Enterprise configurators can reduce sales and engineering costs, increase profit margins and improve customer satisfaction. But what should you look for in a solution, and how do you go about implementing it for the best results? Here's how.
Historically, product configuration software applications — whether standalone or part of an enterprise resource planning (ERP) system — have helped manufacturers of complex product lines to better manage their front-end sales and order processes. Used primarily by make-to-order (MTO) and engineer-to-order (ETO) producers, product configuration software delivered value within its own limited sphere, and was rarely perceived as a significant corporate asset or competitive advantage.
That perception is rapidly changing. The shift is being fueled by competitive pressures, the ubiquity of the Internet and advances in configuration software technology. Manufacturers across every industry — and service companies, as well — are seeking new and innovative ways to compress lead times and speed up order-to-cash cycles and achieve greater efficiencies, higher profit margins and superior levels of customer service. In today's economic climate, it's becoming more and more apparent that the market winners on their competitive turf are not necessarily the suppliers of the "latest and greatest" products, but rather those organizations with the best track record for delivering products to customers, when, where and how they want them.
The Pain of Product Complexity
Because of the complexity of their businesses, make-to-order and engineer-to-order manufacturers have long faced the challenge of trying to keep internal and external supply chain partners on track to meet order delivery dates in a timely fashion.
Whether their products are heavy industrial (e.g., processing equipment, pumps and hydraulic systems) or consumer-oriented (e.g., doors, windows, high quality furniture), cycle times tend to be long and the order process complicated. This can be due to a number of factors: Either the products themselves are complex, involving multi-level or system bills of material (BOMs), or the processes required to make the products are complex and must be precisely sequenced. For some products, such as engineered-to-order capital equipment, a high degree of technical expertise and engineering services may also be required before the order can be properly configured, quoted, ordered and sent to the shop floor.
Typically, the end result of product, process or technical complexity is that an inordinate amount of time and labor is expended to ensure that the order is accurate and that the final product meets customer specifications and can be delivered on time. For MTO and ETO producers, getting it wrong means not only money lost, but potentially a customer lost forever.
Growth of the MTO Business Model
The make-to-order business model has been expanding in recent years. In this age of "mass customization," some formerly make-to-stock manufacturers are beginning to feel the pain of complexity, what with all or part of their customer orders having to be customized to meet customer and consumer demands. Their plight is exacerbated by current cost-saving trends such as global sourcing, multi-plant production and outsourced or even offshore manufacturing partners. This is as true for fashion/apparel manufacturers as it is for makers of durable goods such as automobiles and appliances.
Product configuration applications can help these diverse business models better manage their varying product, process and technical complexity through integration of business processes — from product design itself to sales, customer and order management, to engineering services and/or product configuration, production and fulfillment. This concept of product lifecycle management (PLM) has proven to be invaluable in helping companies create faster and more efficient supply chains, both inside and outside their four walls, and to improve customer service levels for greater profitability.