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Showing posts with label cpq. Show all posts
Showing posts with label cpq. Show all posts

CPQ as a cartoon

Posted On Saturday, June 15, 2019

Looking for a simple way to introduce CPQ. This video was made within 15 minutes.

Mass Customization - a brief history

Posted On Thursday, May 2, 2019


During the 1980-90’s manufacturers in the developed world were faced with saturated home markets and sophisticated customers. The markets were so large though, that they remained attractive to emerging competitors from developing countries, typically entering the market with low price and relatively unsophisticated products.
Many of the traditional manufacturers responded to this competition with the continuous-improvement school. In continuous improvement, the manufacturer drives the employees to find faster and more efficient methods to develop and make low-cost, defect free products to be able to deliver new products to the market quicker. This enabled mass producers to quickly respond to changing market preferences, and to continuously invent and use new technology.
These manufacturers were able to continually introduce new products with more features, increasing the variety offered to the customer. A new paradigm emerged from this – mass customization. According to the mass customization guru Pine, a mass customizer is a company that “develop, produce, market and distribute goods and services with such variety that nearly everyone finds exactly what they want at a price they can afford”.
However this move move to mass customization created conflicts in the different system that had been optimized for low cost and lean production with relatively low variety. Continuous improvement and mass customization require very different organisational structures, values, management roles and systems, learning methods, and ways of relating to customers. It also requires a completely different approach to product description as described above.
Despite the fact that so many companies are struggling with mass customization, most manufacturers are joining the quest. Mass customization offers a solution to the basic dilemma of whether to produce large volumes of standardized goods at a low cost or to decide to differentiated products in smaller volumes at a higher cost. The choice does not have to be made; a true mass customizer can be both a mass producer and an innovative specialty business.
CPQ in the era of Mass Customization
Mass customization requires a very different approach of selling products compared to traditional selling of standard products. The customers are offered a wide range of options of each product, and must be supported in the selection process. This site’s purpose is to look into the methods when implementing CPQ systems which are required when selling mass customized products.

Configurator challenge

Posted On Friday, March 8, 2019


The configurator is one of the more difficult parts to evaluate in a CPQ-solution. The most straight forward way is probably to set up part of your real product rules in the CPQ system. However, this exercise is time consuming if you are evaluating multiple vendors. You are also likely to get questions from the vendors which in turn consume even more time.
It is not uncommon to try to solve this by instead giving the vendors a general problem and ask them to solve it. The travelling salesman problem is one typical example, however these problems tend to be completely unrealistic and have almost no relation to real configuration problems.
Below is an example of a configuration task that can show you how the configurator works. The main complexity with this challenge are all the ‘or’ statements which are very common product rules problems, but that are difficult to solve with a simple configurator.
Please contact us to get the expected results for the scenario.
Configuration task 1: 
Variables:
  • A: integer between 1 and 5
  • B: integer between 1 and 5
  • C: integer between 1 and 5
  • D: integer between 1 and 5
  • E: integer between 1 and 3
  • F: integer between 1 and 9999
  • G: integer between 1 and 9999
  • H: integer between 1 and 20
Rules:
  • Rule 1: A=2 requires D=4
  • Rule 2: B=1 requires (A=1 and E=1) or (A=2 and E=1)
  • Rule 3: C=1 requires (A=3 and B=2) or (A=4 and B=2)
  • Rule 4: C=2 requires (A=3 and B=2) or (A=4 and B=2)
  • Rule 5: C=3 requires (A=2 and B=1) or (A=3 and B=2)
  • Rule 6: C=4 requires B!=4
  • Rule 7: C=5 requires D=3 or D=4 or D=5
  • Rule 8: A=2 requires G=1 or G=2
  • Rule 9: D=3 requires F=3 or G=4
  • Rule 10: A >= F
  • Rule 11: E >= F + G
  • Rule 12: H = A * B

Publicly available CPQ examples

Posted On Saturday, February 2, 2019


Configurators built using CPQ software :

Aritco (Animech Technologies)
Bennington Marine (Verenia)
B├╝rkert (Tacton)
Demag (Camos)
Ebara (Intelliquip)
Festo (Camos)
Grundfos (Configit)
John Deere (FPX in the old version, Configit in the new version)
Maxon motor (Camos)
Mercedes-Benz Trucks (CAS Software / SAP)
Piab (Tacton)
Scania (Tacton)
Tuff Shed (KBmax)

Demos by vendors:

8-queens problem (Configit)
Bike/Lawn Mower/Etc (e-Con Solutions)
Cabinet Configurator (Configure1st)
Hi-tech, SaaS and IT/Managed Services (CallidusCloud CPQ)
Scissor lift/Cupboard/Etc (DriveWorks)
Sudoku (Tacton)

Notable configurators built in-house:

DAF Trucks
International Trucks
MAN Trucks
Montech AG
Renault Trucks
Schindler
Siemens AG
Volkswagen


Other configurators may be found in the configurator database, however most of them are very simple B2C (Business to Consumer) products.

Why is product configuration complex?

Posted On Thursday, January 17, 2019


In essence, a product configurator is only a bunch of selection menus that you need to keep track of to validate that it is technically correct solution. So why is it complex, and why do you need a tool for it?

The easiest way to explain this is to think of a typical configurator for a product. Imagine that our sales configurator has 25 questions, with an average of 10 answers to each question. This is a reasonably sized configurator, your product may very well have many more questions. So how many theoretical variants of the product do we have? To calculate this, you have to take the number of variants in question 1 which is 10, multiple by the number of variants in question 2 which is also 10, and keep on going...

So basically 10x10x10… until we get to 25 questions. So this gives us 10^25 number of solutions (that’s a 1 with 25 zeros).

This is a large number, but how large is it? Well, imagine we spend 1 millisecond (a thousand of a second) to analyze each potential solution just to make sure it is valid or not. Well, then we would spend the time equal to the age of our universe 10000 times (the age of the universe is about 10^21) to validate that our solution is correct.

So it becomes obvious we cannot analyze each solution in a configurator. We can cheat - and just try the configuration the sales rep put together and check that all rules are ok. But then we won't know if there are any better solutions out there.

Tacton uses a constraint-solving configuration engine, to try to do something smarter.

Contact us to find out what!

Common abbreviations explained

Posted On Wednesday, December 19, 2018


Below is a list of frequently used abbreviations used in relation to CPQ:

  • ATO – Assemble To Order;  is a production approach where once a confirmed order for products is received, the products are assembled.

  • BOM – Bill Of Material; describes the different components/articles that together create a product. A BOM for a bicycle, for example, consists of all the parts that make up the bicycle: the frame, the saddle, wheels, and so on.

  • BTO – Built To Order; sometimes referred to as make to order (MTO), is a production approach where once a confirmed order for products is received, products are built.

  • CAD – Computer Aided Design; is the use of computer systems to assist in the creation, modification, analysis, or optimization of a design.

  • CPQ – Configure, Price and Quote; the complete software suite for configuring, pricing and quoting your custom product.

  • CRM – Customer Relation Management; the software suite for managing a company’s interactions with customers, clients, and sales prospects. It involves using technology to organize, automate, and synchronize business processes—principally sales activities, but also those for marketing, customer service, and technical support. 

  • E-BOM – Engineering Bill Of Material; the list of engineering components/articles in a product (see BOM). Typically used as an complement to S-BOM and M-BOM.

  • ERP – Enterprise Resource Planning; the software suite to manage information across an entire organization, including finance, manufacturing and sometime sales and service.

  • ETO – Engineer To Order; a product in which after an order is received, parts of or the design is done uniquely for the specific customer.

  • M-BOM - Manufacturing BOM; the list of components/articles required to manufacture a product (see BOM). Typically used as an complement to S-BOM and E-BOM.

  • MTO - Made To Order; see BTO (Built To Order)

  • PDM – Product Data Management; typically an IT-system containing information about the product like CAD-drawings etc.

  • PLM – Product Lifecycle Management; in essence the next generation of PDM (even though vendors of PLM like to differentiate)

  • Sales-BOM – As Sold BOM; which is the list of component that are sold to a customer. These components are broken down to a E-BOM.

  • SKU - Stock Keeping Unit; a distinct type of item for sale, often the items included in a S-BOM. Typically used as another term for article or component. 

How CPQ analytics can improve product development

Posted On Friday, August 18, 2017


One interesting aspect of an implemented CPQ solution is the possibility to analyze sales in a new way.

Traditional sales statistics answers the question what has been sold. This is somewhat interesting but normally it doesn’t bring very much new insight to the table.

With clever BI-tools (like Tableau or QlikView) it’s possible to slice the data in a way that will give you a better understanding on what’s tending and who is really doing profitable sales. But this still doesn’t answer the big question… With ordinary sales statistics one can tell WHAT is selling, but it doesn’t answer the question WHY?

A CPQ solution makes it possible to keep track of all quotations. This opens up for analysis where one can compare successful quotes with the less successful. This type of analysis will give concrete measures on what products that has been offered and make it possible to compare it what has actually been sold.

The analysis gives the possibility to reduce the product portfolio based on what has been part of actual quotations and if it has been sold. This gives a rating per sub-component whether a certain product is providing adequate value on the market.

The analysis also answers the question where there is possibility for new business. By understanding the type of deals that are refused by customers gives great input for product development.

This video (found on the Tacton Youtube-channel) introduces the concept of CPQ analysis.

What is CPQ?

Posted On Tuesday, August 12, 2014

Definition

CPQ is an acronym for Configure, Price, Quote. CPQ is used to describe the process of selecting components (configure), handling pricing (price) and generating documentation (quote). CPQ software is primarily used for complex products, services or a combination of the two.

CPQ solutions
  • supports a simple way to select valid product combinations with respect to product rules and limitations
  • price the product correctly according to bundling and discounts
  • creates an accurate and persuasive quote based on this information
CPQ software connects front and back end systems and automates the lead-to-cash process.

What is a CPQ process?

What’s included in a CPQ process? Is it all automated and in what way is it adoptable and flexible?

Configure: All complex products have limitations to how modules or sub-components can be combined. The user normally specifies key features and main products, a configurator handles all limitations and itty-bitty details.

Price: Manufacturing costs, geographies, competitive situation, and local protocols - the pricing can be just as complex as the product itself. The price adjustments should both be automatic but also offer flexibility and advice for sales tactics.

Quote: Documents describing a complex product includes texts, illustrations, data sheets, drawings. All specific for each offer generated. The level of details should be flexible and document generation should be fully automated.

CPQ analytics

Posted On Tuesday, August 5, 2014

Understanding the principal drivers for successful sales is essential when developing new products for a fast changing competitive market. This extends the understanding of important key differentiators and the effects by geography and segment.

Using big data from your CPQ solution unlocks analysis capabilities for data exploration. This enables analysis to understand customer segments, pricing and key business drivers. In the end the CPQ data can drive a more optimized and targeted product offering.

What’s really interesting is to see the link between customer need, product selection and likeliness to win the deal. This is the core idea of CPQ analytic, that the logs from the CPQ solution contains underlying cause for successful selling.

To analyze the perceived value there must be a link between three main components:

• What's in the product portfolio?

• What products offerings wins business?

• What value does the solutions deliver?

If you want to know more about CPQ analytics, stay tuned.

Top 4 reasons why manufacturers choose a CPQ solution

Posted On Wednesday, July 23, 2014

What criteria can you use to determine if your company needs a CPQ solution? How can you tell when it’s time to invest in CPQ software?

I wouldn’t set out specific criteria as much as offer four reasons that I think will help you sort out an answer.

This is what we hear over and over again from clients and potential customers.

Spend more time selling

Is there a feeling that not enough selling is being done by your team? If so, this deserves your immediate attention.

Sales people are expensive and their primary role is to engage with customers and prospects. This is how your organization generates revenue.

Preparing quotations and proposal documentation is still a major tasks in many sales organizations. If this can be reduced there will be more time for actual selling. This is the first reason to invest in a CPQ solution.

Better proposals

A good quote delivers a vibrant, crisp and compelling proposals that distinguish you from the competition. A superior quote will persuade your customer and win more business.

Developing best practice for quotes, RFP documents and other sales documentation enables your team to increase the overall quality of the delivered proposals.

A better proposal will tell the customer that you will fulfill their needs and deliver what the customer wants. A better proposal that will provide important benefits and clearly describe the delivered value. A better proposal that validate that you have the right qualifications to fulfill the customer needs.

The proposal should send the message why your company better than anyone else can deliver the optimal solution with the highest value. This is the second reason to invest in a CPQ solution.

Get the price right

Working with complex products is somewhat problematic. To get the price right is a challenge and it makes a big difference when it comes to bottom line earnings.

The first problem: One option often requires another option. Forgetting that other option in a quote can be will severely reduce the profit. But to keep track of all options and exception is a difficult task that requires up-to-date knowledge.

The second problem: When multiple products are combined there is normally a reduction in price that only applies under certain conditions. To work with packages is an efficient way to expand the offering, but it also requires that up-to-date knowledge.

The third problem: In a changing world pricelists need to adopt fast. What was previously done on a yearly basis is nowadays more likely to be day-to-day updates. To be able to adopt to changing circumstances also requires that up-to-date knowledge.

The third reason to invest in a CPQ solution is the fact that up-to-date knowledge should be part of the CPQ package.

First to respond

When a customer asks for a quotation or proposal it’s unlikely the request is sent only to your company. The most likely scenario is that the same questions and requirements will be sent to up to a dozen competitors.

Companies with an implemented CPQ solutions reports that speed makes a difference when it comes to closing more deals. A rapid respond really makes a difference.

Being the first to respond will in itself not guarantee better business. But in combination with more time selling, better proposals and correct pricing it definitely makes a difference. That’s why it’s the forth reason to invest in a CPQ solution.

Why CPQ - business drivers at a glance

Posted On Monday, July 14, 2014

Configure price quote (CPQ) software cuts through sales difficulty to help leading corporations sell more effectively. CPQ empowers sales reps and associates to recommend combination of goods and services, generate accurate quotes, and gets deals signed faster.

With effective step-by-step guided selling and streamlined workflows for quotes, proposals and contract management CPQ software takes advanced sales to the next level. CPQ increases average deal size, accelerates sales cycles and makes your business more professional.
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