In B2B manufacturing, order volumes are relatively low, but the variation of customer needs is high. This creates a difficult situation for efficient mass production. Distinct customization is often needed, introducing a whole new layer of complexity. A company may be able to profitably offer and accurately deliver millions—or possibly billions—of product combinations, which of course can lead to high levels of confusion.
This complexity trickles down to every level of stakeholder within an organization as it relates to products. First, the end customer wants to find out which solutions best match their needs without costing too much. Sales teams want to quickly optimize proposals to meet the customers’ needs and win deals without losing profits and getting too bogged down in technical details. And sales engineers want to find out how to assess and overcome technical limitations for the customer without unforeseen consequences.
Meanwhile, engineers encoding the product variability need to quickly revise and validate interdependencies when they make changes to a product line over time, ensuring accuracy and deliverability. Product managers need to optimize the variability for profitability by considering which customer needs are compatible, which component variants are rarely used, and what happens to overall variability if a component is replaced or removed. Finally, pricing managers need to balance margins with customer value and cost.
Variability breeds complexity
Product variability can be a nightmare without the right solutions. At the heart of this, a cutting-edge configure, price, quote [CPQ] system can completely transform a business. Most CPQ systems simply encode a procedure in order to generate a quote as quickly as possible. This might be enough for simple high-volume products, but for products with the level of variability and technical interdependencies we have been discussing, the navigation must be flexible.
CPQ needs to be a smart product navigator, empowering the different stakeholders to explore the product variability in their own ways, and ensure that it is correctly encoded.
The biggest challenge of navigating variability in physical B2B products—think machinery or transportation equipment—is that the variability can be constrained by thousands of compatibility restrictions. These interdependencies interact; a valid combination for one constraint might violate another, and there are often thousands or more. The combined consequence of this magnitude of product variability is, literally, beyond human comprehension.
With all of this in mind, flexible navigation of product variability requires two essential elements:
1. A smart engine. This is a system that can search the vast maze of restricted product variability in a variety of ways, along with tools to present the variability intuitively for different audiences.
2. A smart definition of product variability. Interdependencies can be defined intuitively, clearly corresponding to the real interdependencies. But the definition also needs to be concise so the same interdependency doesn't have to be defined multiple times. The definition should be inspected, understood, and validated by the people involved in making decisions on variability.
Simplifying complex interdependencies
Many of today's CPQ systems rely on the sequential encoding of rules, even if they support some form of constraints. They essentially encode a procedure, which in this case is defined as a sequence of decisions to configure the product. Interdependencies rest in the head of the person encoding the decision sequence. But the same interdependency must be implicitly considered in multiple instances, affecting different decisions throughout the procedure.
One by one, each decision-rule might appear simple on the surface. The procedure might even look intuitive using a visual flow chart. But with many interdependencies, the procedure quickly becomes a mess that can be a nightmare to maintain—the procedure won't be flexible enough for different uses. There is no way to validate that the rules are correct, meaning millions of combinations cannot be tested.
In the end, disorganized variability leads to disorganized business.
Almost everything related to products across an organization depends on variability, which changes fluidly and frequently as products evolve. When product variability remains a mess, everything else is messy, including pricing, quoting, order processing, e-commerce, product planning and engineering. But with transparent product variability as a foundation, everything else related to products can be simplified…truly digitized.
When multiple touchpoints across the product lifecycle have digital access to the product variability, more stakeholders need to be considered, increasing the necessity and demand for flexible navigation. Conversely, the easier it is to navigate product variability, the more useful it will be for these varying stakeholders throughout the lifecycle.
All of this underscores the need for modern CPQ technology. When implemented correctly, this innovative tech eliminates the messiness that variability can bring to the manufacturing process. Only then can the many stakeholders involved truly be on the same page, creating an efficient, and most importantly, cost-effective manufacturing process.
Dr. Klas Orsvärn is executive vice president of Tacton Systems.