The “To-Order” Mode of your Business will Determine the Needed CPQ Capabilities
By Dick Bourke
CPQ can be implemented in a range of product configuration options. As a starter for your strategic planning, here’s a generally accepted definition of “To-Order” options that will be your strategic choices.
Assemble-to-Order (ATO) – products with standard sets of predefined features and options. The customer selects specific features and options to develop the unique product configurations. Orders are typically processed by an ERP system, for example, computers ordered over the Internet.
Build/Configure-to-Order (B/CTO) – products have been predesigned in CAD models or parameterized documents, but not predefined with specific part numbers. The CPQ process is based on consultative dialogue with the customer, through the Web interface, to identify specific requirements. For example, products with dimensional and spatial requirements, such as kitchen cabinets and hydraulic actuators.
Engineer-to-Order (ETO) – the most complex and sophisticated products. Configuring requires interfacing with product development activities and tools, such as CAD software, design rules and other expert IT systems to produce complete documentation such as drawings and associated geometries for all downstream activities. Typically, the proposal cycle is iterative, for example, electrical distribution systems.
You may wish to tailor these definitions for your specific circumstances. Certainly, there are variations you could consider. European consultant, Jos Voskuil, offers some ideas in What is Digital PLM?
CPQ application is not a “one size fits all” matter. The individual processes must accommodate various product configuration environments, levels of design sophistication, product complexity, inventory, delivery modes and lead time management.
For some companies, a significant strategic shift will be from Make-to-Stock to an ATO environment. The rationale? Competition and customer expectations – unique configurations and fast delivery – may well force this decision to regain competitive differentiation.