August 31,2022 | CPQ What is Product Configuration?

Understanding Product Configuration

Product configuration is the process of tailoring and customizing products to meet specific customer requirements. Rather than offering a one-size-fits-all solution, businesses use configurators to enable customers to personalize their purchases. These configurators require robust software systems known as configure-to-order (CTO) or configure-price-quote (CPQ) software.

Configure, price, quote software is one of the most deeply valuable components of a sales-focused tech stack, regardless of product application or industry. With the right CPQ solutions, businesses across all sectors can architect environments that cater to “consumerized” buyers and their strong preferences for individualized experiences quickly, easily, and consistently. 

And while the “price” and “quote” aspects of such tools are relatively self-explanatory in function, there are still a lot of questions surrounding configuration itself. 

Most notably: what exactly is product configuration? And why is it so vital to incorporate if you want to stay competitive?

Product configuration is the process by which a seller or buyer can customize, modify, or otherwise augment what it is they’re looking to purchase, either directly or with the help of a sales rep, leaving them with a totally personalized order to submit. 

Why Product Configuration Matters

In today's market, customers expect personalized experiences, even when it comes to complex products. Gone are the days of mass production with limited variations. Customers want products that suit their unique needs, and businesses that can deliver on this expectation gain a competitive edge. Product configuration allows companies to offer a vast array of options while efficiently managing production orders and maintaining profitability.

Out-of-the-box or off-the-rack solutions aren’t satisfying buyers in the way they used to, thanks to the wave of consumerization mentioned above. Buyers in B2C settings have had their needs and wants heavily prioritized for a while, and those expectations bled into B2B eCommerce and other environments. 

As the digital sales landscape exploded over the past three years, partially due to lengthy shutdowns of brick and mortar locations, online shoppers were faced with more accessible choices than ever before. This meant that a discerning buyer could shop around a bit until they found a vendor that catered to their most specific needs without compromising experience – ie, one with an established and accessible product configurator incorporated into their sales setting.  

Product configuration software like the Logik.io Commerce Engine can be set up to account for varying product rules, restrictions, recommendations or requirements, bundles, upsells, promotions and more. Native to the Salesforce CPQ but headless in construction, our commerce logic engine supercharges your configuration capabilities by seamlessly integrating into your existing tech stack for both CPQ and e-commerce applications.

Once all of those pieces of information – or logic – are imported into the system, it can intelligently guide buyers through their options and ensure that the product or order they’re creating can actually be made a reality, and that the configuration is best suited to their unique requirements and needs. It maintains determined product boundaries, within which the shopper can feel free to play.

Did you know:

There are two different types of product configurators available today? We’ve put together the definitive guide to explain both product-based and attribute-based configurators, and which option is best for your business. 

Product Configuration Use Cases

Whether or not you’ve been aware of it at the time, you’ve likely engaged with product configurators in different areas of your day-to-day life. For example: if you, like so many lately, have been on the hunt for a new car, the experience you get when dropping onto their website is likely powered by CPQ.

Let’s set the scene – you know you’re looking for a four door sedan with a hatchback, and you definitely don’t want any bright paint colors. Any major car manufacturer will have a product configurator incorporated into their eCommerce environment that helps you physically configure a car to meet those specs. 

Pre-set logic can narrow down which paint colors are available for which makes and models, along with interior options, and 3D renderings can help you visualize what it’d look like in action as you toggle between the swatches. Maybe the dark leather interior you liked going into the shop doesn’t really look as great with the light grey paint as you’d hoped – with the product configurator at hand, you can tweak and adjust until what you see on the screen is what you want to drive away with. 

In such a setting, you may also be presented with suggestions for accessories or upgrades that relate to the input you provide. Sun shades, tire chains, extended warranties and the like could all fall through the cracks if left entirely to the discretion of the buyer, leaving easy money on the table.

Once you submit the order, you receive a digital receipt showing the sales BOM, while the construction line back at the manufacturing plant gets a manufacturing BOM to guide construction. In a live-time, dynamic setting, you’ve officially experienced the power of CPQ. 

Buyers in the modern market are looking for that same functionality, scaled to the level of their prospective order. Whether they’re a restaurateur ordering thousands of industrial kitchen supplies from a manufacturer overseas or a new parent looking for the just-right built-in bassinet, there’s a way product configuration can be leveraged to make their experience that much better. 

Product configuration finds application across various industries and scenarios, each with its unique set of use cases. Here are some primary use cases for product configuration:

1. Customized Products: One of the most common use cases is allowing customers to customize products according to their preferences. This could include selecting features, colors, sizes, materials, or other specifications to create a personalized product.

2. Complex Product Offerings: Product configuration is essential for businesses offering complex products with numerous options and variations. Examples include computer systems, industrial machinery, or automobiles, where customers can choose from a wide range of components and configurations.

3. Configure-to-Order (CTO) Manufacturing: In configure-to-order manufacturing, products are not built until an order is received. Product configuration enables manufacturers to quickly adapt to changing customer requirements and efficiently produce customized products on demand.

4. Sales Configuration: Product configuration plays a crucial role in the sales process, enabling sales teams to generate accurate quotes and proposals based on customer requirements. Sales configurators empower sales representatives to guide customers through the customization process and provide real-time pricing information.

5. Configure Price Quote (CPQ) Systems: CPQ systems streamline the quoting process by automating the configuration, pricing, and quoting of complex products and services. These systems ensure accuracy, consistency, and efficiency in generating quotes, thereby improving sales effectiveness and customer satisfaction.

6. E-commerce Personalization: In e-commerce, product configuration allows online retailers to offer personalized shopping experiences. By implementing configurators on their websites, retailers can enable customers to design and customize products in real-time, leading to increased engagement and conversion rates.

7. Software Configuration: Product configuration extends beyond physical products to include software applications. Users can configure software to tailor functionality, features, and settings to their specific needs, ensuring a customized user experience.

8. Service Configuration: In service industries such as telecommunications or utilities, product configuration is used to define service offerings, packages, and options. Customers can select the services they require, such as internet speed or cable TV channels, and customize their subscription plans accordingly.

9. Product Lifecycle Management (PLM): Product configuration is an integral part of product lifecycle management, enabling organizations to manage and track product configurations from design through manufacturing and service. PLM systems ensure that product configurations are documented, controlled, and updated throughout their lifecycle.

10. Mass Customization: Mass customization combines the efficiency of mass production with the flexibility of customization, allowing businesses to offer a wide range of customized products at scale. Product configuration is central to mass customization strategies, enabling companies to meet individual customer needs while maintaining cost-effectiveness and efficiency.

Types of Product Configuration

1. STO (Select-to-Order):

Select-to-order (STO) is a product configuration process where customers select from pre-defined or standard products that are readily available in inventory. Once the customer makes a selection, the chosen items are ordered and shipped without any further customization or assembly. STO is characterized by offering customers a range of pre-configured options to choose from, with no additional modifications made to the selected products before fulfillment.

2. PTO (Pick-to-Order):

Pick-to-order (PTO) is a product configuration process where products are assembled or picked from existing inventory in response to customer orders. Unlike STO, PTO may involve some level of assembly or customization before the products are shipped. In PTO, products are not pre-configured but are instead picked and prepared for shipment based on the specific requirements of each customer order.

3. CTO (Configure-to-Order):

Configure-to-order (CTO) is a product configuration process where customers have the ability to customize or configure products according to their preferences before placing an order. Customers can choose from a variety of options, features, or components to create a personalized product configuration. Once the customer completes the configuration process, the product is manufactured or assembled to order based on the specified customization options.

4. ETO (Engineer-to-Order):

Engineer-to-order (ETO) is a product configuration process where products are designed, engineered, and manufactured to meet unique customer specifications. Each order is treated as a custom project, and products are built from scratch based on the specific requirements of each customer order. ETO typically involves a high degree of customization and may require extensive engineering and design work to fulfill the customer's unique needs.

3D Product Configuration

In the course of configuring an order, it logically tracks that a buyer would want to see dynamic, real-time updates to their product or cart in accordance with their selections. Here, 3D product configurators can serve as visual, interactive representations of those choices. 

For manufacturers especially, visualizers like this can provide an extra layer of confidence for the buyer that they’re truly going to receive exactly what they’re inputting – or, that what they’re inputting is actually what they want to order. It brings a hint of traditional sales to digitized environments, reminding the buyer that they’re still being taken care of by their seller, even in self-guided cases.

Logik.io has partnered with leading 3D visual commerce platform brand Threekit to deliver top-of-the-line configuration renderings straight to your website. No matter how sophisticated or nuanced your product offerings may be, our combined resources can bring product configuration from a laundry list of line items to life. 

If you’ve yet to incorporate a product configurator into your architecture, it can seem intimidating to start the process. But, if you can honestly address the gap between your offerings and buyer expectations, you’re in prime position to start researching.

 Buyers are clearer than ever in what they’re looking for – all you need to do is take the steps to meet them where they’re at. It doesn’t have to happen overnight, and it doesn’t have to happen all at once, but with a live configurator as part of your environment, you’ll be setting yourself up for success by future-proofing your tech.

Product Configuration's Role in BOM Creation

A Bill of Materials serves as the blueprint for production, outlining the components, quantities, and assembly instructions required to manufacture a product. Accuracy and completeness are paramount; even minor discrepancies or omissions can lead to costly errors, delays, and inefficiencies downstream in the production process.

Product configuration lies at the heart of BOM (Bill of Materials) creation. Each configured product variant necessitates a unique BOM tailored to its specific requirements. Whether it's selecting different materials, components, or features, configurators enable customers or sales representatives to customize products to meet their exact needs. This customization process directly influences the composition of the BOM, ensuring that it accurately reflects the configured product.

Streamlining Data Flow with CPQ-ERP Integration

While product configuration facilitates accurate BOM creation, integrating CPQ software with ERP systems is essential for ensuring smooth data flow and operational efficiency. Here's why:

1. Seamless Communication: Integration between CPQ and ERP systems enables real-time data synchronization. When a customer configures a product and requests a quote, the CPQ software communicates directly with the ERP system to generate an accurate BOM and pricing information.

2. Elimination of Manual Entry Errors: Manual data entry is error-prone and time-consuming. By automating the transfer of configuration data from CPQ to ERP, the risk of inaccuracies and delays is significantly reduced, leading to more reliable BOMs and streamlined production processes.

3. Efficient Order Processing: Integrated systems enable the seamless flow of information from sales to production. Once an order is confirmed, the BOM and associated data are instantly accessible to the production team, expediting manufacturing processes and minimizing lead times.

4. Improved Inventory Management: CPQ-ERP integration provides real-time visibility into inventory levels and component availability. This ensures that BOMs are created with accurate information regarding the availability of materials, preventing stockouts and production delays.

Synonyms for Product Configuration

1. Product Customization

Synonymous with product configuration, product customization emphasizes the personalization aspect of tailoring products to meet specific customer requirements. Whether it's choosing colors, features, or sizing options, customization empowers customers to create products uniquely suited to their tastes and preferences.

2. Item Setup

Item setup denotes the process of configuring individual items or products to align with desired specifications. This term encompasses the initial stages of preparing products for customization, including defining attributes, options, and variations.

3. Product Arrangement

Product arrangement refers to organizing and structuring product components or features to create tailored offerings. This synonym highlights the deliberate arrangement of elements to optimize functionality, aesthetics, or usability.

4. Product Adaptation

Product adaptation emphasizes the iterative process of modifying existing products to accommodate specific customer needs or market demands. This term underscores the flexibility and agility required to adapt products to evolving preferences or requirements.

5. Product Tailoring

Analogous to customizing clothing, product tailoring emphasizes the meticulous adjustments made to products to ensure a perfect fit or alignment with customer preferences. This synonym conveys the attention to detail and craftsmanship involved in crafting bespoke solutions.

6. Item Configuration

Item configuration focuses on configuring individual items or components within a product to create customized variations. This term underscores the granular level of customization possible, allowing customers to select specific features or options to suit their needs.

7. Product Assembly

Product assembly encompasses the process of assembling or compiling product components according to customer specifications. This synonym highlights the collaborative effort involved in bringing together disparate elements to create cohesive and functional products.

8. Product Design

Product design encompasses the creative process of conceptualizing and refining product specifications to meet user needs and preferences. This term emphasizes the importance of thoughtful design in facilitating customization and enhancing user experiences.

9. Product Specification

Product specification refers to the detailed description of product attributes, features, and options available for customization. This synonym underscores the importance of clear and comprehensive specifications in guiding customers through the customization process.

We’ve compiled a list of the 5 main things you should consider – and avoid – when selecting and implementing your CPQ solution to make things a bit easier.