Product Configuration Basics
It’s always interesting to see what questions we’re asked as an ERP consulting firm.
Many of the teams we work with face challenges when customizing products to serve a variety of customers.
As business improvement consultants, we often hear about these issues especially in the age of customer-centric processes. That’s why this blog post offers product configuration basics.
What is Product Configuration?
Product configuration is an activity of customizing a product to meet the needs of a customer.
Although there are various levels of details and versions in this arena, my attempt here is to describe some basic characteristics of the topic.
So to provide product configuration basics, it’s important to note that configurators enable mass customizations to be made by the producer for the customer.
Configurators are used to guide the user through the product definition process and serve as an important tool for choice navigation.
In early versions, they were simply pre-defined options to be selected regardless of interactions between options. Conversely, more complicated current versions incorporate rules, algorithms and/or artificial intelligence (AI) to solve complex configurations with interactions between choices that are made.
Other terms to be used in this topic include:
- CPQ: Configure Price Quote
- Mass Customization
- Open Innovation
- Product Differentiation
- Constraint Satisfaction
- Characteristic Based Product Configurator
The Process of Configuration
In simple options order entry, choices are made about the product with no regard to the interdependencies between the choices.
For instance, if one is ordering a truck, the choices may be:
- size of engine
- color of the truck
- size of tires
- choice or trailers
One choice does not affect the others.
In a rules-based configuration, one choice may limit the possible choices of another selection. In the above example, choosing a certain size engine may dictate what size tires are allowed and/or what trailers can be chosen.
A model-based configurator is more of a parametric processor that will employ logic consisting of rules, algorithms, and characteristics that must be calculated from a base version of the product.
In our truck example, entering the characteristics of the trailer may dictate changes to structural elements to the truck that needs to be made specific to this order, different from any other order. The frame may need to be longer, wider or made of heavier gauge metal which may, in turn, dictate changes to the cab, wheels, etc.
A case-based model will use the defined characteristics input by the user and the system will try to solve the current configuration problem by finding a similar, previously solved problem and adapting it to the new requirements.
ERP and Product Configuration Basics
When it comes to product configuration and ERP, many of today’s modern ERP system utilize product configurators which are referred to as CPQ (Product Price Configurator) and are typically found in the CRM module of the system.
More complex versions may be found in the engineering or manufacturing modules due to the complexity of the model that is being used.
These may also interface with CAD or other specific engineering modules. In these models, once the configuration is completed, outputs include accurate pricing of the product, visualizations of the product, Bills-of-Material for material planning and process routings for manufacturing processing.
However, most importantly, it allows the customer to get the exact product they need or desire, within the limits of the chosen configuration.
Product configurators allow the customer to get the exact product they need or desire.
Benefits of Using a Product Configurator
Configurators can be found in B2B or B2C businesses and can be employed by trained staff or directly by the customers themselves so that they can assist in the design of the product.
Specific benefits to using a configurator include:
- Better turn-around to customer requests
- More accurate information to the customer and internal organization
- Customer differentiation through individuality
- Better knowledge of customers’ needs
- Less finished goods inventory to cover expected configurations
- Less expediting to adapt a specific request for a customer
- Reduced engineering time to develop a custom product
- Reduced order entry errors and improved customer service/customer loyalty
- Latest and greatest version of products being offered
Case Study Example
A recent case where a rules-based configurator was put into place is at a manufacturer that makes furniture for the RV industry.
In the RV industry, nothing is standard as to how the interior is designed. So, if a sofa is offered, there is no telling what the dimensions or requirements will be until the actual order is received.
In this product line, several styles of sofa are offered with a wide variety of options offered. Some of the variables at play in taking the order include:
- Accessories that can be included such as pillows, arm covers, head covers, etc.
- Upholstery pattern that is desired
- Upholstery treatment (e.g. stain proofing)
- Types of cushions to be used
The big variable in the order is the length of the sofa which can be in eighth-inch increments.
Once all the variables and dimensions are entered, the system will compute exact requirements for the wooden structure, cushioning material, upholstery, thread, fasteners, and all other material requirements to satisfy the order and will set in place the processing requirements needed to make the sofa.
As part of ERP process improvement services, we also note additional process improvements.
The configurator will also determine structural requirements based on the dimensions that are input. For instance, if the sofa exceeds a certain length, the program will determine that an extra foot is required in the middle of the sofa to support the extra-long span.
If a cushion characteristic is entered, such as extra firm, it will determine what kind of cushion material should be used and how much of it will fit the design.
Finally, it will determine how much upholstery will be required to cover the given dimension and cushioning as well as covering the extras such as pillows, covers, etc. In some cases, the height and depth of the furniture is a variable so the configurator must compute material requirements based on these added dimensions.
In the end, a properly priced sofa was available for a quote real-time while talking to the customer whereas in the past, given that there are usually several pieces of furniture designed into a single RV, it would take hours, days or more to return a quote to the customer.
As an output to all of this, aside from the sales quote and respective documentation and visualizations, a bill-of-material and process routing specific to that order were created so that material planning and manufacturing could be executed with correct order-specific information.
With product configuration, material planning and manufacturing are executed with correct order specific information.
Driving Value with Product Configuration
Using a product configurator that is appropriate to the situation will help in the sales process, design process, manufacturing process, and delivery process and will reduce costs and investments.
In the analysis stage of defining requirements, it will be important to determine what level of sophistication will be required since it is easy to purchase more or less than what is really needed.
However, once properly utilized, a product configurator can enable a company to effectively give customers exactly what they want.
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