Quote-to-order: The Major Players in the Manufacturing Arena

Quote-to-order (Q2O) configurator technology has been helping manufacturers improve their productivity by shortening lead times, eliminating the possibility of order errors, and reducing the need for training costs and expertise of the various design and service personnel (please see Q2O Systems: Solutions for Quotation Management and Pricing Configuration).

For more background, please see The Basics of Quote-to-order Systems, The Complexities of Quote-to-order and Possible Solutions, and The Essential Components of Quote-to-order Applications.

Knowledge Management Comes to the Aid of Engineer-to-order Manufacturers

The latest generation of Q2O systems goes a step further by using knowledge-based software to reduce the dependence on highly skilled experts. Non-programmers can now capture necessary knowledge with intuitive visual tools (for example, drag-and-drop, rather than by pesky programming languages such as Lisp or Prolog).

Since the ability to harness a company's intellectual property and know-how is key to building competitive advantage, product knowledge management systems have become foundation tools that allow engineer-to-order (ETO) enterprises to capture and maintain critical sales and product knowledge in an enterprise knowledge base and expert system. The most advanced ETO companies leverage their intellectual capital to automate the Q2O processes of attracting customers, selling products and services, fulfilling orders, and servicing customers. Such systems have to be both internally and externally focused (to span the demand chain of any given company), and have to work with complex business rules related to processes, products, pricing, and services (there is virtually no limit to what kind of knowledge can be captured).

The emphasis here is on knowledge management rather than rule management, and this “assisted configuration” approach also helps the manufacturer. The software can output a generative manufacturing specification that is user-defined and that can include a bill of material (BOM), project, quote, order, drawing, and so on. The integration choice (seamless via the Web or desktop) can be at the data, function, or Web service level. For example, pricing information integration could involve all those levels.

A good example of a knowledge management provider is Selectica Inc. Aside from its customary Selectica Configurator, Selectica Pricer, Selectica Quoter, and other “usual suspect” Q2O products, Selectica offers Selectica Studio and Selectica Repository, which leverage declarative constraint engines. As mentioned previously in Q2O Systems: Solutions for Quotation Management and Pricing Configuration, many existing configurators are custom programs that were written specifically for the product or family of products being configured. This means both the configuration logic and the data describing product attributes are combined in a single computer program that requires significant reprogramming to reflect simple product changes.

In contrast, Selectica applications use a constraint-based engine that is separate from the data describing the product attributes. This allows businesses to easily create and modify the Selectica KnowledgeBase to reflect product changes by using the integrated modeling environment, thereby eliminating the need for expensive programming teams.

To that end, Selectica Studio models, tests, and debugs applications using a single tool, which simplifies development processes, whereas graphical knowledge base and user interface (UI) development tools enable application deployment and maintenance by nontechnical personnel. Selectica has developed an integrated modeling environment that allows its customers to easily create a sophisticated knowledge management system without any programming. The programs use drag-and-drop tools that enable sales and marketing personnel (rather than expensive programmers) to maintain and enhance their customized solution.

Using these drag-and-drop tools, businesses can easily create and update knowledge bases containing product attributes; create hypertext markup language (HTML)–based graphical user interface (GUI) applications; test the application interactively as the application is being built; and conduct batch order checks. Businesses can also verify the semantics of the knowledge base and create flexible models from individual models. Users can create and maintain automated knowledge bases through a knowledge base development environment (KDE), although administrators can maintain the consistency of knowledge bases using a fully automated environment and a command line interface (that eliminates the need for a UI).

Selectica Repository is a database that stores the knowledge base in a readable format, which can easily be queried. The solution provides knowledge bases developed by teams from various locations, allowing for easy maintenance. Selectica's engine, written in Java, is easily deployed on various operating platforms, and the use of Java 2 Enterprise Edition (J2EE) allows the vendor to support a range of deployment environments. Such environments range from Java applications in a notebook computer to server-generated, browser-readable pages, with the same engine and the same knowledge base.

Along similar lines, the Cincom Q2O Suite 8.0 consists of Cincom Socrates 8.0, a proprietary knowledge base application studio, and the Cincom SalesConfigurator 8.0 module for sales configuration and proposal management. Like Selectica, Socrates (formerly Cincom Knowledge Builder), which is aimed at knowledge developers (not necessarily IT staff, but rather departmental power users, such as engineering experts), is an enterprise environment for developing and deploying expert sales and configuration systems.

Acting as the “brain” and underlying knowledge base application studio, Socrates offers product configuration functional underpinnings to enable customer needs analysis, pricing, document generation, diagnostics, and intelligent searching. The enterprise knowledge base includes the enterprise project environment with Object Manager, Constraint Map and Decision Map, Forms Editor, Database Attach, List Editor, Tree Editor, Case Editor, Hierarchy Editor, and Procedure Editor as building blocks.

Unlike within most product configurators, Cincom's graphical knowledge modeling environment makes it easy for nontechnical users to quickly develop solutions that assist in the analysis of customer needs, product selection, product configuration, pricing, quotes, and customer support. Modeling tools enable domain experts to capture and maintain rules in the knowledge base in a hybrid rules engine that handles constraints, decision trees, pattern matching, configurations, and procedures. Decision engines serve to provide interactive recommendations and advice on the most suitable products, services, and courses of action. They also help users decide on the next task or action in a workflow-based system, based on current events and available data. In addition, they help to configure products, services, and workflows. There is a rapid application development (RAD) environment for the Web, Microsoft Windows, and embedded applications, where a universal client interface can be Windows, rich Web client, and thin Web client. Although written in proprietary technologies, RAD features an open architecture for seamless integration using extensible markup language (XML), open database connectivity (ODBC), or common object model (COM).

Cincom SalesConfigurator is a knowledge-based configuration and proposal management system aimed at users (whether they are customers, direct sales representatives, agents, etc.). It handles the tasks of sales management (for example, opportunities, quotes, customers, contacts), including discounting and proposal generation (from a Microsoft Word document library of static or dynamic templates). SalesConfigurator also contains product data capabilities, such as searching for parts (even if they are not in the catalog) and templates for features, components, and special options, and there are remote and detached capabilities for mobile users too.

APICS Dictionary defines a knowledge-based system as a computer program that employs knowledge of the structure of relations and reasoning rules to solve problems by generating new knowledge from the relationships about the subject. Knowledge management is an information repository used by executives, managers, and employees to more effectively produce products, interface with customers, and navigate through competitive markets.

Thus, at the center of Cincom's and Selectica's product knowledge management suites is a single version of the truth—sometimes referred to as a “single system of record” (referring to the integrity of data). This is a critical component that should provide a competitive advantage for many manufacturers for a number of reasons, including the ability to launch new products with intensity and focus; accelerate the new product introduction process; redefine product, pricing, promotional, and distribution strategies; and simplify engineering change order and document control functions. It brings enterprises much closer to the dream of capturing years of collective product knowledge that can be used for field training and to support the sales process, and that can leverage relevant insights to every custom order. That role is now being extended even further, as configurators become linked with enterprise resource planning (ERP), product lifecycle management (PLM), and other related enterprise systems.

Other important (although often overlooked) benefits that complex manufacturers should be able to achieve by integrating knowledge-based configurators with their enterprise applications include

  • Improved master data management (MDM)—in which the format and information of the product can be synchronized and unified across all disparate systems from the upstream supply chain, to the engineering and production floor, to the front-end sales configuration and field service. This provides faster time-to-market capabilities given the need for less sales force and partner training. Knowledge management might be the most important asset of the value chain, and the way it is captured and packaged must be clear to everyone.

  • Improved market intelligence—by integrating the configurator with marketing analysis data mining tools. In this way, an organization can better understand what drives customer decision making, as well as what the customer's preferences are from an option standpoint. Organizations also have the ability to discover market patterns, customer profiling and product association, and pricing and product discount differentiation based on geography, customer, and volume—all creating opportunities for up-selling and cross-selling. Support for the acquisition and retention of profitable customers through a personalized approach to campaign management and through the blending of inbound and outbound interactions are capabilities that enable organizations to support targeted marketing campaigns and pursue up-sell opportunities.

To that end, WebSource CPQ, in addition to not requiring any software installation on neither the user side nor the administrator side, is able to keep all the product models (rules, attributes, and so on) in a relational database. This is in sharp contrast to most other peer products that have to resort to compiling product models into binary objects, which does not facilitate easy access to data. For example, it is not easy to list all the rules where a certain attribute is in the constraining condition, or to list all the rules that perform an operation on a certain attribute. To further illustrate, if, for whatever reason, a user is prohibited from selecting the color blue, the configurator administrator should be able to easily obtain all the rules that permit the color blue, and to then investigate why blue has been prohibited. For more information, please see Can We Intelligently Use Part Numbers to Configure and Order the Right Products?

Why Aren't Quote-to-order Deployments Widespread?

A report from AMR Research, titled Configuration Is the Heart of Customer Fulfillment for Complex Product Manufacturers (published March 31, 2003), discusses the significant financial impact of Q2O implementations. The report mentions such findings as a 95 percent reduction in order completion costs; a 13 percent reduction in order rework (from 15 to 2 percent or less); up to a 50 percent reduction in engineering support; a 20 percent reduction in incomplete orders; a 10 percent reduction on warranty costs; a 65 percent reduction in order cycle times; and a 50 percent drop in lead time (from over 60 days to 29 days). With such beneficial results, the logical question becomes, why aren't Q2O systems implemented almost everywhere?

There are many reasons why Q2O systems aren't implemented almost everywhere, beginning with the fragmented nature of the market. This causes market confusion, especially given that organizations need more awareness and education about what Q2O can and cannot do for its users. There are many (maybe too many) best-of-breed product configurators and silo-based tools that may or may not be suitable for a certain user environment. These best-of-breed products were typically created and managed by product experts, and are thus inflexible, not integrated with other enterprise systems, and not readily supported by IT departments. Yet, to meet customer requirements and reap a return on investment (ROI), front-office applications must be integrated with back-end enterprise processes. This integration, plus the availability of Web-based customer relationship management (CRM) suites, has allowed many “to-order” manufacturers to obtain immediate responses on quotes, proposals, configurations, pricing, and in some cases, even on delivery dates.

The market has long realized that CRM systems not only require integration with ERP systems to reconcile such data as customer master data, but also the bigger issue of integrated inter- and intra-enterprise business processes like prospect to cash. For make-to-order (MTO) and ETO products, the overall process starts with capturing customer requirements at the front-end that can be dynamically converted into work orders, routings, and other procedures via product configuration engines. Furthermore, intelligent configurators are increasingly required to provide a direct link with shop floor execution to, for example, add or change an operation, change the work center where the operation is performed, change the run rate on that operation, and change the setup time. They also need to produce special instructions or comments on the work order, sales order, or invoice.

Also, in the case of integrated and packaged software, there would have been many misfit deployments of simple commercial configurators or guided selling systems into highly complex environments (and vice versa—overwhelming knowledge-based configurator systems in light assembly firms), which have resulted in user disenchantment. Further, what has been causing additional confusion for users are the pure-play, guided-selling vendors that are anxious to get into the low end of the configuration arena. Specifically, they are underselling their offerings at a fraction of what a comparable configuration system would cost, but they are also delivering less in terms of comparable functionality. The inherent capabilities of the configurator tool will be determined partly based on whether it is an ERP module, a CRM module, a part of a total Q2O suite, or solely a stand-alone configurator. As a basic requirement, the configurator must be capable of handling the technical rules for specification and configuration of mass-customized products and services, while some configurator tools will also directly handle pricing, discounting, and sales quotes.

The companies with the most complete Q2O solutions include Oracle (including contributions from former Siebel Systems, PeopleSoft, and JD Edwards), SAP, Cincom Systems, and Selectica (the latter two excelling at knowledge management). There are also a number of stand-alone point (or suite) applications, such as FirePond, Trilogy Software, BigMachines, Access Commerce, Webcom Inc., Click Commerce, Configure One, RuleStream, i2 Technologies, Experlogix, TDCI, and Comergent Technologies (now part of Sterling Commerce).

All of these companies offer integrated solutions for incorporating some of the functionality of the complete Q2O solution. All of the above packaged solutions face significant competition from internally developed systems, since IT departments of potential customers have often developed, or may develop, systems that provide for some, or all, of the functionality of Q2O product suites. Internally developed application integration and process automation efforts will continue to be a principal source of competition for the foreseeable future. In particular, it can be difficult to license Q2O products to a potential customer whose internal development group has already invested substantially in, and made progress toward completion of, the systems that Q2O products are intended to replace.

This market segment is intensely competitive and rapidly evolving. The total cost of ownership (TCO), system performance, functionality, ease of use, product reliability, security, and quality of technical support are the key competitive factors that every vendor has to face.

Some of the principal competitive factors affecting the market include vertical domain expertise; product functionality and features; product architecture and technology; incumbency of vendors; availability of global support; relationship with system integrators; coverage of the direct sales force and the indirect channels; ease and speed of product implementation; vendor and product reputation and the company's financial condition; ability of the product to support large numbers of concurrent users (scalability); price; flexibility in delivering the solution (premise, hosted, and on-demand); customer references; measurable value (top and bottom line) of the customer; and implementation complexity and time requirement.

Many of the competing vendors listed above might find most of these key tenets of success challenging. Also, the knowledge-based Q2O concepts for ETO and complex manufacturers might be difficult to grasp (or simply too intimidating), and no one is suggesting that the system's implementation is a “piece of cake” (easily achieved). It is simply not that easy to move from manual, disconnected, and chaotic operations into a single “system of record” overnight. This is best exemplified in vendors' sizeable professional services organizations that globally deploy professionals who specialize in the design, implementation, deployment, upgrade, and migration services for the Q2O software.

Vendors have to assist their customers to consolidate their sales information technology operations, integrate disparate sales and marketing systems to Q2O systems, and increase the security of their data assets. Some vendors focus on implementing software with a number of consulting accelerators such as preconfigured business flows, which are designed to increase the pace at which customers achieve value from applications. Other configurator suppliers have taken things a step further, providing template configurator applications for specific industries, such as telecommunication equipment, personal computers (PCs), or insurance underwriting, to name a few.

If the enterprise, for example, has not done the basic groundwork of product component definition and modular design, then it may be too early to look at configurator tools, and it may be better for the enterprise to invest its time, money, and energy in product modularization. On the other hand, if the enterprise only has a few product lines, or perhaps the product is an insurance policy document of configured paragraphs, a well-structured configurator may actually help in the definition of the modular components.

Many other questions will be answered by customers (or on their behalf), such as what knowledge needs to be captured in the configurator and deployed to support the desired sales, service, and fulfillment process. Namely, are the products and services highly technical, with many features, options, and calculations, and is there complexity in the commercial areas of pricing and discounting? Further, are there regulatory compliance issues or industry standards driving the need for standardization and quality management of documents, such as specifications and proposals? And is there a mixture of products and services, and if so, which should be included or excluded from the mass customization project?

These are difficult questions to answer, but for most enterprises, the required configuration knowledge is likely to be combinations of technical product rules, marketing rules, a pricing and discounting policy, a customer sales and service history, and industry compliance standards.

There is also the issue of who needs to maintain the configurator's knowledge over time, which is likely to be some combination of personnel from the sales, marketing, engineering, manufacturing, customer service, and IT departments. The real knowledge owners for configuration, pricing, fulfillment, and service rules should be business experts, and not programmers, which is a key requirement for agile manufacturing. Also, are product, pricing, fulfillment, and service rules changing all the time, or are they managed periodically in a controlled manner over weeks, months, quarters, or years? In some instances, knowledge and rules may already be defined and resident in other enterprise applications, such as product data management (PDM), computer-aided design (CAD), or order processing (within ERP), which may raise questions regarding technical integration and in establishing which applications are the “masters” (having authority over others) for specific data (or whether to have a central MDM repository).

The major question is, who needs to use the corporate knowledge in the desired sales, service, and fulfillment process? In other words, if sales, marketing, engineering, and so on, define the product and service rules, then who are the “end users” of those rules in the desired sales, service, and fulfillment process? Again, the end user may be any combination of customers (via self-service), agents, distributors, internal sales force, sales support, engineering, manufacturing, and distribution.

The physical location of the end user and the venue for the configuration process is also an important consideration. Interactive, face-to-face specification and configuration between an internal sales representative and a customer implies that the sales representative may need to have the configurator tool available at the customer site on a laptop—either through disconnected usage, CD-ROM access, remote dial-up, or a permanent Internet connection.

To that end, Cincom, for example, commendably and candidly presents its prospective customers with the need to develop a 12- to 24-month Q2O road map, starting with transformation planning that includes gap analysis and determining competitive benchmarks, so that the company can truly discern where it is going (the destination). Namely, what the desired enterprise sales and service process should be is a significant question that requires vision that goes beyond the limitations of existing processes.

For instance, if global customer self-service through the Internet is an enterprise objective, to what extent is this practical given the complexity of the product and the sensitivity and security of pricing and discounting information? Perhaps the major objective is to provide better support for agents, resellers, or distributor channels. Or maybe the enterprise is seeking to improve internal efficiency by cutting labor costs and lead times within their existing sales, fulfillment, and support processes, and if so, how can this be achieved practically. Often the objective is to implement a multichannel and multiphase strategy, where customers or agents can use the Internet for self-service product specification. But this often needs to be fed through salespeople, technical support personnel, or third-party channels for follow-up activities, such as pricing and commercial negotiation.

To that end, Cincom provides Q2O best practices so that the customer can benchmark its quintessential 10 Q2O processes against the market: 1) catalog product and pricing data, 2) capture opportunity, 3) opportunity management, 4) needs assessment, 5) solution specification, 6) product configuration, 7) pricing, 8) quote and proposal generation, 9) order placement, and 10) underlying technology.

The current gaps of each of these ten processes are determined against the “transformational” (or redefining of the industry) benchmark, since they can be at the following levels: “minimal” (process is out of control), “stable” (process is not easily changed), and “progressive” (process is a best practice). The established gaps for each process then help with defining a road map and a 12- to 24-month transformation plan that involves automation, infrastructure, and process initiatives.

These initiatives and phases are to standardize each process across the company, simplify and optimize the process, standardize the technology and tools, and then automate the process. Once the gaps are determined and a Q2O solution blueprint is established, a plan to get there has to be devised, and the transition planning includes feasibility studies, project management and planning, and proof of concepts. Finally, the plan execution and implementation phase, as with any other enterprise system, includes product training, project planning and design, and project execution.

This is part five of the series The Basics of Quote-to-order Systems. In part six, recommendations are made regarding Q2O and its solutions.

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