“Configuration and Estimating Eliminate Risk” is part three of a four-part series on the relationship between risk and technology in business supply chain. Miss any previous articles? Get caught up:
- Part 1: Risky Business
- Part 2: Risky Business: Planning and Budgeting Diminish Risk and
- Part 4: Eliminating the Risk of Supply Chain Disruption and Volatility.
Is there anything more frustrating than a sales rep that ignores your sales plan and sells stuff that customers actually want?
You go to the trouble to design a product and establish a price and commission structure and then some customers talk your sales rep into adding something here, changing the color of this or that, making the product waterproof or making it run on direct current instead of alternating current.
Customers Have an Annoying Habit of Knowing What They Want
These things happen because customers have the legitimate need of capability, and sales reps want to fill that need with the products they sell. The effect of this is anything between inconvenience and disaster.
Companies lose millions of dollars each year through product liability and manufacturing risk. In many cases, these suits are based on the inappropriate use of the product in question. Some of this is due to Sales not understanding the use limits associated with a given product. In other situations, the risk is understood and the Sales group just decides to roll the dice and hope for the best.
Don’t Forget to Ask All of the Right Questions!
Let’s say I’m buying a car. I want a Mini Cooper, but I also want to pull a trailer. The salesman assures me that the car can pull a trailer without knowing what type of trailer I want to pull. The car company is probably going to be on the hook when I want my money back after pulling a 75-foot moving-van trailer cross-country with my Mini Cooper.
Configuration technology helps mitigate this type of manufacturing risk by preventing sales reps from making promises that shouldn’t be made related to usage. These usage questions drive choices that are available for the configured product. The data collected would include questions about my usage of the car including pulling a trailer. For example, how much weight, how many miles, etc. In the process, my specific needs would be revealed, an appropriate vehicle would be recommended and I would not be trying to turn a Mini Cooper into a tractor.
Let’s Design a New Product
Sometimes Sales and prospects get together and modify products to fit some non-standard application. In these situations, the company can find itself losing money on fulfilling an order for a special product that’s not properly specified during the time of the sale. Estimating takes configuration several steps beyond the selection of existing options and parts.
Once again, technology can mitigate this risk by bringing all of the interested parties into the discussion very early in the conversation.
Estimating Software to the Rescue
Estimating software brings engineering into the equation to allow accurate cost estimates, capability assessments and production processes. The company can decide if making a special product is indeed a good business move or a high- risk money pit with little chance of success.
Companies need to be able to address special needs regardless of whether it’s a matter of qualifying a standard product for unconventional use or re-engineering existing product to reflect wholly non-standard use. The problem is not addressing this market; the problem is eliminating the risk and turning these transactions into profitable sales.
CPQ and Estimating technology protect manufacturers from bad business and protect the customer from buying something that doesn’t work as they expect.