- Net cash flow from approximately $996,000 in year one to over $8 million by year five.
The numbers above should be added to the annual revenue of $200 million. As you can see, you stand to gain a lot, even if we’re talking about a very small business. The gains would be smaller, of course, but they’d still represent a positive.
Factoring in Everything
There are several different cost considerations that must be considered when selecting your PLM software. It goes far beyond merely licensing the product, although several expenses will only be incurred in the beginning stages.
For instance, you’ll have to pay for each of the following during the first year:
- Implementation costs
- Integration costs
- Data migration
- Cost of training staff
Then, going forward, you’ll have to pay for each of these annually:
- Maintenance
- Support
And, of course, there will also be new training costs whenever you bring a new employee on staff.
Adding this all up will cost significantly more than your licensing fee, but these costs should be more than offset by your ROI and long-term savings. Depending on the size of your business, it could be worth millions!
Are you getting ready to make the switch to PLM software? Why not take it even further by getting ERP software from N41? ERP software goes beyond PLM’s capabilities, and it provides a PLM solution built-in! In other words, you can have the best of both worlds. Request your free demo today to see how much N41’s ERP software can help your business!
(numbers for the ROI/Cost-Savings section taken from: https://www.to-increase.com/manufacturing/blog/roi-plm-erp-integration-dynamics-365)
