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Glossary » Product Configuration

Product Configuration

What is Product Configuration?

Product configuration is the process that businesses, and specifically manufacturers undertake whereby they customize a product / solution / service to a customer’s specific needs.

This can be done either by the customer themselves through eCommerce channels, whereby available options for a product are selectable, or the sales / product engineer can configure the product based on the customer’s requirements. 

Synonyms

  • Knowledge Based Configuration
  • Product Customization
  • Product Visualization
  • Order Configuration
  • Configure to Order

Why is Product Configuration Important?

Product configuration is important as it helps both the sales team and the customer. While a customer that requests an order quote means sales can focus their efforts on customers that already know what they’re looking for, the customer also knows that they’re going to get an accurate quote based on their specific requirements for a product.

It’s a win-win for everyone involved. It also helps companies to keep pace with ever-changing customer requirements simply and efficiently.

Benefits of Product Configuration

There are many benefits associated with product configuration, that can support both manufacturing and sales processes, such as:

  • Simplifying complex products: some products, particularly in the B2B space, have numerous features, options, capabilities, and calculations involved, which can result in businesses thinking their product is too complicated for eCommerce channels.

    For these types of complex products, product configuration allows them to be pieced together by the customers themselves, through selectable options. This is much more convenient than having to list each and every variation in a vast product catalog
  • Quicker ideation and completion: businesses can shorten the process between imagining a new configured product idea and visual proof of concept, to manufacturing
  • Capture product expert knowledge: a configurator can capture and embed the knowledge of the best product specialists, and make that information available to everyone, so even a new starter or someone with low technical skills will be able to quickly offer the best solution to customers as they have all the information they could need
  • Optimal specifications: depending on a customers’ requirements, salespeople can proactively provide the best and most accurate price based on what the customer values most
  • Faster quotes: the process of product configuration enables organizations to generate quicker quotes with easy configuration selection, that are more accurate and tailored to customer needs
  • Accurate orders: while offering complex or highly-configured product systems can be challenging, a fully-integrated system with manufacturing combined with automatic product specifications means human errors are reduced and customers can be confident that every order is accurate

Types of Product Configurations

There are several different types of product configurators available, such as:

  • STO: Select-to-order
    This is where the customer selects all independent components of a product, no components are interdependent and the selection of one component does not affect the availability of others.
  • PTO: Pick-to-order
    Users select all product components, but they have to consider dependencies of the components without the help of the configurator – this is a product configurator in its simplest form and is often used by businesses for eCommerce stores.
  • CTO: Configure-to-order
    This supports customers in selecting the matching components according to a modular system – it’s a classic contract manufacturing system.

    For example, if a customer orders a laptop, during the ordering process, they select the hard disk, RAM, required software, and so on.
  • ATO: Assemble-to-order
    A mixture of make-to-stock and contract manufacturing, this is where individual components are pre-produced in the ATO configuration on the basis of presumed demand.

    Final production takes place after receipt of order according to individual customer requirements and takes into account component dependencies.
  • MTO: Make-to-order
    Production takes place only after an order has been placed – this can be described as classic contract manufacturing.

    The individual product components are already stored in advance at MTO, but further processing only takes place after receipt of the order. Configurators of this type are primarily used for Industry 4.0, as well as for application cases with fully or partially automated production.
  • ETO: Engineer-to-order
    This is perhaps the most complex type of product configuration as there is a very high level of configuration freedom. For example, new components and new rules may be required to meet customer requirements as individual parts of each order may have to be manufactured specifically.

    Even if the final product partly contains standard components, a separate production process including a bill of materials is necessary.

    ETO configurators are also used as innovation configurators. They consist of extensive solution spaces, unlimited trial-and-error cycles, and highly complex modularity. Engineer-to-order configurators require a very high willingness of users to engage with the overall configuration process.

How to Configure Products for an Enterprise Business

To configure a product, salespeople need to work with the product experts to select and arrange parts in a combination that can be produced and delivered to fulfill a specific customer request. The process can be performed manually by a salesperson or a sales engineer or automatically by using a software solution that does the heavy lifting.

Sales Configuration vs. Product Configuration

Sales configuration, or CPQ (configure, price, quote) as it’s widely known, is a tool that many B2B companies – particularly those in manufacturing – utilize to sell their products. It allows customers to choose from a drop-down menu of options and order products that were specialized for their individual needs. Now, more companies are realizing the benefits of CPQ, including B2C. 

Product configuration takes the technology of CPQ one step further by providing customers with a visual rendering of their product as they customize it. A product configurator allows customers to view their products in real-time and in AR to give them a full, 360-degree experience of what they will be purchasing.

Limitations of the Manual Product Configuration Process

Configuring products manually requires significant time and resources. Sales personnel need to go back and forth with customers to identify requirements, and then sift through sales catalogs to decipher which product configuration will best suit their needs. Not only that but different salespersons may choose different configurations for the same requirements, which could result in customers’ needs not being met. 

How to automate the product configuration process

Rather than using a manual product configuration process, organizations can instead use an automation method. This is where a customer or salesperson inputs the requirements and the configurator automatically generates the best configuration based on the needs that were input.

Going back to the laptop example, this is where the customer or salesperson enters the desired RAM, storage, screen size, etc. into the configurator, which then automatically provides the best product configuration based on those requirements. 

Businesses can automate the product configuration process by investing in product configuration or CPQ software

How CPQ enables a smooth sales to manufacturing process

An effective CPQ software facilitates fast and accurate quoting, even for complex sales, but it also enables a seamless sales to manufacturing process – here’s how.

Many manufacturing companies are leveraging CPQ to streamline their quote-to-order (Q2O) processes, and CPQ enables this by providing enhanced efficiencies for the order cycle. In turn, this is enabling manufacturers to sell more, faster, and more efficiently and effectively. 

For example, the traditional Q2O process involves the manual execution of tasks that consume significant chunks of time and effort, and there are problems in scaling the process to meet dynamic customer requirements, alongside challenges associated with disparate processes and data. Together, these challenges make for significant drawbacks for manufacturers looking to close more sales.

On the other hand, an effective CPQ solution enables manufacturers to meet the needs of the modern customer

  • Easy product configuration
  • Seamless pricing models 
  • Smooth and efficient quote generation
  • Hassle-free implementation of production strategies 

These capabilities provide manufacturers with the ideal platform on which to achieve sales success. By digitally transforming companies’ sales and manufacturing processes, businesses can leverage smart, automated, and visual selling, which simplifies and shortens the overall sales cycle with increased efficiency. 

People Also Ask

What is product configuration management?

Product configuration management is software that enables businesses to sell and process orders for configurable, multi-option, and customizable products and services, in an efficient way. It’s used by product engineers and is integrated with the data management environment across the lifecycle of a product.

These tools then facilitate rapid workflow management from sales to engineering to production, reducing the time-to-market and improving efficiency from start to finish. 

What is the product configuration model?

The product configuration model comprises one or more components that are joined together through subcomponent relationships. Components are defined one time, and can then be used many times in one or more product configuration models, to meet varying customer requirements. For example, Microsoft Dynamics 365 states that:

Product configuration models are created to represent a generic product structure. After you’ve set up a product configuration model, you can configure a distinct product variant that has a unique bill of materials (BOM) and a unique route. Product configuration models use both declarative constraints and imperative calculations to handle the relations and limitations between different product variants. You can configure items on sales orders, sales quotations, purchase orders, and production orders. The following table describes the table constraint–based terms and concepts.”

What are the major features of product configuration?

There are many different features and capabilities available for product configuration software. Businesses looking to add product configuration technology to support the manufacturing process should look for these five key aspects:

1. A clear bill of materials – where each item is listed, and unit prices are used to calculate a final cost for these units.

2. Visual models – so the customer can see a model of their customized product before making any final decisions.

3. CAD models – to print a fully-realized 3D mock-up of the product.

4. Safeguards – to prevent customers from requesting products that the manufacturer can’t deliver on.

5. Simple quote generation – to generate quotes quickly by maintaining a price book with all the customization options.

What does order configuration mean?

Order configuration or CTO (configure to order) as it’s widely known is a manufacturing process where products are assembled and configured according to specific customer requirements. 

What is a product configurator used for?

A product configurator is a tool or piece of software that enables users to customize the components and features of a product.

The purpose of this is to meet customer requirements as closely as possible. In a world where personalization and customization are of increasing importance, a product configurator provides manufacturers with the ability to stand out among their pool of competitors.