Customized product inquiry - Eliminating “Muda”

Demanding customers and increasing competitors are some of the biggest challenges faced by any manufacturer in current business scenarios. Each customer would like to make some variations in the standard product to verify if it matches his unique requirements. At the same time he expects to view the customized product as soon as possible. As per a study done by Giga Information group, the acceptable response time a customer would expect for viewing the result of a modification demand is up to 20 seconds.

Can you imagine such a response from a salesperson using the manual configuration process? It’s almost impossible. However, with the advent of the configurator solution, it has become a reality of today.

It would be interesting to know how the configurator systems have eliminated a number of non-value added steps which would otherwise have added to the total product delivery cycle times. When a customer places a unique product requirement, it is quite possible that there does not exist the final engineering and/or manufacturing BOM (Bill of Materials) for the same. As per the traditional methods, the design team would’ve started working onto preparation of the BOM for the final product and designing of the non-standard components. Design with BOM would then go to Process Engineering team to define the manufacturing processes (routings). There are usually rounds of back and forth between design and process engineering to resolve manufacturing constraints.

This entire process of finalizing the design and process of the final product thus becomes very iterative, lengthy and might irritate the customer. However, most of the leading configurator solutions now come with the feature of ‘Auto-generation of BOM’. This means that the moment the customer configures the product and places the order for it, the corresponding BOM and processes are auto-generated and made ready for the Production team to start working on it. This eliminates the design cycle time and reduces the overall delivery cycle time.

Aberdeen has found out through its research that companies who’ve adopted the configurator solutions for meeting their product customization needs have seen product profit margins improve by up to 80%. What is it that makes this solution reap such high profits? The answer lies in its ability to reduce operational & rework costs thus abiding to the ‘Lean’ principle.
Let’s track the costs involved in the Inquiry-to-Order process in the absence of a product configurator solution. When the customer provides a specific product requirement, the salesperson will need the expertise of the design engineer to analyze the feasibility of delivering such a product. The Cost Analyst will have to calculate the costs involved in designing, procuring and manufacturing such a product. The Planning team would have to refer a series of spreadsheets and make tedious calculations to provide the final delivery date. Such and many more critical decisions would be taken which would require intelligent and skilled resources. All these add to the product costs thus diminishing the profit margins.
However, all these costs can be minimized by setting up the same intelligence and calculations in the rules based engine of the configurator. These form the savings in the direct costs.

Apart from these, there could be some indirect costs which could creep in, in the absence of the configurator solution. The manual process involves information transfer among different entities involved at different tiers of the supply chain. This involves high risk of communication errors. As a result, there could be scenarios wherein the customer wants one thing while the manufacturer delivers something else. This will lead to indirect costs, like customer credits, heavy discounts, rework, loss of sales, etc.
Thus, Product Configurator has become the need of the day for any organization offering customized products/ solutions to its customers. It has single handedly reduced the organizational costs related to skilled resources, lengthy processes, lost sales, rework, etc. This ability of the configurator has made it a forerunner among the various tools available for lean manufacturing.

Comments

[Jason Fernandes]

We’re in an environment where we have, at any given time, as many as 100 offers in market being personalized on individual customer preferences. It is important to be able to quantify engagement for a number of reasons. Most importantly is by understanding where you stand with your customers