How to lower inventories, enhance customer choice & reduce obsolete stock
Product configuration now provides a key opportunity for you to step ahead of your local competition, and more importantly, ahead of
your foreign competition. Product configuration not only provides your customer with a wider variety of choice in his purchase, but gives you the flexibility to ship that choice quickly. As the world has become more competitive, every advantage becomes more important. Your ability to give the customer exactly what they want and to ship it locally can be the difference between getting the order or not.
Let’s explore some of the benefits of product configuration:
- Enhanced customer choice. Now you can offer your customer the choices they want in their products, without the massive internal costs of customization. Now you can offer the exact features, and options they desire. You can also set rules for the use of the features and options to prevent problems that might occur when options might conflict. For example, you may offer various types of wheels on your bicycle product, but can restrict use of the wide tires on the thin rims. This makes choice easy and safe for your customers. Building these rules into the display screens, also makes the order time decisions easier allowing more informed decisions.
- Improved Customer Service. Capturing the product configuration on the computer also reduces those pesky errors that used to drive your customer and production shop crazy. It reduces your product returns due to errors and thereby your total product costs. Since pricing calculations are also done online, your customer receives exact feedback on the price of their order. Again, they can make informed real time decisions that save time and errors. Your customer is also assured of invoice that exactly matches their quote, since the order process is fully integrated to the entire accounting process.
Reduced engineering and administrative effort
Since the configurations are captured on the computer, order entry is fast and accurate. Since the rules for configuration are pre-built into the system, there are no errors. And, best of all, engineering no longer has to be involved in each and every customization. Once the initial product configuration is complete, only an administrative person is necessary to capture the customer order. It is a classic use of “Specify once, use many”. Now your engineering team can be freed to create even more exciting future products for your customers. Automating the configuration also shortens your lead time to delivery for the customer order. No more trips through engineering are needed for each customization.
Makes your operations more lean
Lean manufacturing has become a hot topic in many circles of manufacturing. Its benefits of lower costs, lower inventories and improved quality are quite pertinent. Product configuration helps companies to achieve lean manufacturing within their product lines. By analyzing past demand of major sub-assemblies and feature/option items, lean manufacturing techniques may be used to produce these items ahead of actual customer order demand. These base products can also better utilize methods for level production, and pull systems such as Kanban. In addition these items can be reviewed for common parts and attractive just-in-time delivery and price schedules with key suppliers can be negotiated. Workflows can be smoothed and operations set up on a pull demand basis. In many cases, cell manufacturing and reduced or eliminated setups can be considered. Product configuration allows the products to be rationalized into product families with more common parts and procedures. These families are less complicated, and easier to handle with lean procedures.
One of the reasons that product configuration was not used in the past was that creating the product configurations manually was virtually impossible. Even if the quotes and orders were successfully produced, the complexity of translating those items into workable bill of materials and routings was extreme. With the advent of new software, it is now easier to handle custom products, especially with modular or matrix bills of material. Execution on the shop floor becomes routine, and purchasing becomes simple. Also, as mentioned above, production operations can consider using lean principles that might have been out of reach previously.
Reducing inventory and obsolete stock
Another benefit of product configuration is in reducing inventories. The most beneficial reduction comes in the elimination of obsolete finished goods. In the past, finished goods were created for each and every end product. The varying demand for each of these products typically caused stock-outs or overages. For the overages, these products often had to be sold later at discounts (white elephants), or torn apart and rebuilt into another model. With product configuration, these various finished products are only built to specific customer when the order is placed. Some options and base line products may be pre-built, but only assembled when necessary.
Product configuration also reduces WIP inventory, in that base line products are more easily built with lean techniques (see above).
Integrating the benefits of a product configuration system into all areas of the enterprise provides powerful results well beyond the boundaries of the standalone product configuration system. Imagine product configuration where information is not automatically passed to invoicing, bill of materials, routing, purchasing and shop floor operations. Products would be impossible to build, invoices would not have details, and the orders would be in confusion.
Product configuration is now a tool that helps manufacturer’s with many of today’s critical challenges. First, product configuration can offer the choice and variety that your customers are demanding, along with the simplicity to offer that choice. Product configuration can now also be used a tool to streamline your operations while reducing inventories. Feature Groups and Sub-Assemblies can be structured so that lean practices can be applied to production of those items.