Quote-to-order Solutions and Key Performance Indicators

Quote-to-order (Q2O) solutions help automate the manufacturing and distribution industries, simplifying and optimizing processes and standardizing technology and tools. If any functional gaps are discovered that could become potential problems or that are already active concerns, Q2O systems create a blueprint for devising a plan of action. Q2O products help complex product manufacturers streamline their processes so that no sales are lost due to poor process.

For more background, please see The Basics of Quote-to-order Systems, The Complexities of Quote-to-order and Possible Solutions, The Essential Components of Quote-to-order Application Suites, Q2O Systems: Solutions for Quotation Management and Pricing Configuration, and Quote-to-order: The Major Players in the Manufacturing Arena.

Quote-to-order Solutions: Conclusions and Recommendations

While complex manufacturing companies in emerging and low-wage countries might initially tackle order-capturing challenges by adding more people and more manual steps to the Q2O process, they will eventually hit the wall (see part five of this series, Quote-to-order: The Major Players in the Manufacturing Arena).

Thus, complex product manufacturers and distributors using engineer-to-order (ETO) and configure-to-order (CTO) products should research the available Q2O solutions. This is especially true if they are losing sales due to slow responses to quotes and proposals, draining engineering's time by having it work on complex quotes, reworking orders several times to align them with customer needs, and losing sales due to a lack of reseller training in order entry for customized products.

Providers of complex products, systems, and services that rely on multiple departments for the completion of their estimates should see Q2O systems as enablers. These enablers can improve competitive advantage by reducing proposal lead times, tightening management and control of bidding costs, improving bid team collaboration, improving data access and information availability, and increasing accuracy in cost estimates.

Users also need to keep in mind that no configurator, Q2O, or interactive selling system (ISS) suite is universally useful in all areas of the manufacturing business. An ill-conceived deployment will further impair the overall effectiveness of a holistic customer-facing initiative. Namely, guided selling and product configuration are designed for different needs, which vary significantly by the level of complexity of the product being manufactured, the sales strategies for each channel, and many other factors. Generally speaking, guided selling tends to be used for low-margin, price-inelastic commodity products that have predictable option selections and that are at the end of their product lives. In other words, products that have little if any variation is where guided selling delivers the greatest benefit. For instance, companies reporting the greatest results use guided selling to front-end order capture in global “pick, pack, assemble, and ship” business models.

As usual, enterprises have to define their business strategy first, and if it includes bolstering inventory turnaround, driving down costs, and reducing days sales outstanding (DSO), then guided selling should be a good fit. However, companies that target intricate Q2O and quote-to-cash processes and that need extensive integration of product knowledge, such as supply chain management (SCM), enterprise resource planning (ERP), product data management (PDM), and customer relationship management (CRM) systems, will need to continue to look to configuration technologies to truly affect sales.

The latest generation of configurators based on knowledge management technology is having a real impact on selling complex products. As indicated earlier, a good configurator package captures the rules associated with product offerings and intelligently guides customers, dealers, or salespeople through a selection process without the need for supplier intervention (see part five of this series, Quote-to-order: The Major Players in the Manufacturing Arena).

However, it is important that a configuration solution is not only oriented toward product selection, as it often also has to manage the business rules associated with pricing and with customer terms and service requirements, as well as be able to generate personalized documentation for prospects, dealers, and internal needs. It is important that the outputs from the configurator satisfy the needs of both buyers and suppliers. The buyer needs a quote or proposal for a correctly specified and priced product, whereas the supplier needs a specification that will allow the complete and accurate generation of sales and manufacturing orders within “back-office” fulfillment systems if the quote is converted into a firm order. Thus, in addition to being understandable to the customer, the configurator must also translate the product into the format needed by the internal users within the selling company.

Often, configurator maintenance is too difficult for domain experts, such as marketing and engineering personnel, to grasp. Therefore, configurator maintenance should be a combined effort of many different domain experts, since if the expert cannot input the proper knowledge into the configurator, it becomes a futile piece of software.

It is also important that the configurator tool have sufficient expression capabilities to represent the problem and solve it, and the use of simple and convenient graphical tools goes a long way to facilitate configurator maintenance. Even if the company manages to motivate its staff to share knowledge, the endeavor will fail if the technology behind it is cumbersome and not user-friendly. If configurators are going to be useful, they must allow rules to be captured and published very easily (otherwise the rules will change before they are issued), and rule maintenance must be simple and quick.

Even worse, a configurator that cannot be easily synchronized with a changing business environment can actually be a detriment to the business rather than a benefit. Exposing information from back-office systems to the sales configurator must be done in a way that minimizes data redundancy and supports easy maintenance, as product lines and options change over time.

Difficulties with configurator system maintenance appear to be the most troubling issue within dynamic environments with frequent products and parts changes, frequent marketing campaigns, and new product development and introductions (NPDIs). To stay current, a timely transfer of such data into the configurator is critical, and such high volume changes often make the manual input of the updated information into the system impossible. Yet, in some industries where the product, service, or project is very technical, some of the configuration work will still have to be conducted “back at the office,” with customer requirements being specified by fax, e-mail, Web form, or face-to-face, and then fed through to a back-office configuration facility.

On a more general note, while choosing the right technology is crucial, a great deal of frustration remains in solving many “softer,” people-related issues. Because a configurator touches many aspects of the business, all affected departments should be involved in the selection of the configurator and its capabilities. Collaboration among the sales, marketing, planning, and engineering departments is critical for the success of the Q2O improvement project.

It is a no-brainer (requires little thought) that the configurator's ability to be deployed across the Internet is a must if up-to-date information is to be made available to the entire direct and indirect sales channel network at the “touch of a button” or “click of the mouse.” However, frequency and volume of use is another major consideration. Namely, when a configurator is used on a high-volume web site, due diligence is necessary to ensure the configurator engine and its environment are able to handle a large volume of transactions (thousands of customers online all configuring their items simultaneously).

For example, the self-service purchase of personal computers (PCs) may result in thousands of customer specifications and configurations generated in any one day on the Internet. However, in other industries, such as industrial machinery or capital equipment, there may only be a handful of configurations, specifications, and quotes performed on any given day, although these are likely to be extremely complex and may still involve some back-office function. In any case, product scalability issues should be assessed early on when evaluating a configurator solution, since subsequent problems may not be easily overcome at the time of deployment.

The major challenge is the seamless conveyance of information to and from the engineering and production environments once one gets past the interactive guided sales experience and has moved on to a successfully configured order as a result. In a streamlined and integrated sales, service, and fulfillment process, the configurator will need to integrate with other applications, such as e-catalogs, CRM, ERP (often multiple, diverse systems), computer-aided design (CAD), PDM, desktop office, and enterprise content management (ECM) applications. In this respect, the technical integration capabilities of the configurator tool are extremely important to ensure that the required bidirectional exchange of information between applications can be achieved in a secure and cost-effective manner. Some configurator tool suppliers may provide ready-made interfaces with popular ERP or CRM applications, but again, the buyer must be sure that these predefined interfaces are sufficiently flexible to be easily customized and extended to meet their specific business requirements cost-effectively.

Are There Any Useful Starting Key Performance Indicators?

In order to decide on the relevant metrics and to measure success, users should again start from their strategic intentions. Users should ascertain where most of their business comes from (such as new business, repeat business, major accounts, specific industries, etc.), and decide on priorities (including where they want their business to primarily originate from in the future). As a good guide, some Cincom white papers have provided a large number of astute key metrics, or key performance indicators (KPIs), to gauge Q2O success.

Some of the KPIs suggested by Cincom are

  • company-specific, including project costs and expenses, number of orders per year, current inventory and costs, and customer data;

  • sales-related, including order cycle time, cost of sales, cross-sell and up-sell revenue, and average sales price per order;

  • quote- and order-related, including average cost to complete an order, special pricing requests, and incorrect or incomplete orders;

  • customer service–related, including number of customer complaints, revenue lost to churn (customer attrition), and number of calls on order status; and

  • warranty- and returns-related, including reduction in warranty cost on customized products and labor cost reductions.

It is important for complex manufacturers to pinpoint the KPIs that are the most relevant to their company strategy. A company has to start somewhere: the Q2O process flows that span multiple systems and business units must be visually depicted to determine the major bottlenecks and hurdles. The company might then want to start keeping track of the length of time to order completion; the number of estimates sent out; the number of estimates won (versus lost or late); the value of estimates; the engineering time spent; the cycle time to completion; the number of quotes that need rework; and the cost of rework. All these measurements should quickly result in a baseline (benchmark) on these key metrics. Only after getting this baseline measure can one expect the improvement efforts to start producing some tangible results. Periodic blind tests of the Q2O processes are also recommended, since by getting a personal feel for the customer experience, areas of improvement are even better exposed, and KPIs can be verified.

Translating these into real-life metrics, relative to the value of sales configuration and extension to address the entire Q2O process, some of Rockwell's divisions have reported order process time reductions from four weeks to one hour; same-day delivery for up to 80 percent of non-stocked products; engineering cost reduction of $1 million (USD) annually; and the elimination of approximately 7,000 instruction sheets and product labels.

Danfoss, a global manufacturer of valves and fluid handling components for heating, ventilating, air conditioning (HVAC) and industrial applications, has reported reductions in pricing errors by 85 percent; pricing inquiries by over 50 percent; average time to generate a proposal by 25 percent; quote-to-cash cycle times by 75 percent; and order errors by over 90 percent. In addition, the company has reported increased quote volume by 50 percent per year for the past two years (with no added headcount).

Last but not least, Elliot Tool Technologies, a manufacturer of quality tube tools, has seen since the initial implementation of WebSource CPQ quote volume up by over 165 percent; sales up by about 36 percent; and average order size up by almost 38 percent. Furthermore, a typical quote is now between 30-50 percent faster. The Q2O suite provides built-in reports of performance metrics, such as the reasons quotes are won or lost, and it also presents lead-time and cross-sell opportunity (suggestions) information. Overall, quotes are now delivered more easily, reflect local market realities, and are consistent with previous purchases.

This concludes the series The Basics of Quote-to-Order Systems.

For more information and to start your own custom solution comparison, please visit

TEC's Customer Relationship Management Evaluation Center


comments powered by Disqus