How CPQ Can Drive Manufacturing Sales

In manufacturing, margins are everything. In fact, if you’re like most manufacturers, your business operates on such tight margins that even a small change in the price list can have an enormous impact on your bottom line.

So what happens if your sales team inadvertently uses an old price list and the cost of steel actually has gone up a quarter since that price list was made? A million-dollar project quickly could go from profitable business to a big loss.

Unfortunately, this situation happens too frequently in manufacturing — but it is preventable.

Disconnect Between ERP and Sales

Most manufacturing companies encounter several common challenges that limit sales potential and create situations like the ones described above. Critically, all of those challenges stem from a disconnect between the sales team and the enterprise resource planning system.

Every manufacturing organization has an ERP system, and this tool typically gets significant attention because it’s required to operate the business effectively. However, this tends to create challenges for sales, because ERP systems are not sales tools.

It’s typically slow and difficult to make changes in ERP systems, and they’re definitely not optimized for sales processes like lead and pipeline management. As a result, sales people end up using spreadsheets or a handful of systems cobbled together to build quotes and manage deals, and neither approach is reliable or trackable.

When this happens, sales processes operate completely outside the ERP, even though important information like costs, margins, valid configurations and price lists live inside the ERP. Ultimately, this disconnect leads to challenges like these:

• Sales people selling and pricing products that don’t reflect the products you actually can deliver or the prices you want in the market;
• Lost money due to sales people using inaccurate price lists to develop quotes;
• Double entries for sales quotes, which create a higher likelihood of mistakes;
• No way to audit approvals in the sales process or, in some cases, no way to control the approval process; and
• Individual sales people using their own methods for delivering quotes, which can create inconsistencies and lead to quotes with outdated business and legal terms (in addition to inaccurate pricing).

How CPQ Can Resolve the ERP Disconnect

The best way for manufacturing organizations to resolve the sales-ERP disconnect is to introduce a program that can formalize the process for configuring, pricing and quoting products. Essentially, the CPQ should act as a bridge between your ERP system and your sales processes.

With a CPQ integrated into your ERP, your product master list can continue to live in the ERP, but you also can make all of the relevant data (available products, pricing, etc.) accessible to your sales team through the CPQ. Notably, the CPQ will reflect any changes to that data in real time. With the right integration, this setup accomplishes the following:

• Ensures sales people always have the most up-to-date product and pricing information to eliminate the issue of generating quotes based on inaccurate data;
• Introduces a standard and automated approval process, complete with different levels of approval and thresholds for discounts, to create a documented and auditable process without adding significant time or aggravation for sales people;
• Creates a standard quote template with opportunities for dynamic terms and conditions to ensure sales people always have accurate business and legal information and deliver a professional-looking, on-brand document; and
• Automates document input once a customer signs the quote to save time and eliminate the risk of human error or miscommunications.

Beyond these initial uses, many manufacturing organizations also use CPQ to manage cost plus markup pricing. Since most sales systems only do pricing, integrating a CPQ program that can handle the appropriate markup goes one step further to ensure that sales people always give accurate pricing in quotes.

On top of that, you can make it so that your CPQ properly reflects the bill of materials for each quote. That way, when the signed quote gets pushed back to your ERP, your team immediately has a clear list of what to build for the customer.

A leading manufacturer of steel roof and wall products and structural roof and floor decks recently launched a CPQ program to resolve the disconnect between its ERP and its sales tool. The team used two best practice solutions for ERP and sales, but still found a disconnect between the two that led to sales people using inaccurate data, making it difficult to audit customer quotes.

To resolve that challenge, the company introduced a CPQ program to act as a bridge between the two solutions and bring ERP data– like product lists, price lists and valid configurations — directly into the CRM.

By introducing CPQ, the company increased control and auditability over the quote process, and ensured sales people always would have the most accurate data, since what they see in the CRM through the CPQ program is the exact data that lives in its ERP system.

Now, the company can remain confident that everything sales people send to customers — from quotes all the way through to production — is correct.

Introducing CPQ can help drive sales in manufacturing by resolving the disconnect between sales processes and ERP data — but that’s only the beginning. It also can act as a bridge between other systems to help calculate appropriate tax and shipping costs, confirm inventory availability, improve the online payment process, and more.