Companies that offer configurable products face special challenges when it comes to quoting, processing and costing orders. Let’s take a look at some of the key areas of concern and what companies can do to handle the unique problems these businesses face.
First, let’s use some examples to define what we mean by companies that offer configurable products and services.
The portable music player you just purchased was available in five different colors and two disk capacity sizes. While this does provide for ten finished items, it is really an example of discrete manufacturing since the item is well defined, is always built to stock and the cost will only vary on the two different disk drives.
The computer you are using is a different story. You may have purchased it as a complete system that had a predefined set of components, and thus, a predefined price and cost. More likely, you had the ability to select form a number of choices for the processor, memory, hard drive, keyboard, mouse, etc. When you calculate the number of possible combinations, you could be easily looking into the thousands.
While the computer company may offer certain pre-built models through retail, in most cases they are looking at building the computers as the actual orders are taken. They also will be providing quotations on any of the possible configurations over the phone, which means price and costing information needs to be readily available.
Although we have used the computer company as an example so far, we know that other companies selling configurable goods and services may have different or additional issues as well. Let’s take a general look at the issues configurable product companies face:
Estimating & Quoting
When you have a potential sale on the line you want to be able to provide your pricing information as quickly as possible. Unfortunately, you have already seen where one product could have hundreds or thousands of price and cost combinations. Many companies wait until the request is made and then pull out the spreadsheet or calculator.
Looking up the price and costing information and preparing the quotation could lead to a time delay, giving your competitor an advantage in closing the deal. Or, worse yet, you make a mistake on the calculations and taking the order actually costs your company money.
In addition, the estimating at some companies is particularly complex and only one or two people are actually permitted to generate quotes. We have all heard the “hit by a bus” argument, but what if they are just out to lunch or on vacation and the process gets backed up? Perhaps the prospect wants to make one small change after it is created? It would certainly seem preferable to find a way to calculate the information quickly, accurately and make it accessible to everyone.
Thankfully you did receive the order, but now you need to transfer the information from the estimate spreadsheet or word processing document to the production department. If you are dealing with a manual process, this usually means another point of re-entry and another opportunity for a mistake, or at least delay.
The way your company has decided to invoice customers can also have a big impact on what data you will later see in your system. For example, if you entered a computer order by identifying each component as a separate line item, you will properly record the sale and reduce the inventory by the appropriate quantities as the items are shipped. But, what if you prefer to invoice as a single line item from the complete unit?
Making manual entries for the component parts would again open the door for more processing and mistakes, so it would be wiser to utilize a bill of materials capability to automatically make entries for the component parts.
For many reasons, you can see why it is best to automate the configuration process as much as possible. And for many of you, this could simply be a matter of better utilizing software and applications you already own as part of your ERP solution.
However, as companies look to provide configurable solutions as a way to protect or increase product sales, many are also looking for a solution that allows them to apply rules and logic that is unique to them.
Either way we will be happy to discuss your needs and help find the solution that is right for you.
If you are looking to learn more about a possible solution for the issues that providing configurable products and services can pose consider attending one of the upcoming
webinars. Configur8or is a software product designed to automate the configuration process, thus removing the need for multiple manual entries and reducing the associated possibilities for errors. Upcoming webinars in include:
Wednesday, February 11, 2009 at 2:00 PM
Wednesday, February 25, 2009 at 2:00 PM