Pricing For Complex Manufacturing Configurations with CPQ

Posted by Leo Boon Yeow on Apr 3, 2020 11:17:00 AM
Leo Boon Yeow
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When it comes to industries such as Contract manufacturing or the Engineering-to-order (ETO) and Manufacturing-to-order (MTO) industries, the task ‘create a quotation’ can lead to weeks of work in complex product configurations, in some cases for customers who might not even end up giving them the project.

Sales people in these industries have a dilemma: they can barely increase the volume of quotes sent out to maximise chances of winning a project, due to the complexity of such an RFQ/RFI. If they still pursue this tactic, the rush can lead to inaccurate quotations, from problems with the configurations, materials, finishings, errors in costing to the pricing and finally miscalculation of profit margins. On top of that there are multiple approval gates by engineering experts, purchasing departments or supervisors, that will lead to a much delayed sales cycle.

Is there a solution for this dilemma? We will have a look at a Configure-Price-Quote (CPQ) software specifically made for manufacturing industries.

Automatic Updates Through The Cloud

If your prices and data are not up-to-date, then your quotation will be inaccurate. That’s a given, so how do you ensure that your prices for line items, raw materials, etc, are updated? In ETO and MTO environments, especially, where products are customised based on a series of complex calculations and production estimates, a mistake made in a single item can completely throw off the entire production.

A CPQ software can keep all ERP data synchronised, and ensure that your sales teams don't have to go back and forth to change prices every time the configuration changes. You can expect automatically updated prices each time you change the any configuration, material or process items. If supply of a specific item drops suddenly, your sales person won’t be kept out of the loop, and will be able to quote higher since the item is in demand.

Reducing Delays In Approvals And Ensuring Margin Control

Most sales teams end up giving discounts of some sort to potential clients to secure the deal. For certain thresholds that means that they need to get the approval of their supervisor or the engineering team. Without a CPQ solution, most sales people would send off an email to request approval. Their supervisor might need further details, and an email thread would then form. That’s a delay that your business cannot afford.

With a specialized CPQ solution, approval gates can be set when conditions are met, so any discount under 5%, for example, wouldn’t require an approval. Discounts above 5%, though, would automatically require approval from a series of supervisors, who are notified via mail and can then view all the details of the quotation before approving. Engineering input can also be factored in, as the engineering team can have a role in the approval gate as well. Production costing can be factored in, and the quote will increase in accuracy, which translates into margin accuracy.

All of this can reduce the duration of the quotation process from weeks to days or even just hours, which will make a huge difference in the productivity and revenue of the sales team.

In the end, when it comes to industries that require complex configurations, every quotation matters. Your business needs to make changes to your sales process in order to close sales and ensure that your business can not only survive, but continue to thrive and increase profits.

 

Interested to a CPQ solution? Download our whitepaper on the Values and Benefits of a CPQ Solution!

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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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