ERP Product Configurator

What is an ERP Product Configurator?

An enterprise resource planning (ERP) system is a comprehensive software platform organizations use to integrate and manage their finance, HR, manufacturing, supply chain, services, and procurement. ERP centralizes the data and processes of these disparate business systems into one cohesive unit, giving companies better visibility, insights, and control across all departments.

The ERP product configurator is a tool integrated within ERP systems that automates and streamlines the configuration of made-to-order products. It allows companies to customize products according to customer specifications without the need for extensive manual input or the potential for human error.

Synonyms

Overview of the Product Configuration Process in ERP

HR, finance, supply chain, production, and other departments all play distinct roles in the overall business system. Although they have little (if anything) in common, the handoff between one and the next is what keeps the organization moving. This “handoff” is also where the risk of delays and miscommunication exists.

In a traditional product configuration process, sales reps and engineers work with customers to understand their requirements. They then manually interpret customer requirements to create a custom solution (e.g., through spreadsheets or CAD drawings). The document goes back and forth between customers and sales/engineering teams until the final product is approved.

For types of product configurations like make-to-order (MTO) and engineer-to-order (ETO), this process is time-consuming, error-prone, and not scalable. Conversely, the ERP product configuration process looks like this:

  1. A customer expresses interest in a product.
  2. The sales rep uses the configurator to guide them through the options and captures all their requirements in real time.
  3. Internal approvals and revisions (if needed) are handled within the system, ensuring accuracy and speed.
  4. The configurator automatically generates a visual representation of the product based on the customer’s selections.
  5. Once the customer approves, the system calculates a price based on the configured product’s components, labor, and other factors.
  6. A sales quote, BOM (bill of materials), and other documents are automatically generated, eliminating the potential for human error.
  7. The order is then sent to production, where the item will be built according to the configurator’s specs.

ERP gives organizations a single source of truth, allowing them to access real-time data from the company’s entire operations. This means that during the configuration process, all departments real-time information for business- and product-related decision-making.

Benefits of an ERP Product Configurator

The biggest problem with selling bespoke products is that they require lots of manual work to set up.

By eliminating much of the clerical work in the process, an ERP product configurator delivers several benefits:

Improved Efficiency and Streamlined Workflow 

ERP product configurators eliminate the potential for human error and accelerate the configuration process by automating it. Sales reps can guide customers through complex product options without having to worry about manual data entry or miscommunication, allowing them to focus on building strong relationships with their clients.

Enhanced Configurability and Fewer Errors 

On the configurator’s backend, admins program rules that govern which options can be combined and which are incompatible. As a result, customers (and sales reps) can no longer configure products with incompatible options. Compared to manual configuration, which requires cross-referencing spreadsheets, internal documents, and CAD drawings, this significantly reduces errors.

Faster Time-to-Quote and Quote-to-Cash

The configurator allows sales reps to instantly calculate a price for the custom product. Since ERP can access all relevant data (e.g., labor costs, materials, and discounts) right within the system, it can easily account for all those factors in the final pricing estimate.

With automated approval workflows, it also speeds up the process of getting that quote to the customer. Once approved, quotes can be automatically generated and sent to customers, reducing the time between the initial request and delivery of a quote.

Increased Sales and Customer Satisfaction

Contract manufacturers have to anticipate the unique demands of their customers, which necessitates significant flexibility and agility in their production processes. ERP facilitates a culture of adaptability by providing a digital infrastructure for sales reps and engineers to configure custom solutions quickly. The result is higher sales and better scores on satisfaction surveys.

Better Inventory Management and Cost Control

ERP’s inventory management, supply chain, and production modules connect the dots between products and their components. And finance/accounting modules have visibility into the entire process, from cost projections to real-time data on actual costs.

As a sales-oriented tool, product configuration software feeds real-time insights into demand and product trends that can help organizations plan their replenishment schedules. It also allows them to monitor production and engineering costs better, optimize pricing for custom products, and identify high-ROI products.

Interconnectedness with the Whole Business Ecosystem

The average company has 2,000+ silos. For complex manufacturers, a lack of interconnectedness between departments means supply chain bottlenecks and inaccurate demand predictions. ERP breaks down these interdepartmental silos by connecting sales, production, supply chain, and finance/accounting processes.

While it isn’t immediately obvious that product configurator software plays a significant role beyond the sales process, its impact is felt throughout an organization.

  • Production needs an accurate BOM to assemble the product.
  • Procurement needs to know which components are needed and how often to schedule reorders.
  • Engineering needs accurate data for product design and testing.
  • Finance needs to know the cost of goods sold (COGS).
  • The billing team needs to know what landed in the final quote.

It all starts with configuration. Without an accurate, streamlined mechanism to gather customer requirements and generate quotes, the entire process of handoffs falls apart.

How an ERP Product Configurator Improves Efficiency

For large B2B manufacturers and distributors, the product configuration process is complicated and time-consuming. Using a product configurator integrated within the ERP system eliminates manual data entry, reduces errors, accelerates the process, and makes it infinitely more scalable.

There are several ways it accomplishes this:

  • Guided and (at times) automated product configuration
  • 2D or 3D models that align customers and manufacturers on what the finished product will look like
  • Real-time product validation based on engineering rules
  • Automatic generation of accurate BOM, routings, and shop floor documentation
  • Automated cost pricing based on labor costs, material costs, discounts, etc.
  • Multi-level revision management for configurations and variant products (including those with multiple options)
  • Streamlined approval workflows for quotes, contracts, and orders
  • Integration with supply chain management, production planning modules, and inventory management modules

ERP Product Configurator Features

Since it’s integrated with ERP’s other features and designed to handle complex configurations, ERP product configurators have a special set of features that differentiate them from other standalone product configurators or those in a CPQ solution.

Product and Component Library Management

ERP configurators allow admins to add, edit, or remove products, components, and options from the product catalog in a visual interface. Here, they can also assign price lists, discounts, and other pricing rules to each product or component.

Rules Engine and Validation Logic

An ERP product configurator is a rules-based configurator. In other words, it comes with a built-in logic engine that manages all configuration rules. Admins can dictate which options are compatible with each other, which are mutually exclusive, and which require additional options to be selected.

For example, if a customer selects a certain color for the product, the rules engine can automatically validate that the chosen material is available in that color. If not, it can suggest other compatible colors or prompt the customer to choose a different material altogether.

This simplifies the intricate process of defining product features, components, and pricing variations. It ensures the feasibility of custom orders in terms of production and inventory requirements.

2D/3D Modeling and Visual Configuration

Visual configuration is a dynamic selection of features, options, and customizations, allowing customers to personalize products according to their preferences and specifications. Depending on the configurator, it’ll either produce a 2D or 3D model based on the customer’s selections.

This feature gives customers a realistic, visual understanding of what they’re about to purchase, which is one of the biggest challenges when selling complex products. It also aligns customers with engineering and production teams before production begins.

Document Generation

Product configuration software simplifies the production process by generating accurate bills of materials (BOMs) and routing instructions based on the customer’s chosen customizations. The BOM is particularly important for discrete manufacturers, which have to manage material requirements for complex assemblies with multiple components and sub-assemblies.

The software can also generate other crucial documents, like shop floor instructions, work orders, engineering drawings, and assembly instructions. This reduces lead times and enhances precision in the manufacturing process.​

Integration with Other ERP Modules

For manufacturing businesses, the real benefit of ERP product configurator software comes from its integration with other ERP modules. The data collected through the configuration process is automatically forwarded to production, supply chain, and finance/accounting modules.

The production module receives accurate BOMs and shop floor documentation, while finance receives accurate cost pricing and sales teams receive approved quotes and contracts. Almost all of this happens automatically on the backend.

Reporting & Analytics Capabilities

It all comes full circle when companies look at their sales and product data to make strategic product, inventory management, and pricing decisions. This complete integration eliminates data silos and provides a holistic view of product success, production capacity, COGS, and revenue.

Reporting and analytics capabilities help identify top-selling products, sales trends, and potential bottlenecks in the production process. They also provide insights into where businesses can optimize their supply chain and streamline their production.

How to Select an ERP Product Configurator

Even within the manufacturing industry, there are unique requirements for different production processes, products, and industries.

Some will integrate with specific vendor portals, while others will have built-in product lifecycle management (PLM), AI algorithms, or advanced visual configuration capabilities. It’s on you to evaluate your needs and understand which ERP product configurator can fulfill them.

When selecting an ERP product configurator, take the following steps:

  1. Assess the complexity of your product mix. As a general rule of thumb, assemble-to-order (ATO) products are more straightforward than make-to-order (MTO) products. And engineer-to-order (ETO) products are the most complex.
  2. Narrow down your search by features. Aside from the basics, look at what differentiates one solution from the next. As best you can, choose a platform that offers the features you need without too many “extras” that will overcomplicate it and get in the way of product adoption.
  3. Note integration capabilities. CRM, vendor portals, sales tools, and billing are all part of the equation when integrating with ERP platforms.
  4. Look into CPQ that integrates with your ERP. Integrated sales and business systems is one of the biggest trends in SalesOps today. Configure, price, quote (CPQ) streamlines the entire sales process, from configuration through quote delivery, contracting, and invoicing.

It’s worth mentioning that implementing a solution like this is resource-intensive. Setting up product rules, configuring pricing, and creating contingencies on the backend are just a few things that make rolling out an ERP product configurator more complicated than flipping a switch.

People Also Ask

How do you know if an ERP product configurator is right for your business?

An ERP product configurator is right for your business if you’re a manufacturer with complex products, customizable options, and a continuous need for accurate bills of materials and production documentation. It’s also beneficial if you want to streamline the sales process and integrate it with different modules within your ERP system.

What are the implementation challenges of ERP product configurators?

The biggest challenges with deploying ERP across an organization include integration with existing systems and modules, customization of the software to fit your specific needs, the complexity of setting up product rules and configuring pricing, and training employees on how to use the new system effectively.