Automotive OEMs Can Have Efficient Customization Through Automation
How automotive OEMs can achieve efficiency in customization through improved automation.
Automakers must continually find their competitive edge because the drive for sales never goes away. Catering to the needs of consumers in product design is key, but what about catering to their style and design whims? How far can OEMs go into allowing consumer customization without impacting quality, efficiency and delivery?
Manufacturing Best Practices recently spoke with Kris Goldhair, Strategic Account Director at KBMax, an integrated software solutions provider. He explained how manufacturers and their supply partners can support customization while maintaining strong operations.
Manufacturing Best Practices: Are we seeing a growing trend in product configuration in the automotive market? How do next-gen tools support this?
Kris Goldhair: Automotive was one of the early adopters of product configuration. When a customer buys a car, he is usually configuring the options, like color and seat material, and this has been going on for a while. The larger trend is automotive manufacturers looking to outside vendors for connected solutions. Instead of big automotive companies making their own visual configurators, they are looking for an off-the-shelf configure price quote (CPQ) solution that connects to their customer relationship management (CRM) or enterprise resource planning (ERP) platform. For example, Caterpillar spent years trying to build an in-house CPQ tool that wasn’t delivering any results. They decided to partner with KBMax and saw a 75 percent increase in new traffic visits after implementing a visual CPQ solution.
MBP: How do these tools allow manufacturers to maintain the same high-level quality as if they were making a standard model?
KG: There really is no such thing as a standard car model, as customers can configure some aspect of the automobile (like color). However, cars are only customizable in a finite number of ways, like the exterior color, materials for seating, sound system, etc. Automobiles from major automotive companies don’t have as many things to configure as some other, truly custom products on the market. By maintaining a finite number of configurations, automotive companies can give customers the feeling of a truly customized good while the backend systems remain streamlined, ensuring high-level quality across all configurations.
MBP: How should an operation be structured to fully take advantage of CPQ?
KG: CPQ is customer-facing with salespeople selling the cars, but in the automotive industry there are a lot of back-end steps along the supply chain, including contractors for all of the different parts. With a more complex supply chain, having multiple data sources and business systems in place can make the manufacturing process inefficient and leaves more room for error. By implementing a more connected system, automotive companies can keep their operations streamlined. That being said, the automotive supply chain tends to be a different animal altogether. Because of the finite number of configurations, the industry is forward-thinking in terms of its suppliers and manufacturing. Automotive companies tend to place orders with their suppliers months or years in advance, rather than building custom products on the fly, like other industries that may have more potential configurations.
MBP: How can manufacturers get their supply chains to support this effort?
KG: The automotive industry should encourage their supply chains to use more automated tools, like CPQ. A lot of supply chain companies are very big, old-school manufacturing companies that are more resistant to technology and automation. Modernizing with CPQ and CRM will make it easier to configure and price cars across the industry, while also streamlining the manufacturing process and connecting the systems and suppliers from start to finish.
MBP: How can manufacturers remain efficient with these customizations with the use of CPQ?
KG: CPQ will give a clean set of rules and options about what can be configured and how much it will cost. Efficiency comes with setting up rules and pricing correctly from implementation. Setting up the rules ensures that the possible configurations are actually products that the company can produce, and which will be profitable in the long and short term. By taking all of these factors into account from the beginning, automotive manufacturers will be able to improve their efficiency and profitability while still delivering a unique customer experience.
MBP: How does CPQ help keep these orders cost-competitive and profitable?
KG: If manufacturers have the right pricing rules in place, automotive manufacturers will have the correct data to analyze what is cost-competitive and profitable. For example, if selling leather seats proves to not be making the company any money, then the company will need to change the pricing rules or have salespeople guide customers away from that configuration. CPQ standardizes the rules for pricing. On top of standardization, if automotive companies connect CPQ with a CRM system that has analytics, automotive companies can dig into the reporting engines to have rich actionable data to use and report on.