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.
Data Flow Through the Extended Enterprise
To build and maintain an effective value chain, key information about customer orders must flow freely, accurately and in real time among all supply chain partners. This is particularly true for MTO/ETO and other companies where complexity is inherent. That's where configuration software comes in. It can eliminate the business process silos of information that reside in the sales, marketing, order entry, engineering, shop floor planning/routing and production departments and consolidate key data within a central repository.
Product configurators have come a long way from yesterday's front-end solutions, which were often costly and unwieldy, highly customized, involved long implementations, and delivered limited enterprise functionality. Basically, they were designed to reduce waste by preventing order errors and engineering snafus. Newer and more advanced configuration engines take a bottom-up, rules and constraint-based approach, relying on object-oriented database technology and bundling of business process templates to facilitate easy access to real-time information.
Characteristics of New Generation Configurators
What kinds of technology features should companies look for in an enterprise configuration application? First and foremost is integration — both integration of the configuration modules with each other, and integration of the configurator with existing enterprise systems, such as ERP, materials resource planning (MRP), customer relationship management (CRM) product data management (PDM)/computer-aided design (CAD) and advanced planning systems (APS). This integration with legacy systems is what allows users to access and retrieve data from a number of sources and import it into the central repository.
Second, the software should take a bottom-up approach whereby information — and the rules required to design, sell and build a product or deliver a service — are maintained in a centralized repository. By maintaining data in this fashion, information can be disseminated and distributed throughout the organization — and to channel partners — based on one complete configuration repository to accommodate and record ad hoc changes in real-time no matter where they occur. Additionally, this approach will eliminate the need to keep writing custom code every time a change is required for a product or service.
Third, the solution should be Web-enabled to foster close collaboration among internal and external supply chain players, allowing them to exchange real-time information from any location over the Internet, an intranet or extranet. With this capability, sales and order entry, as well as engineering processes, can be streamlined to eliminate redundant data entry (e.g., multiple BOMs) and excessive paperwork. As a result, customer response and order processing times typically drop.
Finally, look for a solution that provides a good match with your industry and business processes, and also includes specific industry and/or product line templates. Obviously, the sales, order, engineering and production processes required by an MTO manufacturer of doors and windows will differ from those required by an ETO producer of heavy industrial processing equipment. Likewise, the needs of a configure-to-order (CTO) telecom or financial services organization are quite different from both manufacturing models. Industry-specific templates bundled in with the software solution and an industry best practices library available from its vendor, go a long way towards ensuring a good fit and accelerated hassle-free implementation.
Look for Broad and Deep Functionality
To derive the greatest business and operational benefits from an enterprise configurator, it's important for a company to first define its unique complexities, and then select a solution offering functionality that addresses that complexity over a wide range of supply chain processes. For example, depending on the business model and critical path process workflow, a CTO manufacturer might look for the following configuration functionality:
* Flexible quoting and cost estimating designed to handle complex, multi-level products/services.
* Guided selling tools and templates for all product types and sales channels.
* Pricing based on product specifications and options, for the sales force, dealers, distributors and customers.
* Strong rules-based engineering and manufacturing execution functions to accommodate generations of multi-level BOMs, detailed process routings, CAD drawings for exchange with in-house and external supply chain partners, and customers.
* Demand flow capabilities to facilitate scheduling, process engineering, materials handling and administrative tasks.
* Generation of CTP date and MTO component/subassembly scheduling based on finite material and/or capacity planning.
* An intelligent integration control system that serves as a "visibility dashboard," enabling users to define and manage various activities on the system.
Keys to Rapid Implementation and Return on Investment
To achieve a rapid implementation and ROI on the configurator investment, it is important for CTO companies to take the following steps:
Define the project scope. Identify areas where the configurator can add the most value, then map out an implementation path based on products, processes and problems. If some systems and processes need to be redesigned — for example, part numbering, product coding or nested product configuration — map out workflow procedures for these processes, using industry best practices as a guide.
Set a timeline, budget and resource allocations. Have the executive sponsor and implementation team meet to establish a realistic budget and timeline, then identify and allocate the necessary resources for implementation. Also, assign a project manager and draw up a project management plan that includes periodic benchmarking and execution progress reporting. These steps will ensure that the team takes a pragmatic approach, focusing on results and staying within the project scope, schedule and budget.
Cleanse data for optimum integrity. For any CTO company, the business value of a configurator relies on the appropriateness and integrity of the data in the central repository. For this reason, it is imperative to ensure that the right data sets are identified, collected and cleansed prior to implementation of the enterprise configuration application.
Don't skimp on training. Take advantage of the software vendor's professional services to implement on-site or classroom sessions. This will ensure that all users throughout the enterprise are fully on-board in how to use the system for maximum workflow efficiency and productivity. In addition, make sure the IT staff is well-trained in monitoring and maintaining the software for maximum uptime and reliability.
In meeting customers' product configuration and customization requirements, capabilities can be a powerful differentiator in the marketplace, whether the company happens to be selling food processing equipment, steel and wood office furniture, elevators, or mobile phones and service. First you must know the configurator characteristics that will best fit your company, and then follow the steps outlined above to make sure any implementation goes smoothly and brings a healthy ROI.
About the Author: Dale Colosky is president, CEO and founder of Configuration Solutions. Colosky has many years of experience in the manufacturing software industry and is a frequent writer and speaker at APICS, A.I.I.E., and A.I.C.P.A. events.