Bottom Line: Next-generation configurable products sold through Configure, Price, and Quote (CPQ) channels will need to flex and scale to a broader range of customer needs than ever before, making real-time integration of product design, engineering, quality production and sales a must-have to succeed.
What A Successful CPQ Product Strategy Looks Like In 2020
Supporting short-notice production runs, achieving higher product quality levels, and launching next-generation products that are more configurable to customer needs is how manufacturers are going to grow in 2020 and beyond. Walk any factory floor where configure-to-order (CTO) and engineer-to-order (ETO) products are being built today, and the following differentiates those manufacturers achieving the greatest growth:
- They’ve all standardized on a single, scalable product model that engineering, production, sales, and marketing share and update in real-time. The cornerstone of any successful CPQ strategy today and into 2020 is how quickly engineering (PLM), manufacturing (ERP & MES), and sales & marketing (CRM) can anticipate and react to customers’ changing preferences and needs. When product models are at the core of a CPQ product strategy, every aspect of marketing and sales scales with greater accuracy than any other approach.
- Pricing is one of their core strengths since they can see in real-time how engineering’s changes to a product model are impacting manufacturing costs and margins. Knowing in real-time how a customers’ requested changes to a product model impact costs and margins give manufacturers who have integrated PLM, ERP, and CRM systems a formidable pricing advantage. An example is how effective visual configurators built on a single product model can show in a second or less how a change in product design impacts manufacturability, costs, and profits.
- They’re able to be more collaborative with channel partners and customers, designing and delivering more customized products they prefer. By closing the gaps between PLM, ERP, and CRM systems, manufacturers’ channel selling teams and partners gain greater flexibility in defining customized products. Engineering, manufacturing, and sales know in real-time if a customers’ requested configuration is buildable, profitable and when it will be produced.
- Knowing if a given customers’ product design is configurable and at what cost and margin is available in real-time, making quote approvals more automated gives them a competitive advantage. When product engineering, manufacturing, sales, and marketing are all looking at the same customer data at the same time, it’s possible to set guardrails on deals that meet specific cost and margin targets. Automating quote approvals is easier to accomplish, making it more efficient for channel partners and sales teams to close deals.
- They’re better able to manage the paradox of improving production efficiency while producing engineer-to-order (ETO) products. Relying on a single product model definition that each department can interpret in their specific lexicon improves production efficiency and communication across production floors. It also enables every team member on the production floor to understand how ETO-based product modifications impact how they’ll build each customized product.
Improving Time-to-Market & Time-to-Customer At The Same Time Pays
Engineering evaluates its success by how much it can improve the time-to-market for a new product. Manufacturing prides itself on time-to-customer performance, or never missing a customer delivery date. When both departments are sharing product and customer data, the following often happens:
- Reworked order counts plummet, perfect order performance jumps, and customer satisfaction increases. A specialty vehicle division of one of the world’s largest automotive companies has integrated PLM, ERP, and CRM systems so they can see the entire lifecycle of every configured product they’re selling. By taking a more model-based, design-to-manufacturing approach, order rework has plummeted from an average of six per build-to-order vehicles to one. Perfect order performance is up over 17%.
- Build instructions are updated faster and distributed immediately across the shop floor, so every operator knows what to do. An Aerospace & Defense (A&D) manufacturer whose business in almost entirely engineer-to-order had been relying on manual updates to work instructions. Real-time updates to the product model in their PLM system get immediately reflected in the product model, Bill of Materials (BOM) in the ERP system, and then feed new work instruction edits. Manufacturing engineering checks them for accuracy, and then they’re sent electronically across the shop floor.
- Scrap rates decline, Non-Compliance/Corrective Action (NC/CA) incidents are reduced, and product quality improves. The more engineering, manufacturing, and sales are sharing product information using a common model, the fewer mistakes are made on the shop floor. A Quality Manager told me recently that he was able to reduce scrap rates by 36% because manufacturing and engineering were sharing product data in real-time.
If you want to know the manufacturers who will dominate their markets in 2020, look for the ones who are taking steps to sync up PLM, ERP and CRM systems today. Each of these systems has a unique cadence or clock speed, and only by integrating them can any production operation scale. Successful CPQ strategies in 2020 and beyond will share the common attribute of relying on a product model as the catalyst for unifying engineering, production, marketing, and sales. Every department needs to see what customers want in their lexicon or language, to achieve greater production scale, speed, and quality.