How CPQ Can Drive Sales in Manufacturing

By Nathan Spiwak

AllCloud Blog: Cloud Insights and Innovation

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 has actually gone up a quarter since that price list was made? A million dollar project could quickly go from a profitable business to a big loss.

Unfortunately, this situation happens too frequently in manufacturing — but it is preventable. And the solution lies in a Configure, Price, Quote (CPQ) program.

A Disconnect Between the ERP & Sales Leads to Several Common Challenges in Manufacturing

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 ERP system.

Every manufacturing organization has an ERP system, and this tool typically gets significant attention because it’s required to effectively operate the business. But this tends to create challenges for sales because ERP systems are not sales tools — they’re typically slow and difficult to make changes in, 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, neither of which is a reliable or trackable system.

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:

  • Sales people selling and pricing products that don’t reflect the products you can actually 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 creates a higher likelihood for mistakes
  • No way to audit approvals in the sales process or, in some cases, no way to control the approval process
  • 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sales people using their own methods for delivering quotes, which can create inconsistencies and lead to quotes with outdated business and legal terms (in addition to inaccurate pricing)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 to Increase Sales in Manufacturing

The best way for manufacturing organizations to resolve the sales-ERP disconnect is to introduce a CPQ 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 can also make all of that data (available products, pricing, etc.) readily 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: 

  • 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
  • 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 even make it so that your CPQ properly reflects the bill of materials (BOM) for each quote, that way when the signed quote gets pushed back to your ERP, your team immediately has a clear list of what they need to build for the customer.

Inside One Manufacturer’s Journey to CPQ Success

ASC Profiles, LLC, 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 ASC Profiles team used two best practice solutions for ERP and sales — SAP and Salesforce — but still found a disconnect between the two that led to sales people using inaccurate data and made it difficult to audit customer quotes.

To resolve this challenge, ASC Profiles introduced a CPQ program to act as a bridge between the two solutions and bring SAP data like product lists, price lists and valid configurations directly into Salesforce. By introducing CPQ, ASC Profiles increased control and auditability over the quote process and ensured sales people always have the most accurate data, since what they see in Salesforce through the CPQ program is the exact data that lives in SAP. Now, ASC Profiles can remain confident that everything sales people send to customers — from quotes all the way through to production — is correct.

How Will CPQ Help Increase Your Sales and Beyond?

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 can also act as a bridge between other systems, for example to help calculate appropriate tax and shipping costs, confirm inventory availability and even improve the online payment process.

How will introducing CPQ make a positive impact on your business? To learn more about the possibilities for CPQ in manufacturing, click here to get the full story on ASC Profiles.

Nathan Spiwak

Read more posts by Nathan Spiwak