Businesses in manufacturing industries offering complex products or services to their customers often have 3 problems in common:
- The sales process is lengthy
- The complexity of the products or solutions offered, extends to the sales process itself
- Price calculations are difficult but require 100% accuracy due to slim margins
Nevertheless, today's customer expectations are on the rise and level with those in non-complex B2C sales. Customers demand accurate quotes at the best price, delivered in a short time. So how do today's manufacturing and engineering businesses solve this dilemma?
In the age of digitalization and Industry 4.0 they won't be able to avoid assessing certain technologies to boost profitability and revenue. When it comes to automation and digitalization of sales one of the first options to look at for manufacturing businesses is a Configure Price Quote (CPQ) software. (For those new to CPQ, feel free to read our article "What is CPQ?")
How do I know my manufacturing business will benefit from CPQ?
In this article we want to demonstrate the 10 most important business indicators that your manufacturing company will benefit from a CPQ software.
1. Does the complexity of product configurations affect your margins?
How many products, components, parts, materials, finishings or other manufacturing processes are usually compiled in your BOMs? The larger the Bill of Material and the more difficult it is for sales to configure products, the higher the potential to save money via automation to avoid them eating up your margin. If this is the case for your business, it makes sense to automate this part of the sales process and bring all information into product models or digest existing models from your ERP directly in a CPQ software. Read more about how to enable profitable Engineering-To-Order and Made-To-Order Processes in this article.
2. Is pricing and product information from your ERP always available to sales?
Always available product and pricing information from the backend is a pre-requisite for accurate proposal generation. With a cloud-based CPQ you can make all relevant data available for sales anytime, anywhwere and on any device. When assessing a quotation platform, also make sure that it is compatible to any of your existing product or configuration models (thinking Lo-Vc or IPC models) and seamlessly connects to your back end.
3. Do your sales teams make costing and pricing errors?
A well integrated CPQ system will load all relevant data from your ERP system and digest all pricing information directly in the quoting process. If you are choosing a CPQ system specialized for manufacturing needs, your sales reps can benefit from an internal pricing engine that is especially usefull for ETO and MTO industries. Another factor is the inclusion of external and internal pricing within the CPQ system to not only avoid errors but to increase costing accuracy.
4. Are your approval regulations increasing the length of the sales cycle?
Workflows and approvals are there to protect the accuracy of a quote but naturally they are adding time to the sales cycle. Unnecessary approvals can be avoided if triggers are set for error prone steps of the quotation process only. For example, not every configuration of a manufacturing product requires approval by engineering departments. With an advanced CPQ approvals and routing can be set up individually and email notifications will be sent to approving managers to accelerate the process.
5. Are your margins eaten up by real production costs later?
Costing complexity, especially in engineering-to-order (ETO) or made-to-order (MTO) scenarios, has a direct impact on your margins. The actual product margin is usually difficult to estimate, so when the sales team prepares the quotations, the costs are only “assumed” to be correct, and the applied margins over those costs remain theoretical. With a CPQ specialized for MTO and ETO industries, real costs can be directly and almost instantly compared with the ones used in the quotation, when the production process starts. This allows the company to greatly increase the accuracy of margins over time.
This was part 1 of our list of indicators helping you to understand the benefits of a CPQ solution. Watch out for part 2 of this series where we will extend this list with questions targeting Time-to-Quote issues, promotion introductions, revenue potential from up- and cross-sales and more.
Do you already have an idea of how a CPQ can help your manufacturing business improve on margin protection?
Watch our CPQ video to see a short demo of our software and find out how that looks like in practice.