Knowledge Based Commercial Excellence - Configuration - a Game Changer
The idea for this topic came from a number of conversations I’ve had with thought leaders in the configuration space over the past few years. In the course of these discussions it became clear that they believed that this space could become more relevant by becoming a forum for both business AND technical exchange. So I saw it as a great opportunity to step back from WHAT we do to take a look at WHY we do it – and even HOW we could go further to drive value in our organizations. I don’t expect that today will be a definitive answer for anyone – but we hope that it’s the start of an ongoing dialogue that will continue within CWG and in your own organizations. The topic is “How to leverage best practices in configuration to radically change business performance”… to change the game that your company is in so that you are sure to win it.
My first direct experience with configuration as a game-changer came to me by surprise. About 20 years ago I was the new CIO at a Fortune 500 industrial equipment manufacturer. I had been recruited by top management to turn-around a failed corporate-wide ERP implementation. A reputable SI had been trying to implement CATS, or competitive advantage through simplification. This program had been initiated at the board level to significantly improve operational performance across all divisions. By the time of my arrival, the SI had been terminated and the program was on hold. It was 300% over budget; but only 25% of the planned functionality was deployed – and that small part (the fully standardized product element) was implemented in only 25% of the operations. Now at that point I already had what I considered to be a strong background in the manufacturing industry - but during my initial assessment of CATS I realized that I was up against a completely different challenge.
As the industry leader, we were producing a full array of product solutions – from highly standardized to very specialized, including “one-off” designs. Our largest sales volume division at that point was producing about 16,000 units per year - BUT there were over 1MM BOMs – with an entire engineering group dedicated to adding new ones ‘on the fly’ for “special” orders - this was unmanageable with BOM accuracy under 30% - and up to 50% of the order cycle was being consumed in the PRE-PRODUCTION process (leaving only half of the time to actually produce the orders) and the entire customer service and production control organization spent most of their time ‘expediting’. I’d never experienced anything like this before – and it took a while to fully un
derstand. The Sales Price Book was enormous, with multiple sections each an inch thick – and a multi-step process to complete an order specification for the factory. The clean order rate for any non-standard product was ZERO – and there were an average of 3 changes per order after order entry.
That CATS program faced all of the usual large business systems project challenges,– project management, change management, training, etc.; but ONE stood out as a NEW opportunity. It was the opportunity – and actually the NEED – to automate the entire quote to cash process to handle the dynamic and specialized products. It was the opportunity to completely change the process and the business outcome through technology leverage. This was the missing leverage for the simplification program – and we reorganized the entire business solution around configuration from quote to cash… It was named CATS-II.
Fast-forwarding, two years later we had introduced a new business systems solution for Quote to Cash, leveraging configuration technologies – and improved productivity in pre-production staff by over 50% while increasing order accuracy (clean order rates) from under 30% to over 95%... and eliminating over 90% of the pre-production cycle time. We had also deployed the solution to all of the divisions and operations, including the full array of products from standardized through engineered products. The tangible benefits were beyond any expectations – we dramatically reduced costs, cycle times and error rates. After a very rough deployment, we had succeeded.
That was great! But that was not the only game-changer. In reality, the key for that company was realized in the ability to continue to dominate that industry in the face of off-shore competition. In retrospect, I realize that in the early 1990’s, like many North American and Western European manufacturing companies, we were facing a dilemma. In reality, that company was like many others who had recognized the competitive need to dramatically improve performance … by eliminating errors and waste… it was the early days of Total Quality Management and the Lean Enterprise Revolution. In our company, as in many of yours, there was a real dichotomy between Marketing/Sales and Production Operations:
Production Operations management were overwhelmed by the diversity of products, features, options and special-handling needs; and were motivated to eliminate many of the highly specialized capabilities from products because of their lower margins. The error rates and delays were keeping management from executing to target performance levels – and the costs were eating into profit margins.
At the same time, the Marketing and Sales organization was completely against STANDARDIZATION – as they were being pushed by customers to meet even more specific product and services needs. Their view of the push toward elimination of customer driven products was that that this type of “standardization” had been tried in the past – and had always led to losing market share to competitors.
As a result of the CATS-II process and systems changes, the outcome was that we were able to accommodate BOTH of the need for higher efficiency AND the need for greater product differentiation. We had to accept that if the customers/markets wanted (or needed) specialized solutions – we could either master the ability to efficiently provide them, or resolve to become a commoditized supplier with a lower market share, without forcing us to abandon the specialty product markets that differentiated us from the commoditized suppliers. It was BIG. This was the game-changer for that industry.