Who Needs CPQ? Manufacturers, That’s Who
Configure-price-quote software is most typically thought of as a sales tool or sales-enablement solution. But, the benefits of CPQ systems extend well beyond the sales process and the selling organization into other areas of the enterprise, especially in the case of complex manufacturers. This is often overlooked because many CPQ vendors spend most of their resources marketing their products exclusively to sales operations and management and ignoring other LOBs within the prospect organization.
CPQ solutions obviously do bring value to the selling organization, but much of that “sales value” is also applicable beyond sales. This is especially true with manufacturing enterprises.
- Improved configuration accuracy – The sales team obviously benefits from product configuration accuracy. But manufacturing functions such as production planning and scheduling also derive benefit from building highly configured products correctly the first time.
- Pricing accuracy – Nothing protects commission dollars like quoting the correct price. The organization as a whole also benefits by covering all expenses in producing and selling the product and bringing a profitable sale.
- Quotations and proposals produced automatically deliver accurate quotes and proposals, but since they eliminate manual input of sales-order details, they also ensure accuracy with automatically generated bills of material (BOMs). This automated order entry benefits supply chain management as well as planning and scheduling processes and quality in the production process itself.
But these benefits are just the easy money or the clichéd low-hanging fruit. Let’s look at manufacturing by itself and see how CPQ, especially when tied to a proper ERP integration, can really make a difference.
CPQ Enables Diversity of Complex Markets, Products and Pricing for Manufacturers
Manufacturing has never been easy, but it was once more easily executed. Plants, assembly lines and processes were focused on building single products in mass quantities. The more you built, the easier it was to reduce the cost-per-order. Sales orders were less prone to errors because the level of variation available for any given product was much lower.
Today, things aren’t quite that simple. Shifting demands shorten the market life of many products. Customers demand product customization to more closely align the products they purchase with their specific needs. They also expect customized services to help them identify specific needs and to implement solutions acquired.
Markets themselves are also more complex and extend over large territories—even globally. This means complex pricing to support multiple market geographies and regional or country versions of configured products.
Market and product diversity also drives the need for specialized sales channels. Sales orders must reflect dealer-specific accessories and services.
CPQ helps to support this requirement for product and pricing complexity especially when manufacturers extend CPQ to dealers and distributors. Changing costs are more easily reflected in pricing updates via CPQ. Additionally, sales add-ons and increased up-sales opportunities that are unique to specific markets are much easier to exploit with CPQ.
Specific Manufacturing Processes Boosted by CPQ
- Product Design – Designing products that minimize build time and build complexity. CPQ facilitates the development of products with generalized efficacy early in the production process. This product development becomes more specialized through option selection and add-on modules that are integrated into the product assembly later in the production process.
- Superior Inventory Control – Model sales performance and option selection popularity. CPQ supplies the data that allows manufacturers to make intelligent inventory and part-availability decisions that balance maximum part availability and simultaneously minimize inventory costs.
- Increased Product Variability – Bill of Material (BOM)-driven production sequence that reflects model options, parts and sub-assemblies used in completing product builds. CPQ builds generate multilevel BOMs to drive manufacturing inventory calls and production sequence as well as pricing and billing data.
- Intelligent Production Processes – The build sequence for complex products impacts the assembly time required, timing of part availability and other production-line efficiencies desired during the product build. CPQ configures products in a logical sequence driven by the customer input that specifies general requirements initially and specific needs later in the process. This allows the use of common parts and assemblies across multiple end-product models and even product lines and also allows the products to be built in the same general to specific sequence.
- Enhanced Supply Chain Management – Supply chain management means that raw materials and externally sourced parts are available as needed with minimal threats to interruption or pricing volatility. Inventory controls ensure that parts are maintained locally in quantities that ensure availability when needed but minimize cash that’s tied up in inventory while sitting on a warehouse shelf for days or months before being used. CPQ provides the earliest possible indication that a specific model or part will be needed. This data is first collected in the form of responses produced to inquiries from prospects. Over time, the data collected from these early inquiries can be used to accurately forecast supply chain and inventory needs and allow early trigger acquisition orders up the supply chain and within the warehouse.
- Efficient and Responsive Plant Re-tooling – When do you build lawnmowers, and when do you build snow blowers? When do you add “self-propelled” capabilities to your lawnmowers, and how many snow blowers require high-capacity throughput? Implementing decisions relating to these variables can mean shutting down assembly lines for re-tooling, adjusting part orders and delivery schedules and even identifying the most efficient sequence of bringing parts and assemblies together to fulfill an order on the shop floor. CPQ provides valuable data in terms of when seasonal and other market variables affect product demand based on the time of year. Again, early warning means maximizing planning time and customer responsiveness.
- Accurate Pricing and Configurations – Configuration and pricing errors mean you build the wrong product or you build a product with deficiencies that prevent it from addressing your customer’s needs. CPQ ensures configuration accuracy by matching parts and assembly capability with stated customer needs. This ensures that pricing accurately reflects the product value delivered. Field returns, production errors and rework are all minimized.
- Lean, Low-Waste Processes – Customer-driven manufacturers need to embrace the lean principle of eliminating waste in the product and product-building process. Waste is defined as that which does not deliver value to the customer. CPQ ensures that the exact functionality required is built into the product configuration and that the price quoted covers only that which facilities mitigating the pain or needs identified by the customer.
If you sell stuff, you need CPQ. But, if you make stuff, CPQ will make you a better manufacturer.