The web effect on mass customisation

Mass customisation, effectively the nth degree of make-to-order, is ever so slowly coming in. In the main it’s not being driven by manufacturers – although there can be significant benefits in terms of differentiation, efficiency and customer service, there is also the need for serious investment in everything from production set-up to sales order processing and the links between the two. So, mostly, it’s resisted first and embraced when there’s little choice. But as Peter Woodward, automotive industry consultant at enterprise and e-business software colossus Oracle, observes: “Customers have driven manufacturers to increase the number of products and variants.” And it’s this customer push that is forcing the change. Fortunately, the IT at least has pretty well matured to the point where it can provide realistic support. Beyond the abilities of most modern enterprise systems (ERP) to handle the relatively complex manufacturing, supply chain and departmental reorganisation and integration involved, on the sales side, useful front-end ‘product configurators’ are now available, suitable and proving themselves in a variety of industrial sectors. These are enabling manufacturers and their customers alike to handle the rigours of ordering from what can be millions of product variants. With them, everyone from salespeople to customers themselves is being empowered to configure even quite complex valid final products rapidly from options progressively presented to them on-screen – including via the web. And it’s these primarily that are the focus here. Ron Bligh, a consultant with ERP software developer Mapics, explains some of the benefits of web-based configurators. “You reduce the cost of the order processing cycle by being accurate, and reduce the time it takes. The manufacturer doesn’t need engineers and design personnel to review configurations, because they put their knowledge into the configurator or customisation engine such that what comes out is a valid product that can actually be built.” Newage International, part of the Cummins Group and a world-leading manufacturer of synchronous a.c. generators, is one making use of this kind of software today. Ken Atkinson, customer services manager (special projects) at Newage, says “By using a software configurator, we considerably reduce the time that sales engineers take taking customer orders.” That time-saving can translate into real money, says Fredrik Carpenhall, e-business manager for electrical machines at electrical motor manufacturer ABB Motors. “The figure that has received widespread acceptance in our industry is a savings potential on each order of about $40.” ABB Motors manufactures low voltage motors, of which there are about 20,000 standard configurations. “But the customer can, and always has been able to, specify their specific requirements on top of that.” At ABB, the need to provide customers with a web-based configurator was driven by customer demand: “Customers are interested in cutting the time taken to take these three steps: find and configure the right product; place the order; and follow up on order status and tracking to ensure on-time delivery. Just a few hours can mean a lot to them,” says Carpenhall. For Newage, the pressure both to increase mass customisation and to offer web-based configuration – the planned next step – has also come from customers. Many other industries stand to benefit from making these moves, but the motivation isn’t always the same, says Gary Jones, senior researcher with analyst the Butler Group. “Those with complex products, such as the aircraft or high-tech industries, will benefit, and industries where the product lifecycle is short. But also where competition is very high and there is a need to differentiate offerings, such as automotive,: make-to-stock just isn’t working – they end up making products they can’t sell and lose money on.” At South Wales office chair manufacturer Giroflex, make-to-order is the way it’s always been done, as the only sensible option with literally millions of product permutations. Ewan Tozer, Giroflex’s IT and engineering manager, says: “We had a very complex configuration tool, and it was a nightmare to use – it took six months to train people up.” Giroflex now uses product configurator software from Fourth Shift partner Eden Origin, and as a result of its sheer simplicity and comprehensiveness, says Tozer, “Temps are loading orders within a couple of days”. Back at Newage, the problem was similar. “Previously, configuration was done in a paper configurator, using a tick-box form,” explains Atkinson. “Anything outside the scope of this had to pass through the head of one individual. The configurator has given us the opportunity to empty his head into the mainframe, allowing us to configure products obeying his knowledge of how sub-assemblies go together. This has already opened the door to more customisation, and will become an outward-looking tool in time – after all, the cheapest way to get customers to place orders is to ask them to type them in themselves.” So far so good, but Atkinson also sounds a word of warning for manufacturers considering this route. “It’s much more time-consuming to create the rules and sensible questions than it appears initially. It’s very easy to underestimate the work involved. I’ve been working on that for the best part of the year!” And Mapics’ Bligh also sounds a cautionary note: “One of the expensive mistakes that some SMEs (small to mid size enterprises) make is ending up with implicit descriptions of the products, that are then open to argument with the customer. It’s essential that every item is explicitly acknowledged, interactively on-screen and then in writing.” Carpenhall advises: “Work with an outside-in perspective when it comes to functionality, and involve a pilot customer. Don’t assume you know what the customer wants – there are some examples of functionality that we really thought would be a big success, yet no customer is using them. We are now much more restrictive and focussed at putting functionality on the web site so as to reduce, as much as possible, the time a customer needs to spend on the system.” Integration Whatever, a configurator alone is not enough, says John Griffith, managing director of on-line web shopping software developer Intershop UK. “Linking the dynamic front end to the ERP configuration is vital. True sales-side e-commerce has to extend not just into the enterprise but beyond it to its suppliers.” And it’s here that many installations fall down, says Woodward: “There are lots of front-end configurators that have never really given the benefits to industrial organisations because, quite simply, they have just been front-end configurators.” So first, manufacturers need to link configurators to their manufacturing systems, as has already been done at, for example, Giroflex and Newage. Says Atkinson, “The configurator drives all activity: it interfaces with material requirements and production programs, accounts, test, shipping and despatch.” But beware. Not every configurator will generate the necessary information, says Bligh. “Some don’t produce routing at all – so manufacturers must decide whether they just want a shopping basket program, or one that will actually let them manufacture a customised product.” Information also needs to flow the other way, says Woodward: “Customers are demanding to know when they will have the products, so the most rewarding part is linking through to the planning systems that will give them capable to promise (CTP), available to promise (ATP) and capable to deliver information. That has always been the key benefit to the customer and the manufacturer.” How to Start Although key, product configurators alone are not enough – and are unlikely to be the ideal starting point. If the move to mass customisation itself is new for you, Butler Group’s Jones has specific advice: “Include as many stakeholders as possible – supply partners, purchasing, production, planning, distribution (including third parties), sales and marketing and customers – since you’re changing your business model, not just deploying a piece of software.” And he also urges: “Run a pilot, and focus on communication, co-ordination and relationships.” Bligh suggests the most important questions are those that the business has to ask itself at a manufacturing level. “There are several details you need to define. Do I need to generate bills of material? Do I need multi-level BoMs? If I need a multi-level or single level BoM, do I then need a routing file to tell my people how to build it? If you need a routing file to build the unique products, that will dictate your choice of configurator to some extent.” Meanwhile, at the other end of the e-technology spectrum, there’s some other important internal work to do before you go live. Griffith: “You can’t have a configurator without a catalogue, so you need the catalogue piece first. Usually this is installed upon an existing ERP system, as you need to extract whatever dynamic data you can – at least by a daily batch file – from your core business systems.” And Carpenhall advises putting your own house in order first: “I would like to stress that if you don’t have things in order internally both process-wise and technology-wise, you can’t do configuration on the web and present it to customers. If you have problems inside, they’re going to show.” And as Atkinson puts it: “Unless you have the infrastructure right first, by putting your face out into the Internet you risk disappointing everyone with your performance”. To help decide where web-based configuration should be placed in terms of e-business priorities, Giroflex’s Tozer says there’s no magic formula – normal business sense and practice apply. “We were quite brutal and asked what processes are business critical? We looked at the volume, because a process may be business-critical but if it’s low volume you can handle it manually.” That’s why the firm started with configuration, and is only now looking at providing customers with ATP information. “It’s not business-critical, but it would give us great benefits and save administration and hassle,” says Tozer. “It would enable us to improve customer service, as it would help us identify a constraint before we run our MRP system – which we do once a day.” Newage’s Atkinson took a similar view. “We take most orders assuming we can deliver with the timescale the customer wants, but within the configurator you can give messages, say, on a specific item that might have 12-week delivery.” And that’s another way around complexity if your customers will tolerate it. However, even without providing ATP information, the investment won’t be small – configurator software alone starts at around £100k and a complete project can cost £500k. And for a successful outcome it’s going to be hard to get away without some serious expense in terms of consultancy. Tozer found that Giroflex was helped in its project by this – both pre- and post-sales. “We used the Fourth Shift people in project management and training.” And there’s absolutely no doubting what his people have achieved. So is it worth it? Firms that get this right say it is: you can expect those that have to work with the system, internal and external, to be delighted. “Users are very receptive,” says Newage’s Atkinson. “They see the benefits and it lets them do their work without the danger of silly little mistakes.”