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Configurators for Mass Customization

by

David J. Gardner

Note: This article was originally published in a special issue of "Agility & Global Competition" dedicated to Mass Customization in the Spring of 1998.

To compete in the global marketplace, manufacturers are adopting mass customization as a means to be more responsive to their customer's needs. One of the critical elements manufacturers need to make the transition from mass production to mass customization is a configurator.

Configurators are software applications that enable customers to order exactly what they need based on allowable choices. I liken a configurator to a menu, much like a menu you find in a restaurant. Items that fall within the menu can be ordered without restriction. Items that aren't on the menu must be approved and added to the menu before the customized item (configuration) can be priced, quoted and ordered.

A configurator help you quickly converge on a valid configuration within the product line's capabilities, to precisely summarize the customization, and to be the source of information transmitted to your order entry system and subsequently to the factory. Configurators also support the evolution of a product line's capabilities over time. An optional, but impressive, capability is the display of what the configured product looks like using advanced graphics capabilities. Configurators can also be used to quickly and easily prepare quotations and drive forecasting.

Configurators achieve their greatest value when deployed for use by your customers. For this reason, more and more configurator applications are deployed via the Internet or extranets. If you are reluctant to expose your customers to such a tool, I encourage you to, at a minimum, place the configurator application in the hands of your sales force.

When companies implement a configurator for headquarters' use only, but not the field staff, the configuration process is left to the imagination of their sales team and customers. They run the risk of disappointing customers when you have to inform them that you cannot provide products that you have already quoted or, worse, that have been accepted as orders.

Operational Differences Between Mass Production and Mass Customization

In mass production, pre-packaged configurations equate to individual bills of material in the MRP/ERP system. This assumes that a manufacturer can identify specific configurations best suited for specific customer needs. Usually, engineering and marketing meet and agree to restrict the choices that a customer is permitted to make.

Gardner's Law concerning "Number of Bills of Material Required to Satisfy Actual Demand" is: There is a need to create "n + 1" bills of material where 'n' is an unknown and very large number. It is not possible (or practical) to create a bill of material describing every configuration a customer might want; yet many companies try to approach mass customization this way.

In mass customization, there are no pre-packaged configurations and therefore no bills of material representing each order configuration. Mass customization views the probability of any two order configurations being identical as coincidence. The customer's order requirements are derived from the configurator. Decisions are made based on the limits described within the configurator. The order itself (the Sales Order in the MRP/ERP system) captures and identifies the elements needed to satisfy the customer's requirements and subsequently transmits this information to the factory. This is accomplished without need for a unique bill of material describing each customer's unique order requirements.

Configurator Development and Implementation

A configurator can either be developed from scratch or purchased as a standalone application enabler tool kit that you customize to reflect your needs. Most successfully deployed configurator applications have been developed from scratch. While the future trend will be to purchase a configurator application enabler tool kit that can be integrated with your Sales Force Automation (SFA) and MRP/ERP applications, I am very leery of "configurators" sold as part of MRP/ERP systems as most rely on pre-packaged configurations, an approach that is inconsistent with mass customization. Also, the MRP/ERP user interface is usually unacceptable for sales and customer interaction.

It is critically important that you develop or acquire the appropriate configurator technology based on your company's needs. Not all configurator technologies are the same. There are essentially four types of configurators:

• Features and Options
• Rules-based
• Knowledge-based
• Constraints and Resources ( a sub-set of Knowledge-based)

Before installing a configurator, you should carefully define your current and predicted needs. Then, make sure you are getting the appropriate configurator technology for your needs.

Configurators Have Historically Solved Real Business Challenges

Dell Computer has long been known for its mass customization program. At Dell, mass customization has been a tremendous source of competitive advantage, company growth and high margins. Dell's success has not gone unnoticed.

Apple Computer, a company that has lost significant market share in recent years, recently shifted from mass production to mass customization. Apple has adopted a business model that looks more like Dell's, i.e.., selling mass customized units directly to end-users at higher margins than it was able to realize selling pre-packaged configurations through authorized resellers. Apple developed a configurator to make this transition. After switching to mass customization, Apple was recently rewarded with its first profitable quarter in several years.

As of early 1997, Cisco Systems was selling its configurable networking products with an extranet configurator tool at a rate of $200 million annually. Cisco plans to increase sales to $2 billion over the next couple of years using this technology. Cisco only offers this capability to its existing customers who are familiar with its products.

Boeing is facing significant challenges as it's order rate has grown and as it responds to increased competition from Airbus Industries. In response, Boeing is trying to make a transition from an "engineer-to-order" process for each plane ordered to mass customized aircraft. In an "engineer-to-order" product, each order is managed as a separate product. In a mass customized product, each order is managed as an individualized configuration of a given product. This change will help reduce costs and cycle times while improving margins through greater operating efficiency.

While at first glance it would seem that Boeing is taking choice and flexibility away from its customers, Boeing will need to reward its customers with more competitive pricing and on-time deliveries while maintaining very high quality levels. Look for a configurator to play a key role in helping Boeing make the transition to mass customization.

A Configurator Isn't Just for Your Sales Organization

It is a mistake to view a configurator as a tool just for Sales. A configurator gives you the opportunity to achieve greater efficiencies in Sales, Engineering and Manufacturing. Making the transition from mass production to mass customization can (and should) be company-wide initiative. Many companies limit the scope of their configurator effort to "automating the price list" and never realize the benefits.

I favor an approach I refer to as "Customer-Driven Manufacturing." This is an integrated business process for transitioning to mass customization. CDM focuses on the problem from a refreshingly new perspective: CDM is focused around the way your customers and sales organization think about your products.

The four key aspects of a Customer-Driven Manufacturing effort involve:

• Bill of material (or product) structure
• Configurator tool development
• Business process integration
• Training

By aligning your bill of material structure in the way that customers and your sales team thinks about the configurability of your products, you eliminate the interpretation errors that often occur during order entry or in the factory. Imagine the efficiencies associated with Sales, Engineering, Marketing and Manufacturing operating with exactly the same understanding of product line. And because the CDM approach is adopted to better serve your customers, it is far easier to get everyone to embrace such an initiative.

Conclusion

If your company offers configurable products, you may be looking for ways to: 

• Respond to more bids in a shorter lead time
• Properly set your customer's expectations about what you can offer
• Increase your order "win" rate
• Get buildable orders into the order backlog more quickly
• Ensure you understand your order configuration profit potential before you accept an order
• Dramatically reduce the Engineering content per order configuration
• Free up Engineering resources to work on new products and enhancements to existing products rather than being limited to supporting order demand
• Reduce Engineering errors that affect downstream efforts
• Smooth the production flow and eliminate production delays due to missing parts
• Get more capacity out of the same physical assets

Transforming a company from its current state to become a lean, efficient organization involves new thinking, new technology, and a highly-focused effort.  This initiative requires a holistic approach.  This is not the problem of a single department nor can it be resolved by the efforts of a single department. 

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