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  • Lawrence Matusek

Configure to Stock in SAP ERP

What customers want

Most people have heard about mass customization, the lot size of one, "have it your way", and other taglines for customized products. Customers expect and increasingly demand that they can easily get products that are tailored to their specific needs and desires. This trend has been growing for years with no end in sight. Customers have unprecedented choices today, and many are choosing their suppliers based on the ease of quickly getting what they need.

"It's not that easy for us to do" doesn’t garner much empathy in market anymore. A particularly candid customer once told us "just because it is difficult for you doesn’t make it more valuable for me". Is it difficult for you to handle low volume (i.e. special) product configurations? The conventional thinking is that focusing only on high volume configurations will generate greater efficiencies that translate into better margins. But consider that many customers prefer a single supplier that can provide whatever configurations they need. To them, they are all just products. They are special in your eyes, not your customer's. Uh oh.

Does this sound like you?

Do you market, sell, and produce hundreds or thousands of different product variants in a given family, each having a unique part number? How much time and effort does it take to set up new part numbers for a new product launch? Not just the item but its specifications, drawings, bills of material (BOMs), routings, costing, and pricing. And don’t forget approvals and end-to-end testing.

With all of that effort, do your customers and sales teams still have difficulty finding the part numbers they need? How do they search and how much training is required to ensure that they find the right part? And how much effort does it take to make continual component, pricing, and other changes across an entire product family?

For most companies, their customers only order a single digit percentage of their available product variants and the vast majority of variants are never quoted or sold. How do you know which variants will be of interest to customers (so you know which part numbers to create in advance)? Some companies have gotten pretty good at guessing what will be the "high runners" (i.e. variants with highest demand), but what about the rest of the demand? There are so many variables that the best you can do is take an educated guess.

Some companies choose to create part numbers for only the expected high runners in advance. For any other demand, they create a part number the first time that variant is ordered. The problem is that your customer cannot search for a part number that doesn’t yet exist or may wrongly assume that variant is not available (because it has no part number). If your customer can get past this and order the variant, it often take weeks for companies to set up all the necessary part number data to produce the variant. Or perhaps they can just get it from your competitor with normal lead time?

A better way?

Is there a better way to manage these types of products? On the surface, a configurator sounds like it could be a good fit. I expect that your product models would have only a few characteristics (to generate up to hundreds or thousands of feasible variants). The good news is that your model logic should be relatively simple and manageable. If you had millions or more feasible variants, you would have already been using a configurator out of necessity.

The bad news is that switching from a make-to-stock process to a pure configure-to-order process can have some far reaching impacts. The first question that I am inevitably asked is how do we market, sell, produce, store, deliver, and invoice a product without a unique part number? In my experience, this is a substantial organizational change management challenge in most companies. I explain that each variant configuration will have a unique identifier (i.e. sales order item number) instead of a unique part number, but years or decades of part number thinking is rarely easy to change.

If you can get over that hurdle, then you will likely have a lot of work to do to get your back end processes to work for pure configure-to-order. There are numerous IMG settings that must be made or revisited along with all of your custom programs, reports, and outputs (if they expect make-to-stock). Product catalogs and literature may also require updates. This may represent an uncertain level of effort, risk, and benefit to make the switch. This has stopped many such opportunities in the planning stage.

A better way!

If all of this sounds familiar, then you are a candidate for what we have coined CTS (Configure to Stock). Don't bother searching for CTS in the help; we invented the term (catchy right?). Simply stated, CTS gives you the benefits of a configurator from end-to-end but reuses or generates a unique part number for each variant that is ordered and fulfilled. You enter the configurable material and desired configuration in quotations (or orders), then the system will search for a matching part number when ordered.

All CTS part numbers are a special kind of material known as a material variant. In addition to typical finished good data, a material variant stores a distinct configuration of a configurable material that can be read for configurable BOM, routing, and pricing calculations. And you can convert existing finished part numbers to equivalent material variants so that you do not have to change existing orders, drawings, and documentation.

We are not the first to think of this concept. For example, the BaaN ERP and configurator had the concept of generating customized items from generic items (analogous to material variants from configurable materials). We are perhaps the first to have a repeatable solution for SAP ERP (with some customization to fill the key gap of automating material variant creation). There is actually a lot of specialized know-how required to generate material variants that serve the full range of needs in a typical organization (and perhaps that is a reason that this functionality is not yet in the standard system).

CTS is not just a technical solution. We walk you through the entire design, setup, go live, and ongoing maintenance. Most customers learn a lot from the experience. For example, discrepancies in prices and costs often surface when switching from highly manual make-to-stock processes to highly automated CTS processes. Even better is that a lot of tribal knowledge is gathered and organized in a way that is truly repeatable without reliance on a few individuals. Think of CTS as the best of both worlds when you will ultimately produce up to a few hundred distinct variants (but can't easily predict which ones in advance).

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