Impact of product configuration systems on product profitability and costing accuracy

Abstract

This article aims at analyzing the impact of implementing a product configuration system (PCS) on the increased accuracy of the cost calculations and the increased profitability of the products. Companies that have implemented PCSs have achieved substantial benefits in terms of being more in control of their product assortment, making the right decisions in the sales phase and increasing sales of optimal products. These benefits should have an impact on the company's ability to make more accurate cost estimations in the sales phase, which can positively affect the products' profitability. However, previous studies have not addressed this relationship to a great extent. For that reason, a configure-to-order (CTO) manufacturing company was analyzed. A longitudinal field study was performed in which the accuracy of the cost calculations and the products' profitability were analyzed before and after a PCS was implemented. The comparison in the case study revealed that increased accuracy of the cost calculations in the sales phase and consequently increased profitability can be achieved by implementing a PCS.

Configuration Lifecycle Management – Future of Product Configurators

“…The second step of the analysis revealed which are the lifecycle phases that PCs are covering in the 59 case companies. As expected, and in alignment with the literature [8,9], the majority of the analyzed case companies have PCs in the sales phase (67%). Engineering is the phase following with 25% of the examined companies reporting the use of PCs, however there is a significant difference between the first and the second place.…”

“…In particular, in the sales phase due to the process standardization, companies are experiencing shorter lead times and shorter cycle times for the sales process, faster quotation process and improved communication of the sales personnel with the customers [8]. In a similar way, for the successful implementation of a PC in any of the other lifecycle phases, process standardization is a prerequisite.…”

“…So far, sales PCs have been used to guide the customer to select the most suitable product for his needs and to generate the quotation. This use of PCs is linked a number of benefits, which include among others, reduced sales cycle time, improved quality of quotations, improved pricing accuracy and increased customer satisfaction [8]. These PCs support the commercial process [9].…”

Cost of Not Maintaining a Product Configuration System

“…The literature on product configuration systems (PCSs) discusses in detail the modeling process [11,12] and the benefits realized from their implementation [4,13,14]. More recent research focuses on the challenges of implementing PCSs [15][16][17].…”

The impact of applying product-modelling techniques in configurator projects

“…The literature describes numerous benefits that can be gained from utilizing configurators, e.g., reduced work-hours to prepare specifications, routine work, lead time and improved quality, certainty of delivery, control of product variants and knowledge availability (Tiihonen et al 1996;Salvador 2007, Hvam, Mortensen, andRiis 2008;Trentin, Perin, and Forza 2011;Forza and Salvador 2008;Tenhiälä and Ketokivi 2012;Zhang 2014;Myrodia, Kristjansdottir, and Hvam 2017). However, the modelling techniques used in a configurator project impact knowledge availability, as knowledge is made more explicit and thereby more accessible to a greater number of employees within the company.…”