SOURCE: Arena Solutions

December 18, 2007 08:00 ET

Study Shows a Majority of Contract Manufacturers Incur Cost Impacts for Poorly Managed Change Processes

Two-Thirds of CMs Say On-Demand Arena PLM Is Preferred Solution for Improving Manufacturing Outsourcing

FOSTER CITY, CA--(Marketwire - December 18, 2007) - Arena Solutions, the leading provider of on-demand product lifecycle management (PLM) software for manufacturers of all sizes, today announced results from a companion study it conducted with 400 suppliers and contract manufacturers (CMs) to determine, from the suppliers' point of view, concerns related to outsourcing practices with their original equipment manufacturer (OEM) customers. The study indicates that CMs blame poor communication with manufacturers for 79 percent of new product introduction (NPI) delays and 30 percent of product compliance issues (e.g. RoHS and WEEE), causing over 90 percent of suppliers to incur cost impacts that ultimately drive up outsourcing-related costs for manufacturers. A majority of suppliers said they see their customers who use PLM software to manage their design through manufacturing process experience fewer errors, improve cycle time, and lower outsourcing costs.

Results of the study offer insight into the steps manufacturers should take to have a successful relationship with their manufacturing outsourcing suppliers. To share the full results and implications, Arena Solutions also announced it will hold a free educational webcast to present their findings and analysis tomorrow, Wednesday, December 19, 2007, from 10-11 a.m. Pacific Standard Time for anyone involved in the outsourcing process. To participate, call 1-866-937-1438 or register at www.arenasolutions.com.

Perception among suppliers is that more effective collaboration with their OEM customers is critically important to address problems including coordinating NPI, managing and communicating product changes, and communicating product information, (e.g. RoHS status), across organizational and geographic boundaries. A majority of suppliers responded that these problems create hard-dollar impacts, such as increases in inventory or unplanned rework and expenses, and often result in the need to increase charges to the OEM, raising the overall cost of outsourcing. Suppliers in this study noted that only 40 percent of the OEMs they work with are using PLM, leading to a high percentage of manual and time-consuming processes such as phone calls, faxes, and emails, and spreadsheets being used for communication, resulting in a high occurrence of errors. Suppliers clearly see PLM software as a positive solution, with nearly seven out of 10 saying PLM leads to improved NPI, and six of ten noting PLM improves change management processes and compliance.

In addition, the research showed suppliers preferred on- demand (SaaS) delivery over traditional client/server PLM software, and preferred Arena PLM three-to-one over Agile as the most productive and easiest to learn solution. Two out of three CMs believe Arena PLM is more broadly utilized among their customers. Suppliers appreciate that Arena's on-demand PLM software requires no special hardware or IT staff, is easier to deploy than client/server software and is accessible from anywhere in the world through an ordinary web browser and Internet connection. And, all suppliers can be included as users on an OEM's Arena PLM account free of charge.

Suppliers who responded to the survey are acutely aware of the problems related to a poorly managed design through manufacturing process:

--  54 percent of CMs compared to 35 percent of OEMs said design and
    manufacturability problems cause new product delays
--  56 percent of CMs report sourcing problems because OEMs provide
    approved manufacture list (AML) information too late in the process and
    include expensive, hard-to-get and obsolete parts, causing late re-sourcing
    activities
--  50 percent of CMs say they have poor change communication coming from
    the OEMs
--  Nearly 40 percent of CMs say OEMs do not identify compliant parts, and
    when they do, their use of compliant part numbers is inconsistent. In fact,
    one-third of CMs believe OEMs don't know what type of documentation they
    need to supply and maintain for compliance
    

"We learned so much about the challenges of manufacturing outsourcing from surveying OEMs earlier this fall, we decided to follow up with a similar study to get the supplier perspective," said Michael Topolovac, chief executive officer, Arena Solutions. "What we gathered is that from the suppliers' point of view, companies that are using PLM simply perform better, especially in terms of change management, NPI, and compliance. When these issues are managed with PLM software, OEMs and suppliers can achieve lower costs and allow outsourcing to provide all the benefits a company might expect."

About Arena Solutions

Arena Solutions is the leading provider of on-demand (SaaS) product lifecycle management solutions for manufacturing companies of all sizes. As the only true on-demand, secure Internet-based PLM service, Arena PLM provides a superior alternative to complicated, lengthy and expensive traditional PLM software deployments. Through its award-winning service, Arena enables product manufacturers and their global supply chains to streamline outsourcing, improve operational efficiencies, and speed time-to-market. Arena PLM has been adopted by more than 15,000 users across companies at all stages of development, including industry leaders Foundry Networks, Color Kinetics, Intuit, Sierra Wireless, Align Technology and more.

Arena Solutions' market-changing approach to PLM has received significant recognition in the industry, including Manufacturing Business Technology's Top 40 Emerging Vendors, the Supply & Demand Chain Executive 100, Industry Week's "Technology of the Year - Notable Innovators" and Start Magazine's "Hottest" Companies.

Founded in February 2000, Arena Solutions is headquartered in Foster City, California. For more information, please visit the company's website at www.arenasolutions.com.

Arena Solutions, Arena PLM Workgroup Edition, Arena PLM Professional Edition, and Arena PLM Enterprise Edition are trademarks of Arena Solutions, Inc. Other product and company names are the property of their respective holders.

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