A CPQ is Key to Closing Deals for ETO Businesses

Posted by Leo Boon Yeow on Feb 24, 2021 4:33:11 PM
Leo Boon Yeow
Find me on:

Engineer-to-order (ETO) businesses have a unique challenge in the manufacturing space: When your business model depends on mass customization, sales is never routine. Each project requires precise complex calculations, engineering resources and input due to the singularity of the final product or project.

During the sales process, that can surface in problematic ways. To close a project in the ETO industry requires plenty of resources: People, time, and precision. Delays are a constant problem. Competition is stiff, but at the same time, differentiating factors will depend on two things: The proposed solution, and its cost.

Knowledge Retention in ETO

When it comes to the proposed solution, it should be 100% tailor-made for the customer. Price is not an incentive if the proposed solution does not match requirements. 

Success for sales reps or sales engineers does not depend on just capturing exact requirements. It also includes deep knowledge of technical factors and engineering constraints that goes into an RFQ or tender.

As per a study by the International Journal of Industrial Engineering and Management (IJIEM) ‘the solution space is undefined in ETO companies and thus the number of possible configurations can be close to infinite.’ 

The Margin Dilemma In ETO

When you include margin retention into an RFQ, it makes the situation even more complicated for sales engineers. Just as with any other industry, ETO businesses have to contend with competitors, and there is a need to quote quickly, and accurately.

However, due to time constraints and competitive pressure, cost estimates for similar projects are often re-cycled. In ETO businesses, that cost estimate can lead to wildly-varying results: From undercharging for materials to overcharging for the final product.

Cost estimation, by default, does not deliver the accuracy needed. It could even lead to your business losing the tender. Repeated negligence in this aspect can even affect your company’s reputation as a leading ETO provider.

Historical data should only be used to determine how to calculate costs. The solution to this problem is to empower the engineering and sales team with a Digital Sales Platform powered by a CPQ, that can create accurate proposals and quotes in a very short amount of time.

The Applications Of A CPQ in a Digital Sales Platform: Making Production Data Available In Real-Time

According to another research paper in IJIEM, a product configuration system (PCS) can help with knowledge retention. A PCS keeps all historical data and previous designs within one system that can be quickly accessed by sales.

All previous quotes and information are instantly available in a cloud-based PCS or CPQ; this means that all engineering knowledge can be accessed and reused, even if it is in an Excel sheet that is only understood by its creator. 

With a CPQ built for manufacturing, your sales teams create quotes faster. With it, sales does not need to manually compare designs and projects to find similarities or extract and convert data from your ERP system. A cloud-based CPQ that is part of a Digital Sales Platform provides transferable knowledge that is accessible anytime, anywhere, creating that all-important factor: Repeatability.

At the same time, your CPQ can speed up the configuration and calculation process. It can automate processes like cost estimation using real-time costs and prices of materials, components, and products. Rules set up in the CPQ can speed up configuration and calculation significantly, helping sales generate RFQs in hours, not days.

Other Benefits For ETO Businesses

Besides the preservation of knowledge, the IJIEM papers discuss other benefits of a CPQ for manufacturing companies that use mass customization:

  • Use fewer resources in each project
  • Less routine work in sales and engineering processes
  • Reduced lead time in generating proposals
  • Improved quality of product specifications via an increase in accuracy
  • Improved certainty of delivery
  • Reduced data redundancies via tight integration between front and back office

Interested in how your business can benefit from a CPQ solution that is part of a robust Digital Sales Platform? Download our latest guide to find out how you can accelerate manufacturing sales. 

Download Digital Sales Guide

Leo Boon Yeow

Written by Leo Boon Yeow

Boon Yeow – is passionate about all things tech. His background as a journalist helps him understand complex B2B technology. His mission is to translate it into fact-based, comprehensible stories that help manufacturers do business better.

Leave a Comment

Sign Up For Our Newsletter