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"This executive guide identifies the two interrelated phases in a
configurability strategy: developing the product, which emphasizes the essential functionality of a product
configurator; and executing the strategy, which identifies the many benefits gained by optimizing configurability."
Source : Access Commerce
Configurability Strategy: a Competitive Advantage
Configurability Strategy is also known as:
business strategy,
corporate strategy,
strategic planning,
strategic thinking,
strategic planning process,
strategic management,
business process improvement,
engineering strategy,
methodology strategy,
best practice strategy,
solutions strategy,
business innovation,
operational strategy,
productivity strategy,
strategy implementation,
strategic planning strategy,
strategic management strategy,
business strategic planning,
project management strategy,
change management strategy,
organization strategy,
innovation strategy,
operations strategy,
organizations strategy,
manufacturing strategy,
strategy management,
cost strategy,
organisation strategy,
integration strategy,
organizational strategy,
structure strategy,
strategic strategy,
strategy planning,
outsourcing strategy,
quality strategy,
project strategy,
supply chain strategy,
competitive advantage strategy,
business development strategy,
business planning,
product development,
information technology project management,
industry strategy,
strategy analysis,
process mapping,
change management process,
business process mapping,
business process analysis,
product innovation,
design strategy,
business process reengineering.
Preface
To gain a distinct
competitive advantage, forward-thinking manufacturing companies that sell
complex products are implementing a configurability strategy ' providing more
options and variations while using less resources.
This strategy is mandatory
because today's marketing environment continues to shift dramatically. In
many industry sectors, customers no longer willingly accept whatever product
is available "off-the-shelf." They now demand products to match their
specific needs.
This demand-driven environment is compelling companies to
drastically improve their configurability processes ' supported by advanced
information technology.
This executive guide identifies the two interrelated
phases in a configurability strategy: developing the product, which
emphasizes the essential functionality of a product configurator; and
executing the strategy, which identifies the many benefits gained by
optimizing configurability.
The Spectrum ofTo Order Products
Pick-to-Order (PTO) - products usually shipped
from stock inventory, for example, catalog items with optional accessories
shipped with the catalog item.
Assemble-to-Order (ATO) - products with standard
sets of predefined features and options, from which unique product
configurations are developed by the customer selecting specific features and
options; for example, computers ordered over the Internet.
Configure-to-Order (CTO) - products based on
consultative dialogue with the customer, through Web interface, to address
specific requirements. The products have been predesigned in
computer-aided-design (CAD) models or parameterized documents, but not
predefined with specific part numbers; for example, products with dimensional
and spatial requirements, such as hydraulic actuators, and windows and doors.
Engineer-to-Order (ETO) ' the most complex
products that during configuring must interface with product development
activities and tools, such as CAD software, design rules and other expert IT
systems that can support development of configuration, pricing, and complete
documentation over a typically iterative proposal cycle; for example, electrical
distribution systems.
Configurability Strategy: Introduction
For companies selling complex products with a multitude of options and
variations, developing unique, customized product configurations ' without a
product configurator ' is a tedious and error prone process. With a poorly
structured product database, identifying a valid configuration solution is both
cumbersome and time consuming for the sales team, as well as the customer. The
results are a major drain on a company's valuable expert personnel '
particularly engineers - and a lengthy customer response time.
A superior strategy to optimize configurability addresses these problems and
enables solutions.
As the graphic depicts, the strategy encompasses two major phases:
- Developing configurable products
- Executing the Lead-to-Order (LTO) process in a Lean Manufacturing
environment (1)
Developing Configurable Products
A robust configurability strategy capitalizes on the power of a product
configurator, initiated in concert with several related elements of product
development - a set of activities, tools and methods spanning concept
generation, performance planning, design and testing, and the commercialization
of new products.
Product development encompasses a vast array of engineering design software
tools and methods. However, only those directly related to exploiting
configurability are briefly described in this guide: platform planning, product
modularization, parts standardization, design for manufacturing and assembly,
product line rationalization and product lifecycle
management (PLM). The extended functionality of a product configurator is
explained in more detail.
First, it is important to recognize that the following widely recognized
axioms will dramatically affect product development:
- The early stages of product development result in 70-80% of committed
direct product cost.
- Engineering changes, later in the product lifecycle, become
exponentially more expensive to incorporate.
Clearly, therefore, design personnel must actively pursue cost avoidance
during product development, not after release to manufacturing when
opportunities for product cost reduction are minimal. Manufacturing and supplier
participation from the beginning is essential ' "throwing the prints over the
wall to manufacturing" cannot be tolerated.
All of the following elements share a common goal: gaining more product
options and variations ' with less or more efficient use of resources.
Platform Planning - designing components (parts and
assemblies) that are widely shared by product families, and from which numerous
derivative products can be designed and produced. (2)
The automobile manufacturer's efforts to derive more car models from fewer
major components, such as a chassis, are a prime example of this cost reduction
thinking.
One output from platform planning is a Concept (or Generic)
bill of material (BOM). It defines marketing factors, major assemblies,
required performance and target pricing. This special BOM is the basis for more
detailed product development in the following related elements.
Product Modularization - developing smaller sub-systems to
be able to function properly when assembled and tested as an end item.
It is required for a configurability strategy and is an effective design
approach if precise, unambiguous and complete.
The tangible goals of product modularization are to:
- Avoid the unnecessary cost of designing new components for each order to
meet individual customer requirements
- Encourage parts reuse in as many product families as possible
- Gain higher product quality
Significantly, modularization facilitates the use of product configurators
and enables a postponement strategy ' delaying the point of product
differentiation to the latest possible time in the supply network.
Parts Standardization - an initiative to eliminate
duplicated parts and dissimilarities between similar parts to avoid duplicated
parts costs and excessive inventory.
Unfortunately, duplicated parts are a common condition in many manufacturing
companies, resulting from a lack of a Preferred Parts and Sources List. The
estimated cost of creating one part ranges from $6,000 to as high as $25,000.
IBM, in overhauling its complete product development cycle, instituted
rigorous controls on using approved parts. The company was able to reduce its
part count by 50%.
Design for Manufacturing and Assembly (DFMA) -
evaluating product complexity early in the design process by use of analytical
software tools.
The result is to insure ease of manufacturing and assembly by eliminating
unnecessary parts, thus reducing direct product costs, and shrinking lead-times.
Computer manufacturer Dell uses DFMA methodology and software as an integral
tool to the product development process. (3)
Product Line Rationalization - simplifying the product
portfolio by rethinking the marketing and economic factors, including future
potential and profit margins, and reassessing true marketplace needs.
A company's current product portfolio may include some unprofitable products,
and a mish-mash of options and variations that have evolved over time, in an
ad-hoc manner.
Analysis of the product models, developed with a product configurator,
together with price, cost and volume information from
enterprise resource planning (ERP) and supply chain
management (SCM) systems, provide useful input to this simplification
process.
Product Configurator Software ' a product configurator's
vital role is delineated by its definition ' a software tool to create, maintain
and use electronic product models that completely define the range of variations
and options of a product, without the need to predefine all possible
combinations with unique part numbers and bills of material (BOMs), and with a
minimum of data entry.
A robust product configurator is one that automatically and seamlessly
facilitates all configuration needs ' sales, engineering and manufacturing '
across the entire spectrum of "To-Order" products.
Once developed, the configurable product model enables all users ' customers,
company personnel and sales partners ' to configure unique products in an
efficient manner. Moreover, different versions of BOMs are facilitated. The
sales team needs a detailed breakdown (BOM) sufficient to price and book an
order, while manufacturing requires a complete BOM listing all parts required to
produce and deliver the customer's order.
To create product models, a configurator provides a full range of product
modeling functionalities, some simple, some sophisticated ' that are essential
to model complex manufactured products. The term "Definition Logic" covers all
methods, the most common include: rules, constraints, inclusions and resources,
described in the text below.
A company's current Definition Logic ' right or wrong ' may exist in many
different locations, including people's notebooks and memories. Software tools,
spreadsheets and flow charts can be used to document the existing and new
Definition logic. Then, the new configurable product model can be developed
using a choice of modeling approaches.
For Assemble-to-Order (ATO) products, the simplest form of modeling is
feature option selection, using If-Then-Else logic. For example: One, select a
feature, e.g., type of engine; and, then, two, pick an option, e.g., horsepower
value.
For Configure-to-Order (CTO) and Engineer-to-Order (ETO) products,
performance oriented Definition Logic is widely used. To illustrate, a customer
designated need for a truck to haul a specified load, e.g., 20 tons, will drive
the requirements for a specific chassis. Other examples include hydraulic pumps
and industrial equipment. A variation of performance-oriented modeling is the
ability to configure dimensional and spatial products, like office furniture
systems.
For all "To-Order" products, the modeling results must include the ability
to:
- Create and maintain the configurable product models by non-programmer
personnel
- Deploy across numerous sales channels with a single architecture
- Link to ERP and SCM systems to provide information seamlessly
- Visualize the product
- Configure a unique product automatically and quickly ' without
continuous intervention by engineering personnel during the LTO process
- Generate, dynamically, manufacturing and engineering BOMs and routings
For CTO and ETO products, these additional functionalities are essential:
- Interfaces to computer-aided design (CAD) models
- Automatic creation of related files and documents by parametric logic
Product Lifecycle Management (PLM) ' a strategic business approach for
collaborative creation, dissemination and use of product data across the
extended enterprise from concept to end of life ' integrating people, processes
and information. (4)
PLM capabilities are highly desirable ' some say mandatory ' to ensure an
effective configurability strategy. They provide a multitude of software tools,
including the ability to:
- Enable configuration management ' ensuring product documentation
integrity over the life of the product ' using PLM data vault management
functionality to rigorously control all versions of all product data files,
including the Definition Logic
- Share product visualization
- Ensure timely distribution of product information using electronic
workflow, including attached documents
3For ETO product specifications, additional PLM capabilities are significant
when more design effort is required to develop a complete configuration, other
than provided by Definition Logic. These include the ability to:
- Share configuration and design files with suppliers and customers
- Perform collaborative product design with suppliers
- Conduct material and vendor sourcing by engineering personnel
Product Development: The Last Steps ' The last step before
releasing a configurable product model for use in the execution phase is to
completely validate it through structured testing, accomplished with full
participation of engineering personnel. When validated, the operational product
model eliminates the costly need for engineers to constantly validate completed
configurations ' a major benefit.
A validated model ensures a positive customer experience during the critical
"customer facing" LTO process, for instance, by not offering a unique
configuration that could not be built.
Furthermore, the validated model can then be used in future product
development modeling efforts for "what-if" simulations, reducing the new product
introduction cycle time.
Optimizing Configurability: A Balancing Act To reemphasize,
the goal is to gain competitive advantage by offering a greater variety of
product options and variations with less, or more efficient use of resources.
However, unlimited variety may not be economical, risking an increase in
non-value added costs.
Optimizing configurability, therefore, is a balancing act ' weighing the
additional value of more product options and variations compared with any
additional costs required. For instance, some product modules may be more
difficult and expensive to design, including the added cost of designing
interfaces, as Reinersten points out. (5)
Executing a Configurability Strategy
An optimized LTO process, coupled with Lean Manufacturing facilities and
nimble suppliers, is an essential element for executing an effective
configurability strategy to realize reduced costs and to gain a competitive
advantage.
Capitalizing on the product model, customers can configure unique products '
quickly and accurately during the LTO process ' the continuous cycle that begins
with recognizing a prospect and identifying needs, continues through configuring
a unique product, pricing, quoting, booking an order, and ending with automatic
generation of bills of material and routings for manufacturing execution. (1)
Throughout the LTO process, users interact with the prompts on computer
screens to develop product configurations that satisfy each customer's unique
needs. The prompts are usually a combination of feature-option selection and
performance oriented dialogues, as described above. In addition, the Definition
Logic guides users with explanatory messages, for example:
- Constraint ' "you have a range of choices . . ."
- Resource ' "you have consumed this much of the allowed . . ."
- Inclusion ' "this selection also requires . . ."
A key output of the LTO process, automatically generated from the sales
configuration, is the unique manufacturing BOMs and routings needed to produce
and deliver the customer's special order.
"A Lean Manufacturing environment is mandatory to complement the LTO process,
providing flexibility to respond quickly to changes in product configurations
and volumes, manufacturing processes and short lead times."
Benefits of a Configurability Strategy
Many benefits ' including cost reductions ' are synergistic; benefits created
during product development also catalyze additional benefits that become
apparent during the following two phases:
The LTO Process - Many of the benefits linked with using a
configurator surface now, including:
- Increasing revenue by up-and-cross selling, particularly on higher
margin options and accessories
- Cutting quotation response time and costs to a minimum
- Generating a valid product configuration ' quickly and accurately '
without iterative validating of the configuration
- Producing ancillary drawings and documents automatically
- Eliminating payment delays caused by order and invoice errors
Manufacturing/Customer Order Fulfillment - The newly popular
term "Designing for Lean" speaks volumes about the relevance of product
development results for Lean Manufacturing, making possible:
- Increasing product quality
- Lowering product cost
- Reducing number of suppliers
- Eliminating rework and scrap caused by mis-configured products
- Reducing inventories
- Cutting manufacturing and assembly cycle time to improve the order
fulfillment rate
- Enabling postponement
Postponement is a prime example of synergism. It is enabled by product
modularization, use of a configurator, a Lean Manufacturing environment and a
flexible distribution channel. A recent survey highlighted several significant
benefits of postponement ' the three highest rated: increased customer
satisfaction, reduced inventory cost and improved order fill rate. (6)
Clearly, cost reductions are highly desirable, as noted by the benefits
above. The results have a powerful, multiplier effect, improving product margins
and driving increased profits.
Arguably, perhaps as significant as cost reduction, is freeing engineering
personnel from non-value added activities, redirecting them to reap strategic
benefits. As a vice president of engineering declared, "We can't just reduce the
product cost to gain competitiveness; innovative new products must be our
answer". A recent survey amplified his sentiments ' accelerating product
innovation is critical for growth. (7)
Conclusion
To gain the benefits and competitive advantages of a configurability
strategy, thinking configurability must be pervasive ' originating early in the
heart of product development, using a robust configurator as a core element '
and continuing persistently over the entire product lifecycle.
Cited References
- Access Commerce, "Optimizing the Lead-to-Order Process," 2005.
- Meyer, M. and Lehnerd, A., "The Power of Product Platforms," The Free
Press, 1997.
- Jagodzinski, S. and Keup, B., "No New Factories," Desktop Engineering,
January 2004.
- CIMdata, "Product Lifecycle Management," 2002. www.cimdata.com
- Reinersten, D., "Managing the Design Factory," The Free Press, 1997.
- American Production & Inventory Control Society, "The Adaptive Supply
Chain: Postponement for Profitability," 2003.
- Deloitte Research, "Mastering Innovation: Exploiting Ideas for
Profitable Growth," 2004. www.deloitte.com
Additional References
- Anderson, D., PhD, "Build-to-Order & Mass Customization," CIM Press,
2003.
- Pine, B. J. II, PhD, "Mass Customization: The New Frontier in Business
Competition," Harvard Business School Press, 2003.
The Author
Richard W. Bourke is a principal consultant with extensive experience in
systems planning and implementation. For other publications, visit :
www.bourkeconsulting.com.
About Access Commerce
Access Commerce is an international provider of E-Commerce and CRM
software
The Cameleon Commerce Suite from Access Commerce helps manufacturing,
distribution, retail and service companies sell products and services through
direct, indirect, call center and Internet sales channels. Cameleon drives
business efficiency by aggregating, standardizing and syndicating product
information across supply and demand chains. Cameleon optimizes selling and
ordering processes by simplifying core business functions: e-commerce,
electronic catalog and guided selling, product and service configuration,
advanced pricing and promotions, quote and proposal generation, and order
management. Employees, channel partners and customers use Cameleon to eliminate
errors and non-value added activities, decrease cycle times and improve customer
satisfaction, resulting in increased revenue and a reduction in sales and
operational costs. Access Commerce customers include AREVA, Eaton Corporation,
Eiffage Construction, Invacare, Leroy Merlin, Manitou, Mitsubishi Caterpillar
Forklift Europe (MCFE), Perceptron, Perkins Engines, Saint-Gobain, Schneider
Electric, ThyssenKrupp, Total and X-Rite.
Access Commerce is headquartered in Toulouse, France and Chicago, Illinois
and has offices located in North America and France. Cameleon is a trademark of
Access Commerce SA and may be registered in certain jurisdictions. All other
product and company names mentioned are the property of their respective owners.
For further information, email to info_en@access-commerce.com or contact us
at:
North American Headquarters
5215 Old Orchard Road - Suite 270
Skokie,
IL 60077
Chicago
+1 (847) -583-8450
www.access-commerce.com
Configurability Strategy
Copyright© 2007 - Access Commerce - All rights
reserved.
European Headquarters
Rue Galilée - BP 87270
31672 Labège
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+33 5 61 39 78 78
Contents
- Preface
- Configurability Strategy: Introduction
- Developing Configurable Products
- Executing a Configurability Strategy
- Benefits of a Configurability Strategy
- Conclusion
- Cited References
- Additional References
- The Author
- About Access Commerce