In Mind Cloud Blog

Smart Manufacturing: The Definitive Glossary

Posted by Leo Boon Yeow on Jan 15, 2021 8:00:00 AM
Leo Boon Yeow
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The manufacturing industry is incredibly complex. Manufacturing Sales involves numerous parties, each with their own processes. To help you understand each party better, we compiled a glossary filled with commonly used acronyms and terms—with a digital-focused spin. Let us help you to build up your knowledge so you can take control, and accelerate your manufacturing digitalization projects. Watch this space as we continuously update this list with the latest digital manufacturing terms.  

A

 

ASCL - Average sales cycle length

ASCL is a metric used to measure sales efficiency or success in digital sales implementations. It refers to the average time it takes for a lead to convert into a sale. In traditional manufacturing sales, this process can take weeks. Shortening this time with digital solutions can help ensure sales efficiency and lower cost-of-sales—providing your business with huge savings that improve profits. 

 

Automation

The manufacturing sales process is full of labor-intensive manual work. With digital solutions, manual tasks like calculations, change management, or product variation can be performed automatically (partially or in full), giving sales teams more time to focus on selling. Automation frees up precious resources, allowing manufacturers to pursue even the most ambitious of business strategies.

 

B

 

B2B Sales – Business-to-Business  

Most manufacturers sell to other manufacturers or businesses—a process we call Business-to-Business (B2B) sales. In manufacturing, the process of selling products (or services) to other businesses is incredibly complex.

There are many factors like material costs, supplier mark-ups, or market conditions that affect it. These factors lead to critical risks that are best managed with a digital solution that encompasses the entire sales process.

A digital sales platform can also help manufacturers manage external sales channels such as partners or distributors and enable new ones such as digital commerce.

 

B2C Sales - Business-to-Consumer

Some manufacturers adopt a different business model to sell directly to consumers (Business-to-Consumer, or B2C). This model helps them bypass several layers in the sales process to reap larger profits and transfer savings to their customers.

While B2C sales processes are less complicated in configuration, costing, and pricing, they need to manage the end-to-end process from marketing to logistics fully. They are also held accountable for the large number of customers they serve. Commerce solutions are indispensable in B2C sales but are also entering the B2B world.

 

BoM - Bill-of-Materials 

Manufacturing a product requires many materials. A Bill of Materials is a structured list of parts or raw materials needed to assemble a product. It will also contain sub-assemblies that signify different steps in the assembly process.  

Example - A laptop may include; circuit board assembly, screen assembly, outer cover assembly, and battery assembly. 

In manufacturing, BOMs may contain up to thousands of items. BOM accuracy is a critical factor when selling a manufacturing solution and inhibits error risks in production. This need makes a tight two-way backend integration of any quoting tool essential. 

 

BoM Level - Bill-of-Materials Level

This term refers to the level that an item or part occupies within the hierarchy of a BOM. For manufacturing businesses, the BOM level determines what components are directly or indirectly used in a parent item.

When an item is a sub-component, it shows all the different components, such as the purchased parts and raw materials. When BOM levels increase, the complexity of cost calculation increases along with it.

This is where a CPQ built for manufacturing can help. A modern CPQ extracts the most updated information from the ERP and perform complex calculations that consider each BoM level. 

 

C

 

Cloud Computing 

In simple terms, cloud computing gives manufacturers access to computing services (software, storage, analytics, intelligence, etc.) over the Internet. These services are defined by software and are elastic—letting manufacturers scale usage to as little or as much as their business needs.

This elasticity gives cloud computing the advantage over owning (and operating) a costly on-premise IT infrastructure. Cloud is the key to digital success and the backbone of smart (or digital) manufacturing. It allows manufacturers to explore new production systems, modernize operations, and explore new business models.

 

CLTV / CLV – Customer Lifetime Value

Manufacturing customers can stay for as little as a few months or as much as a few decades. CLV refers to the revenue a manufacturer can expect from a customer's projected time with them.

Businesses typically use this metric to identify potential customers to focus sales efforts on for the highest returns. While CLV can be observed manually, a well-integrated digital sales platform uses advanced data analytics to help sales teams quickly identify high CLV opportunities.

 

CMS - Content Management System

Even for B2B manufacturers, a web presence is essential. It is a customer-facing portal that reflects the entire business. Manufacturers need a reliable CMS to manage their websites and the associated pages.

However, in manufacturing, the impact of a CMS is not just skin deep. It is used to manage content in digital sales channels enabled by a digital sales platform. Partner, distributor, and customer portals are easily maintained from one system, allowing control and efficiency.

 

CPQ – Configure-Price-Quote for Manufacturing

A manufacturer's CPQ extracts valuable information from the ERP—a source of essential business data that spans from production to fulfillment—and makes it available throughout the organization. 

A CPQ enables manufacturing sales teams automated, two-way access to that data—resulting in faster, more accurate quotes for complex products and a cleaner ERP. Besides automating the sales process, a CPQ also allows manufacturers to respond faster and more accurately in other aspects of the business, such as production. 

A CPQ needs to be tightly integrated with a manufacturer's ERP for it to work. But a CPQ's true potential is realized when it is coupled with two other essential services: CRM and E-Commerce.

 

CRM – Customer Relationship Management for Manufacturing

Manufacturers have evolved to become smarter, more connected, more customer-centric, and more complex. So have their customers. A manufacturing-focused CRM helps manage the complexity from both sides.

At the same time, it keeps sales teams and customers updated with the latest data from the manufacturer's ERP, CPQ, or Commerce systems. It provides manufacturers with a 360-degree customer view and the ability to match the customer's request for speed and customization. 

 

CX – Customer Experience

Every industry is now focused on improving the customer experience. In the manufacturing industry, more businesses are making it a priority to ensure recurring revenue. The COVID pandemic accelerated the use of digital sales channels—making it more critical than ever before.

B2B customers experienced the convenience and speed of the B2C buying experience—and are expecting their B2B interactions to be on par as well. Satisfied customers are more likely to become loyal, repeat customers. 

Many businesses in the B2B manufacturing industry invest heavily in manufacturing-focused digital sales platforms to ensure a consistent customer experience across all touchpoints so that customers stay loyal.

 

D

 

Digital Manufacturing

All manufacturers use technology to improve processes or operations. But digital manufacturing in the age of the fourth industrial revolution (4IR) refers to the use of new or emerging technology across the end-to-end value chain. These new digital tools can integrate with or replace legacy systems. 

Manufacturers that adopt digital see tangible benefits like productivity gains, reduced bottlenecks, minimal errors, improved quality, shortened time-to-market, and most importantly, increased revenue. One of the most commonly digitalized processes is the sales process. 

A digital manufacturing sales process is automated and streamlined to shorten the sales cycle. A digital sales platform also impacts several other parts of the business, such as production and fulfillment.

 

E

 

E-Commerce - Digital Commerce

Today customers expect a seamless B2C buying experience—even from B2B manufacturers. With digital commerce or an e-commerce storefront, B2B manufacturers can enable 24/7 access to their business via customer, partner, or distributor portals. An e-commerce portal or a digital storefront can also allow manufacturers to double down on their after-sales strategy to boost revenue and improve customer relationships. 

 

EMS - Electronics Manufacturing Services

An EMS company deals with electronic components for original equipment manufacturers (OEM). The services provided range from design, manufacture, testing, assembly, and distribution. However, many EMS companies also offer various value-added services, such as support with design, design for manufacture, supply chain management, configure-to-order, outbound logistics, and repair elements. Due to the make-to-order nature of an EMS business, calculating costs (products and services) can be a significant challenge that a digital sales solution may solve.

 

ERP - Enterprise Resource Planning

Businesses in almost all major industries use ERP software. This system helps manufacturers manage the organization's financials, inventory, distribution, costs, people, processes, production, purchasing, capacity, assets, orders, etc. To put it simply, an ERP is a manufacturer's most fundamental asset. Today, manufacturers are integrating advanced solutions to enhance their ERP with digital capabilities—and unlocking its full potential. 

 

ETO – Engineer-to-order

ETO is a manufacturing process that is often used for extremely complex or specialized products. The process covers design, engineering, and production. It ends once the finished product reaches the customer. Products manufactured through this process are engineered (or customized) by the manufacturer according to customer specifications. In an ETO business, a digital sales platform is a considerable asset. It helps the business achieve repeatability, and helps the company save precious resources. It retains historical data (previous designs or customizations) and can be quickly reused to significantly accelerate design, engineering, and cost calculation of new orders. 

 

I

 

Industry 4.0

Industry 4.0, or the fourth industrial revolution, refers to how technology should shape the manufacturing industry's future. It is currently defined by four clusters of disruptive technology: Connectivity. Intelligence. Human-machine interfaces. Digital-to-physical conversion. While each cluster is an enabler of massive change, manufacturers can capture the full potential of this new wave of manufacturing by investing in each cluster simultaneously. 

 

Integrated Digital Sales Platform

An ERP holds a manufacturing company's most critical data. By integrating a digital sales platform with an ERP, manufacturers can extract this data to improve sales and other business operations like production or fulfilment. When the integration is tight and seamless, customer-facing information like cost or price can be fed back into the ERP, keeping it always updated with the latest data.

 

L

 

Lot Size of One

Lot Size of One is a key Industry 4.0 concept. The idea behind it is simple, but it can be incredibly rewarding when made possible. In simple terms, Lot Size of One is the exact opposite of mass production, a common manufacturing goal. A manufacturer only produces an item when a customer asks for it. 

For the manufacturer, this means they only creates products that have 100% chance of being sold. Manufacturers that achieve Lot Size One efficiency can also customize every single product according to the customer’s specification (mass customization). This approach helps reduce finished product inventory that may not even get sold (locked up capital). 

To achieve Lot Size of One, manufacturers need to digitalize their sales processes, while upgrading their core production capabilities (with emerging technology like additive manufacturing for example). With a fully digital sales process, manufacturers can ease the bottlenecks in ordering (before production) and fulfilment (after production).

 

M

 

MaaS – Manufacturing-as-a-Service

MaaS is a service-oriented business model that has been around for a long time. In this model, customers specify what needs to be made, and the manufacturer makes it. With the introduction of Industry 4.0 digital technology (IIoT, additive-manufacturing, connectivity, big data, AI, and cloud computing), MaaS is starting to make a comeback.

Manufacturers are now pivoting their businesses to provide manufacturing platforms that can produce products faster, cheaper, and in any quantity, while keeping resource consumption in check. These platforms are networked and tightly integrated. A vital component of a MaaS platform is its digital sales solution. It connects customers seamlessly to the MaaS platform and ensures smooth delivery of production service.

 

MTO - Manufacturing-to-Order

MTO is a strategy that lets clients customize and purchase pre-designed products from a manufacturer. Manufacturing only begins when a customer order is confirmed. In an MTO business, it is key to possess pinpoint accuracy during the highly complex configuration phase. Any lapse or errors could result in potential losses—an avoidable scenario. With an advanced digital sales platform built for manufacturing, manufacturers provide much more accurate quotes, keep their ERP updated with new orders, and intelligently automate intensive manual tasks like cost adjustments or margin control.

 

MTS - Made-to-Stock

Manufacturers who employ the MTS business model conceptualize, design, manufacture, and store these products. Customers then buy these products and sell them with some slight modifications (like rebranding). MTS manufacturers require the highest accuracy in demand forecasting.

Any errors here could result in overstocking or understocking. To overcome this challenges, manufacturers can digitalize their sales process with a digital sales platform. A platform that is tightly integrated with their ERP can help manufacturers can use past production data to make highly accurate demand forecasts.

 

O

 

ODM - Original-Design Manufacturer (Private Labelling)

An ODM company designs and manufactures un-branded products. These existing products are then selected by importers or other companies and sold under their brand—with or without a few minor changes). An ODM's business model is similar to that of a contract electronics manufacturer (CEM).

ODMs, however, typically own the IP for the products they sell. Operating through this business model often means that cost calculation accuracy amidst constantly changing material costs is a significant challenge—one that can be resolved with a Sales Platform containing a CPQ integrated directly with their ERP.

 

OEM - Original-Equipment Manufacturer

An OEM company (e.g., Foxconn) manufactures products according to their customers' specifications and design. OEM businesses need to be digitally mature to manufacture products according to their customers' highly specific requirements.

Any lapse in the accuracy of prices or precision in production and order fulfillment could send even the most loyal customers towards their competitors. That is because an OEM's customers invest heavily in product research and development—and consider the OEM company a critical element that could make or break their business.

 

P

 

PaaS - Platform-as-a-Service

When developing a software application, businesses need to build, manage, and maintain their IT infrastructure. It is a heavy investment. With PaaS, this app development infrastructure resides in the cloud and is delivered over the Internet. Apps built in a PaaS are usually lightweight, and instantly cloud-native. They also inherit all the value-added benefits of the PaaS they are made in, like powerful API integration, scalability, high availability, and security. The In Mind Cloud sales platform is built on the SAP Cloud Platform and is a perfect fit for SAP ERP systems.

 

PLM - Product Lifecycle Management 

A product typically goes through multiple stages in its lifespan. It starts at inception, through to engineering design, manufacture, servicing, after-sales, and ends at disposal. PLM tracks the entire process to analyze how the product can improve or be made more cost-efficiently. Ideally, a PLM is tightly integrated with the ERP, CPQ, and CRM of a manufacturing business. 

It allows manufacturers to see (in real-time) how any change can affect costs, prices, and margins—a key pricing advantage over competitors. A PLM also lets manufacturers provide after-sales services or products that can extend the product lifecycle. By offering more touchpoints, manufacturers can effectively increase the product lifecycle value. 

 

Q 

 

Q2O, QTO - Quote-to-Order
Q2C, QTC - Quote-to-Cash
Q2P, QTP - Quote-to-Production

QTO covers the end-to-end manufacturing sales process. It begins with understanding the customers' needs and configuring the right quote so the customer can eventually order. This process is incredibly detailed and requires highly accurate cost or pricing data to find the perfect balance between profit and customer needs. 

With an integrated digital sales platform, manual calculations can be calculated automatically using real-time data from the ERP. When orders are made, a digital sales platform can flow order data back into the ERP. A robust sales platform can also keep track of cost or order changes and adjust costs or prices to protect margins throughout the contract. Q2C is an extension of the QTO process and includes payment from the customer, while Q2P includes the start of production.

 

R

 

RFI - Request-for-Information

Manufacturing customers often launch RFI exercises to gather the information needed to find the most suitable suppliers. An RFI can help customers identify the suppliers with critical capabilities that match their needs. Once a pool of the most suitable suppliers are identified, the suppliers will be sent a Request-for-Quote (RFQ) or Request-for-Proposal (RFP) for more information needed in the decision-making process.

This step of the sales process is critical for manufacturing firms. The faster the RFI response, the happier customers are, and the higher the chances sealing the deal. For manufacturers, cost or price accuracy is also just as important with it comes to RFIs. Without accuracy, the RFI process gets dragged out. Or when the deal comes in, margins are low to negative. 

 

RFQ, RFP - Request for Quote, Request for Proposal

Once manufacturing customers decide on a pool of the most suitable suppliers, they will follow-up with an RFQ or RFP. The quotes or proposals typically corresponds with a specific product or service needed by the customer.

  • Request for Quote (RFQ) - Commonly used when a buyer knows what he wants but needs more information on how vendors can meet specific requirements and the costs. 
  • Request for Proposal (RFP) - Used when a buyer is looking for a product or solution provider. The RFQ is a formal request and has strict procurement rules for content, timeline, and vendor responses.  

In both cases, manufacturers with integrated digital sales platforms can respond much faster to RFPs and RFQs than their competitors. Digital sales platforms have real-time access to ERP information and can help sales teams configure quotes and proposals in minutes instead of days.

 

ROI – Return-on-Investment
RODI – Return-on-Digital-Investment

For manufacturers, ROI is a performance measurement that evaluates the value of an investment. For RODI, this measurement is focused on investment in digital technology. An investment in robotics, for example, can yield gains from faster production, lower HR costs. 

For entire processes such as sales, RODI is determined by deal speed and sizes. Digital maturity also plays a part in achieving higher RODI. Digitally mature companies often have processes that assess and improve their digital initiatives' performance—resulting in much better business performance than their less mature competitors.

 

S

 

SaaS - Software-as-a-Service

SaaS solutions are a vital component of a holistic digital transformation. It is a software distribution method that delivers powerful capabilities over the Internet. With SaaS, manufacturers can access software from a web browser on any device. While SaaS solutions provide convenience, its most significant advantage is its cloud-native nature. 

Instead of merely lifting capabilities off on-premise infrastructure and putting them in the cloud, SaaS solutions come with value-added benefits inherited from the platform they are built on—such as enhanced security and scalability. 

Resource intensive tasks such as complex, large-scale calculations or data analytics enabled by advanced tools like a CPQ are also done on cloud platforms. For manufacturers manufacturers, SaaS provides powerful capabilities without heavy investment in on-premise infrastructure.

 

SAP CP - SAP Cloud Platform (previously known as the SAP HANA Cloud Platform) 

SAP's enterprise Platform-as-a-Service comes with comprehensive application development services and capabilities. Manufacturing services built on the SAP Cloud Platform (like the In Mind Cloud Digital Sales Platform) use best-of-breed integration and extensions that are secure and agile by default. Powerful APIs also allow for deep, seamless integrations into SAP's comprehensive manufacturing solutions like the SAP Cloud ERP, for instance.

 

SEC - Sales Enquiry Checklist 

An SEC is an essential tool for customer requirement discovery. It helps manufacturers gain a deeper understanding of what customers need during the initial engagement. With the checklist in hand, a manufacturer's sales team has a point of reference for the customer's requirements to ensure exact fulfilment. An SEC is one of the most critical elements of a manufacturer's sales process. A deal's success depends on the manufacturer's ability to deliver according to the customer's specifications. 

 

Smart Manufacturing - Digital sales

The smart manufacturing concept is similar to digital transformation. However, simply adopting new and emerging manufacturing technology like IIoT, big data, cloud computing or robotics, does not result in a smart manufacturer. Manufacturers need to make strategic introductions of disruptive technology that uses data to optimize entire processes.

Take the sales process, for example. Manufacturers that digitalize their sales process not only close bigger deals faster but are also able to optimize production to reduce costs, create new business models, and achieve faster Time-to-Market.

 

SOP - Standard Operating Procedure

Standardization helps manufacturers reduce costs. Manufacturers use written documents with instructions on how to perform all steps in a process or procedure to ensure uniformity in processes or performance. This step helps manufacturers achieve efficiency and maintain quality output.

Having an SOP also helps manufacturers reduce friction, miscommunication, or non-compliance with regulations. In the age of Industry 4.0, smart manufacturers use digital automation to maintain business-critical standards. Processes like sales benefit tremendously from this approach. Not only does the sales process get sped up, but the impact of a digital sales solution can also be felt from production through to after-sales.

 

T

 

TCO - Total-Cost-of-Ownership

With the advent of cloud computing, low TCO is becoming a standard measurement of digital success. Instead of investing in costly on-premise infrastructure, skilled IT talent, and other miscellaneous capital expenditures, manufacturers only need to invest in a fraction of the costs for implementing cloud solutions.

All additional costs are shifted into operating expenses (OPEX), which can help relieve cash flow. Cloud-native software like a digital sales platform also comes with value-added features like robust security and scalability—providing manufacturers with more opportunities to lower costs. 

 

TTM - Time-to-Market

In manufacturing, TTM is the time it takes for a manufacturer's product to reach the market. TTM starts when a development project has been confirmed and resources have been committed. It ends when the customers receive the final product. For some high innovation products, this cycle could take years.

If a manufacturer takes too long to complete this cycle due to the inability to adapt to market conditions), their competitors might be able to corner the market with the first-mover's advantage. With a digital sales platform, manufacturers can streamline multiple steps in the TTM process—and accelerate it.

 

TTQ - Time-to-Quote
TTP - Time-to-Proposal

The size of an order any manufacturer takes is substantial. It makes preparing a quote or proposal extremely critical to a manufacturer's business. The time it takes to create such a quote or TTQ) could stretch to weeks due to inaccuracy or outdated information.

With a digital sales platform, the TTQ can trim down to mere hours thanks to smart automation. The processes that can be automated include configuration, calculation, and even approvals.

A streamlined TTQ also helps manufacturers respond to requests from time-challenged customers while lowering the time (which equates to money) it takes to prepare a quote.

 

TTV - Time-to-Value

TTV refers to the time between an action a customer takes and when a customer sees the tangible value that resulted from that action. This measurement is critical for manufacturers when analyzing the effectiveness of their digital initiatives.

In digital sales, manufacturers often find exceptional value in the speed that results from the automation of manual tasks, product configuration, and of course, securing winning deals.


Do you want to create a dynamic new sales channel to capture the opportunities the digital economy has to offer? Download our Manufacturing Commerce Playbook to find out how you can get a digital storefront up and running in just three months!

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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.

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