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 importantly, it is by no means a lesser CPQ software for manufacturing but rather one with added power and benefits that go far beyond configuration, 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 (CPQ) process is a sophisticated system designed to streamline the intricate stages of custom product manufacturing. By seamlessly integrating various elements, such as product configuration, pricing details, and quotation generation, CPQ ensures a smooth and efficient flow from initial quoting to final order processing, enhancing overall operational efficiency and customer satisfaction.
The CPQ process comprises three main steps:
Configure
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.
Price
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.
Quote
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:
Real-Time Integration
To uphold the precision of product configurations and pricing, the Configure, Price, Quote (CPQ) components within the Enterprise Resource Planning (ERP) system are intricately linked to real-time data sourced from various relevant sources. This encompasses current details on inventory levels, production schedules, supplier data, as well as market trends and customer demands, ensuring a comprehensive and accurate decision-making process.
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, Configure Price Quote (CPQ) software for manufacturing, which is seamlessly integrated into your Enterprise Resource Planning (ERP) system, offers immediate access to up-to-date production schedules and inventory levels. This real-time data equips sales teams with the information needed to provide precise production and delivery estimates, effectively eliminating delays and significantly boosting overall operational efficiency.
By streamlining processes and ensuring accurate information flow between departments, the CPQ software integrated within the ERP system optimizes the entire production lifecycle, from initial sales interactions to final product delivery.
Improved Sales Effectiveness
The CPQ (Configure, Price, Quote) process is a robust tool that not only empowers dealers and customers to envision their custom cabinets or furniture configurations but also streamlines the sales process.
By providing a visual representation of the final product, it enhances customer engagement and satisfaction. Moreover, CPQ aids sales representatives in identifying upselling and cross-selling opportunities by recommending complementary accessories or premium materials, thereby maximizing revenue potential per order.
Additionally, when integrated into your ERP system, CPQ can leverage inventory data to suggest items aligned with your stock levels, enabling you to strategically promote slow-moving or fast-moving products based on your business requirements.
Accurate Pricing
With CPQ (Configure, Price, Quote) software tailored for the manufacturing sector, pricing strategies are devised based on predefined rules, ensuring uniform application across all quoting processes. When seamlessly integrated into your ERP system, intricate details such as specific customer discounts and payment preferences are automatically factored into the quotes generated. Consequently, this automated system eradicates the necessity for customer service representatives to manually tweak quotes or generate and disseminate discount codes, streamlining the overall operational efficiency.
Error Reduction
Manually generating quotes without the support of a Configure Price Quote (CPQ) system can be a cumbersome task prone to human errors. These errors can result in significant financial losses and customer dissatisfaction, impacting the overall efficiency and profitability of a business. On the other hand, utilizing a stand-alone CPQ software specific to the manufacturing industry may necessitate manual updates for any changes in component prices, potentially leading to delays and inefficiencies.
However, when the CPQ system is seamlessly integrated into your Enterprise Resource Planning (ERP) software, it streamlines the process by automating updates and ensuring accuracy in pricing, measurements, and configurations. This integration not only minimizes the chances of errors but also enhances the overall operational efficiency and customer satisfaction levels within the organization.
Personalization
The CPQ (Configure, Price, Quote) system revolutionizes the customer experience by empowering them to personalize cabinet or furniture designs. This not only cultivates a profound sense of ownership and satisfaction but also elevates the perceived value of their choices.
This tailored approach not only differentiates custom manufacturers from competitors that offer only standardized options but also fosters increased customer loyalty and fosters repeat business. Ensuring a seamless experience, however, hinges on synchronized ERP data. In cases where pricing or engineering updates are not promptly entered, sales or support teams may need to engage with customers to modify orders or propose suitable substitutions.
Real-Time Data Insights
The data generated within the Enterprise Resource Planning (ERP) system, encompassing the components of Configure Price Quote (CPQ) software tailored for the manufacturing sector, offers custom cabinet and furniture manufacturers a wealth of valuable insights. These insights delve into intricate details such as customer preferences, trending configurations, and evolving sales patterns. By meticulously analyzing this data, manufacturers gain the ability to make well-informed decisions, fine-tune production processes for efficiency, and unearth new product innovations and market prospects to capitalize on.
Shorter Sales Cycles
CPQ (Configure, Price, Quote) expedites the sales process by streamlining operations. By offering instant quotes, CPQ eliminates the need for time-consuming manual calculations and discussions with the factory. This efficiency translates to customers receiving quotes faster, thereby enhancing their preference for your company and ultimately resulting in shorter sales cycles. Moreover, when seamlessly integrated into your ERP system, the quotes generated are more precise, as they reflect the most up-to-date overhead costs and production schedules. This level of accuracy not only benefits your customers but also safeguards your profitability in the long run.
Streamlined Manufacturing
ERP systems that encompass the functionalities of Configure, Price, Quote (CPQ) software specifically tailored for manufacturing industries provide invaluable real-time insights into the intricate details of inventory components and resources needed for fulfilling each order. This seamless integration guarantees that once a customer’s order is officially confirmed, the relevant design and production specifications are effortlessly and instantaneously relayed to the manufacturing team, streamlining the entire production process.
The generated data serves as a powerful tool for enhancing production planning strategies, minimizing wastage, and optimizing resource allocation across different operational facets. Noteworthy benefits include the automation of custom order reviews by engineers, a significant reduction in manual data entry errors, leading to shortened lead times, and an overall acceleration of the production workflow.
Full Data Integration
The seamless integration between CPQ (Configure, Price, Quote) functions and your ERP (Enterprise Resource Planning) system guarantees a smooth flow of sales data, product configurations, and pricing information. This automated transfer extends to various departments like manufacturing, procurement, and finance, optimizing the end-to-end business process and enhancing overall operational efficiency.
Conclusion
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.
