Recently, IEN subscribers were offered a chance to participate in an AberdeenGroup survey on custom product configuration, and several completed the survey. The research report, Tailoring Products to Customer Preferences: Configuring Profits to Order, is now available; contact Aberdeen Group for information.
Below, some highlights from the study:
In today's highly competitive global market, many manufacturers are seeking to win business by offering their customers products configured specifically for them. However, capturing and validating exactly what customers want, accurately quoting orders, and still delivering products quickly is challenging.
"The biggest performance differentiator is in the ability to predict cost,” says an Aberdeen analyst. “The key to being profitable is in knowing what the costs will be and developing an accurate, yet competitive quote. To accomplish this, companies must look at the unique challenges of their business and implement the capabilities and enablers that will provide more visibility and predictability to cost.”
Companies that are successfully addressing these challenges are able to reap the benefits of higher product profitability. Some are even seeing product profit margins improve by up to 80%, just by using configurator solutions.
In fact, the study demonstrates that “Companies who have not deployed a configuration solution will be at a competitive disadvantage and will forego the benefits of higher profit margins. A sales configurator alone can translate to profit margins that are 12% higher. An integrated sales, product, and manufacturing configurator solution can mean profit margins that are 21% higher.”
Additionally, Best-in-Class companies report only $31,400 in lost revenue due to quote or order errors. In comparison, Industry Average companies report write-offs of $823,900. Best-in-Class companies are better equipped to accurately capture what their customers want and process, engineer, and manufacture the order with far fewer errors.
Five Facts You Can Act On
The research presents conclusions about steps companies can take to emulate the performance of Best-in-Class companies. These companies:
- reduce write-offs by 26.2 times by minimizing order errors with sales configurators.
- are 20% more likely to accurately predict costs used to develop quotes for custom products, allowing them to achieve higher profit margins.
- are 14% more likely to meet the customer’s promised delivery date with design rules to automate the creation of sales and design deliverables
- achieve higher customer satisfaction by offering 3.5 times as many customizable product features as Industry Average companies
- are 18% more likely to hit revenue targets with integrated sales and product configurators.
When compared to industry-average firms, Best-in-Class companies share the following characteristics:
- They are up to 3.3 times as likely to use integrated sales and product configurators.
- They are up to 2.9 times as likely to use design rules to drive configuration logic.
- They are up to 2.2 times as likely to automate system hand-offs of the Bill of Material.
Recommended actions include:
- Use visualization, web technologies, and an automatic quoting process to ensure order accuracy and empower direct and indirect sales representatives.
- Leverage sales order information and use rules to drive the design process.
- Integrate system and configuration tools to automate the creation of all sales, design, and manufacturing deliverables.
The survey took place during January and February 2008, among 300+ companies. An online survey was supplemented by interviews with select respondents. Aberdeen Group has been performing independent research since 1988.