Engineer-to-Order (ETO) and Make-to-Order (MTO) companies manufacture complex products to exact customer specifications, often involving long lead times and heavily engineered content. To win business, these manufacturers must provide accurate product cost estimates and quotations to highly demanding customers.
For too long now, manufacturers have struggled to get accurate early product cost estimates, and, as product complexity has increases, the situation continues to get worse. A smarter and simpler approach is needed to keep costs of complex products and quotations in line with market prices and to increase quote-win rates. Additionally, manufacturers need to gain visibility across teams, proactively manage costs, and support the sale of customer-specific engineered products with accurate costs to quickly identify cost drivers and easily simulate and compare alternatives.
At the quotation stage of a sale, the sales representative configures the quote in the sales quotation system and includes all engineer-to-order components. The main challenge of this complex process is: how to get accurate costs for the engineer-to-order components quickly? There are different approaches to simplify and speed the quotations that include ETO components.
One approach is that, at the quotation stage of a specific sale, the cost estimate of the ETO components is requested in the short term. The costing engineer often leverages templates or reuses quotes with similar ETO material as a basis, reworks the costing structure, and validates prices. Typically, companies with new ETO projects follow this type of procedure at the early stage of a sale.
The second approach is that all possible ETO components and their variants have been analyzed and calculated by the costing engineer and already uploaded as cost information to the sales quotation system. This will be done at fixed intervals, often annual or quarterly for complex machines, using always up-to-date, future costs in the sales quotation and configuration system. This second approach is described in the following customer case study.
A Customer Case Study
Bühler Group, a leading provider of machinery solutions for processing grains, rice, cocoa, coffee, and other raw materials, as well as die-casting and surface-coating technologies for high-volume application areas, operates in more than 140 countries.
THE BUSINESS PROCESS
To configure and price complex, customer-specific machinery during the quotation phase, all possible products in the sales configurator must be broken down to the component/item level, such as dispensing cartridges or bevel gear motors, that may come in many variants.
At fixed intervals, the costing engineer needs to calculate the cost of all components, which involves examining huge data sets of bills of materials (BOMs) and routings to achieve an accurate cost picture of these component-level items. This is a very comprehensive task, requiring lots of interaction with the product manager, product engineer, project engineer, cost controller, and procurement specialist, as illustrated in the graphic below. Processing speed is essential for fast execution of tasks, while annual calculations need to be automated to help drive increased efficiencies, ad-hoc calculations, and continuous improvements.
At the quotation stage of a sale, speed, flexibility, and cost accuracy are a must. However, Bühler struggled to ensure fast, accurate, and well-monitored cost calculations that included simulation figures and were properly aligned with the latest manufacturing bills of materials and routings. The various business divisions used different approaches and diverse systems, with a lack of integration, which caused a lot of lot of manual work. Bühler had a strong need to improve the flexibility and accuracy of costs for complex, customer-specific machines and solutions based on various factors in the quotation stage of a sale.
THE PROCESS INNOVATION
Bühler recently rolled out the SAP Product Lifecycle Costing solution to help achieve accurate and reliable costs during the sales quotation process.
Now, flexible and hierarchical product-costing structures are aligned with the latest manufacturing bills of materials and routings. Transparency is increased through integrated reporting and analytics like BOM compare to explore alternative product structures and cost rates, while process efficiency is also improved. Bühler also leveraged the validation cockpit and mass update capabilities to automatically handle multiple ad-hoc recalculations and yearly updates, while further efficiencies were gained through integration with SAP ERP and various legacy systems.
Because SAP Product Lifecycle Costing is fully integrated with the SAP ERP application, Bühler was able to import data and structures, such as bills of materials, routings, quantities, prices, and rates, for greater consistency and accuracy, while all costs are automatically delivered to Bühler’s quote tool for each engineered item.
The SAP solution creates greater cost accuracy with faster processing and response times, combined with an intuitive, first-class user experience for Bühler. The new solution delivers a major step forward in the way Bühler manages quote costs in Engineer-to-Order scenarios on a global scale with one global tool and harmonized quote and costing process to help drive sales and lower financial risk.
“Getting fast and accurate costs to our quote system is crucial. With SAP Product Lifecycle Costing, we know our salespeople are getting the right numbers every time.”
Markus Suter, Head of Applications Quotation and Project Execution Processes, Bühler Group
Read more about how Bühler improves cost accuracy for the quotation process in engineer-to-order scenarios with SAP Product Lifecycle Costing in this Business Transformation Story. Learn more about SAP Product Lifecycle Costing at https://www.sap.com/products/product-lifecycle-costing.html
Marion Heidenreich is working in the SAP Industrial Machinery & Components Business Unit focusing on Finance, Procurement, and Business Networks. With almost 20 years of SAP experience, Marion is well versed in business development, solution management, and go-to-market strategies for discrete manufacturing industries.