Delivering accurate pricing and delivery estimates are vital components of a successful business. That’s especially true if you make custom kitchen and bath cabinets, furniture, or other build-to-order, configured products. Fortunately, an ERP that includes CPQ software for manufacturing operations may be the key to unlocking growth for your business.
What is CPQ?
CPQ stands for Configure-Price-Quote. CPQ is an essential component of the custom manufacturing process. CPQ software for manufacturing streamlines the configuration and pricing of customized products, enabling customers, dealers, and sales representatives to create tailored products with ease.
CPQ can be a powerful tool that enables businesses to streamline their operations, improve customer satisfaction, and maximize profitability. However, some manufacturers still rely on standalone online configurators that lack integration with their ERP systems. This leads to inaccuracies and missed opportunities. The true operational benefits of CPQ software for manufacturing come about when the CPQ activities are baked into the company’s ERP software.
When this is the case, CPQ may be known as the ordering and quote pricing module coupled with the ERP’s product configurator. Most important, it is by no means a lesser CPQ software for manufacturing but rather one with added power and benefits that go far beyond configure, price, and quote.
What is an ERP?
Enterprise Resource Planning (ERP) systems are comprehensive business management solutions designed to centralize and optimize various aspects of the manufacturing operation. An ERP provides a unified platform that integrates processes and data across departments, including inventory management, production planning, sales, finance, and customer relationship management.
While their primary function is to centralize data and streamline operations, many modern ERP solutions offer additional functionalities like CPQ to cater to specific industry needs, especially for manufacturers of complex and customizable products. Frontier ERP, for example, includes a robust parametric product configurator, pricing tools, and quote management along with many other features for manufacturing excellence.
If you manufacture highly customizable or complex products such as custom kitchen and bath cabinets or furniture, you could be an excellent candidate for an ERP with integrated CPQ software for manufacturing.
In this article, we will explore the CPQ process and highlight its numerous benefits for custom manufacturers, emphasizing what is often missing in standalone tools and how embracing an ERP with CPQ software for manufacturing can drive more efficiencies and growth.
Understanding the CPQ Process
The Configure-Price-Quote process is a comprehensive system that brings together multiple aspects of custom product manufacturing to facilitate seamless quoting and order processing. The CPQ process comprises three main steps:
During the product configuration phase, customers use a user-friendly, online product configurator to design their custom kitchen and bath cabinets, furniture, or other goods. The online configurator presents various product options, such as cabinet style, materials, colors, hardware, fabric, and accessories. As customers make their choices, the CPQ system dynamically generates a 3D model of the cabinet or furniture design, ensuring accuracy and visual representation.
The Configure part of the CPQ tool allows businesses to set up the parameters to ensure that customers can only select valid and feasible combinations of features, materials, and other customizable elements at the time of implementation. These rules help prevent unrealistic, incompatible, and unbuildable configurations from being ordered.
With the configuration in place, the CPQ software instantly calculates pricing for the custom cabinets or furniture order. The pricing is determined by multiple factors, including the selected materials, accessories, and any additional customizations.
The ERP system’s pricing engine will factor in production costs, materials, labor, overhead, and profit margins to generate the final price. If the CPQ tool is not connected to the ERP system, these costs are estimated and entered into the CPQ tool. One problem is that they are rarely revisited and updated as costs change. The stand-alone tool also has no visibility to current inventory levels.
Having real-time access to both production costs and inventory levels ensures that the quotes are both competitive and profitable.
Once the design and pricing are finalized, the CPQ tool generates a detailed quote, which can be instantly shared with the customer. This quote includes the itemized breakdown of the selected options, pricing, production lead times, and estimated delivery dates. The seamless quote generation significantly reduces manual errors and expedites the entire sales process.
However, unless the CPQ tool has visibility to the production schedule in the ERP, the lead times and delivery dates are simply estimates based on averages.
While a bolt-on CPQ can often do much of the above, the true benefits of CPQ manufacturing software are realized when the capabilities are part of your ERP system. When combined, an ERP featuring CPQ software for manufacturing provides a range of benefits, including:
To ensure the accuracy of product configurations and pricing, the CPQ components in the ERP system are connected to real-time data from other relevant data sources. This includes up-to-date information on inventory levels, production schedules, and supplier data.
Sales and Customer Management
The CPQ capabilities seamlessly integrate with the ERP’s sales and customer management modules. This ensures that all relevant customer data, quotes, and orders are centralized and easily accessible by sales, customer service representatives, and other stakeholders.
Reporting and Analytics
An essential aspect of CPQ software for manufacturing within an ERP system is the ability to generate reports and analyze data related to customer preferences, popular configurations, sales trends, and pricing strategies. This data-driven approach helps businesses make informed decisions and identify areas for improvement.
9 Benefits of ERP with CPQ Software for Manufacturing Cabinets and Furniture
- Enhanced Efficiency: Unlike the existing standalone online configurator, CPQ software for manufacturing that is an integral part of your ERP system provides access to production schedules and inventory levels. This real-time data empowers sales teams to provide accurate production and delivery estimates, thereby eliminating delays and enhancing overall operational efficiency.
- Improved Sales Effectiveness: The CPQ process empowers dealers and customers to visualize their custom cabinets or furniture configurations. It also assists sales representatives in upselling and cross-selling opportunities by suggesting complementary accessories or premium materials leading to increased revenue per order. As part of your ERP, it can suggest items based on inventory levels so you can highlight slow-moving or fast-moving products based on your needs.
- Accurate Pricing: With CPQ software for manufacturing, pricing is based on predefined rules and is consistently applied across all quotes. When it is part of your ERP system, specific customer discounts and payment preferences are automatically reflected in the quotes. This eliminates the need for customer service personnel to make adjustments or to create and distribute discount codes.
- Error Reduction: Manually generating quotes without the support of a CPQ system is prone to human errors, leading to potential financial losses and customer dissatisfaction. However, a stand-alone CPQ software for manufacturing also requires that any changes to component prices are updated immediately, often manually. When part of your ERP, the integrated CPQ functionality ensures that all changes are automated, minimizing errors in pricing, measurements, and configurations.
- Personalization: The CPQ system allows customers to personalize their cabinet or furniture designs, fostering a sense of ownership and satisfaction with their choices. This enhanced customer experience sets custom manufacturers apart from competitors offering standardized options, leading to increased customer loyalty and repeat business. However, if your ERP data is not in sync, and pricing or engineering updates have not been entered promptly, sales or support employees may have to reach out to the customer to change their order or to accept a substitution.
- Real-Time Data Insights: The data that is generated in the ERP system including the components of CPQ software for manufacturing provides custom cabinet and furniture manufacturers with valuable insights into customer preferences, popular configurations, and sales trends. Analyzing this data helps manufacturers make informed decisions, optimize production, and identify new products and market opportunities.
- Shorter Sales Cycles: CPQ expedites the sales process by providing instant quotes and eliminating the need for time-consuming manual calculations and discussions with the factory. Customers receive quotes faster, increasing their preference for your company, and leading to shorter sales cycles. When part of your ERP system, the quotes are more precise, reflecting the latest overhead costs and production schedules, protecting your profitability.
- Streamlined Manufacturing: ERP systems that contain the elements of CPQ software for manufacturing offer real-time insights into the inventory components and resources required for each order. Such a system ensures that once an order is confirmed, the design and production information is automatically transmitted to the manufacturing team.
The data can be used to optimize production planning, reduce waste, and improve resource allocation. By removing the need for engineers to review custom orders and eliminating manual data entry errors, lead times are reduced as the entire production process is accelerated.
- Full Data Integration: The seamless integration between CPQ functions and your ERP system ensures that all sales data, product configurations, and pricing information are automatically transferred to other relevant departments — such as manufacturing, procurement, and finance — streamlining the end-to-end business process.
The CPQ process presents a transformative opportunity for custom furniture and cabinet manufacturers to enhance their operational efficiency, accuracy, and customer satisfaction. However, standalone online configurators leave significant gaps in the quoting process due to their inability to incorporate the full range of ERP system data.
Embracing an ERP that includes all the elements of CPQ not only bridges these gaps but also brings a myriad of benefits, including enhanced efficiency, personalized customer experiences, improved sales effectiveness, and data-driven insights.
For companies selling complex and customizable products, implementing an ERP with built-in CPQ software for manufacturing is a game-changer. By embracing the capabilities of a manufacturing ERP system with CPQ tools, custom products companies can stay ahead in the market, drive growth, and build long-lasting relationships with their customers.
Ready to see an ERP with CPQ software for manufacturing in action? Contact us to arrange a demo of Frontier ERP by Friedman.