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Impact SMART product configurators on the (SAP) enterprise architecture

Summary;

On 23 January the VNSG focusgroep Industry 4.0 will organize a meeting on the topic ‘Impact SMART product configurators on the (SAP) enterprise architecture’.

The SMART product configurators provide for configurable, adaptable and personalized product and service offerings (servitization) and is driving change towards a subscription-based economy. As the product and services offerings evolve, the realization can become increasingly complex.

The SMART product configurators will help organizations to bring new products and services to the market quickly, support usage based recurring revenues, improve order fulfillment and improve customer retention.

Customer individualized products & services are the main differentiator in a global competitive market and maximizes revenue generation across all channels with AI-powered selling configurators (e.g. Guided selling, CPQ and SAP advanced variant configurator).

The product configuration strategy has an impact on product launches (time-to-market and time-to-customer deliveries). 60% of the revenue in each year is generated by new product introductions. Efficient product configuration and product life-cycle management is driving the revenue growth. By 2022, more B2B quotes and orders will be created in CPQ or in B2B commerce applications than in ERP.

Serving the ‘segment of one’ with a SMART configurator means the following 2 product design principles; 1 Modular product concepts across all product lines, 2 ETO (Engineer To Order) lead times are available during order configuration.

The SMART configurator has an impact on the following application platforms;

1.   CRM / CX commercial platform

2.   ERP business suite platform

3.   Digital twin platform

4.   IoT cloud platform

The agenda of the meeting on 23 January will be the following;

1 Visit to the Royal Boon Edam factory (Royal Boon Edam is a world’s leading manufacturers of revolving doors, security access gates and entrance solutions)

2 Introduction to the SMART configurators solution architecture

3 The impact of SAP C/4 CPQ within a spectacles company

4 The impact of the SMART SAP S/4 advanced configurator on Royal Boon Edam

5 The business impact of SMART configuration program in a global manufacturer.

1 Introduction

Within the Digital Economy, individualized products that address; segment of one, lot size of one at scale, together with live insights and analytics, are crucial to success of the companies.

Customers demand; improved and personalized customer experience, increased flexibility in the products / services and higher delivery reliability. Most innovative companies therefore offer customizable products and service offerings (84%),

Companies like IKEA create product configurators that can integrated their products into the houses of the customers to visualize their product experience.

The product / service manufacturers consider the SMART product / service configuration as a critical success factor, but only 40% of them use the SMART product configurator to also pursue logistical flexibility and enhance product life-cycle management.

Car manufacturers (like BMW and Audi) show the impact of the selected product features on the appearance of their cars and create personalized production orders with expected delivery dates to improve customer satisfaction, order quality and logistical fulfillment.

The implementation of the SMART configurator will change the operating model of a company and has for example an impact on; product standardization, logistical process control and standardized pricing and contract structures.

The SMART configurator will support the strategic objectives of many companies to increase the offer quality / win rate, differentiate pricing, reduce errors in the supply chain and standardize products and spare parts.

The application architecture must be extended with e.g. CPQ (Configure, Price. Quote)) which must integrated with front and back-end service management to fulfill the selected required services (e.g. predictive services).

This article will explain what the impact of the SMART product configurator is on the application architecture and what the business impact is of the flexibility of the service offerings, improved supply chain and standardization of product components.

2 Business impact of the SMART product configurators

The SMART configurator is automating business processes and delivers the future customer experience for the customers’ customers and the future way of working for employees.

The SMART configurator obtains data and information from a wide variety of business processes / applications and found efficient and effective ways to collect and connect data that was previously siloed.

The SMART configurator delivers end-to-end view of product configurations over all relevant lines of businesses, combined with SMART Technologies and Automation.

The SMART configurator creates end-to-end sales orders visibility in order to meet customers’ quality and delivery expectations, improve new product introductions and improve time-to-market with less risks.

The SMART configurator can correlate information across the business processes to optimize the product configurations. The following picture gives an example;

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The SMART configurator can support the product managers with information on;

·      Which custom-specific options or services are becoming popular and should be included in the standard offering of a configurable product?

·      Which configuration options, or combinations of options create the most challenges in product quality, the supply chain, or in manufacturing and production?

·      Which configuration options, or combinations of options create the highest number of customer service incidents and highest maintenance?

·      How can the overall price of a complex configurable product be predicted with more than 90% accuracy based on just a few simple questions?

Identifying the answers to these questions leads to a deeper understanding of the customers. Customers’ needs can be predicted and proactively met and deliver personalized customer experience and customer service.

An agile SMART configurator strategy makes it possible to deploy new products to all sales channels more quickly, giving a competitive advantage. The SMART configurator can respond faster to changes in the marketplace and adjust the business processes towards the right outcomes for their customers.

The SMART configurator can recognize unseen patterns and automate complex processes, such as; the efficient selecting of products, invoice and payment matching, quote and pricing approvals, engineer-to-order processes, to free up employee time and empower them to do more meaningful work.

The SMART configurator can apply these new possibilities into core business competencies in innovative ways, invent new business models and generate new revenue streams.

3 Impact of the SMART product configurator on the application architecture;

The SMART configurator has an impact on the following application platforms;

1.   CRM / CX platform    (CPQ configurator, E-commerce, CX service management).

2.   ERP platform          (ERP VC, PLM, ETO order fulfillment, ERP SM, Resource billing)

3.   Digital twin platform        (Asset data management, IoT data and asset management)

4.   IoT cloud platform (IoT sensors, IoT edge and logistical (vending) bots)

The following picture gives an overview of the SMART product configurator application architecture (every box is an application domain);

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3.1 Impact on the CX platform (SAP C/4 HANA)

The CX platform has multiple integrated applications but the applications which are most relevant for the SMART configurator are; E-commerce website, front end service management platform and the CPQ configurator.

CPQ simplifies complexity of product / (IoT) services configurations and pricing functionality and enables the salespeople, channel partners, and customers to quickly generate accurate quotes. Salespeople can automate the quote approval / negotiation process and protect margins.

CPQ integrates within ERP Contract Life-cycle Management and Sales commissions to incorporate incentive calculations at the time of quoting. A document generator helps to create high-quality quote (proposal) documents and has eSignature integration.

CPQ provide easy integration of variant configuration capabilities and ERP data across multiple channels like Sales Cloud, Commerce Cloud, Service Cloud and ERP by a single common data model. Reporting tools are available to make optimized business decisions.

CPQ provides for SMART AI supported product, service recommendations (guided selling) and customer specific sales price recommendations to reduce the need for specialist expertise and improve revenue.

CPQ can use 3D visualizations to support customers with the product configurations, supported by chat-bots, and voice technologies, to anticipate and proactively respond to the needs of their customers

The integrated CPQ service offerings have an impact on the business processes and all platforms (e.g. predictive maintenance requires an IoT platform), The Intelligent Enterprises can automate the complex service management processes.

3.2 Impact on the ERP platform (SAP S/4 HANA)

The ERP platform (SAP S/4 HANA) platform has multiple integrated applications but the applications which are the most relevant for the SMART product configurator are;

·      Advanced SMART variant configurator

·      Service management

·      Production – Engineer to Order (ETO)

·      Delivery of requested configurations

·      Subscription and usage-based billing engine (e.g. SAP BRIM)

The billing engine can collect multiple data streams from different sources (e.g. digital content (music), IoT logistics (vending refills) and predictive IoT services) and generate collective billing documents based on complex revenue sharing contracts.

The SMART ERP configuration can integrate the configurable products information into Product Engineering, Procurement, Manufacturing, Digital twin, Sales Order management, Supply Chain management and Service management.

The SMART ERP configurator can automatically create ETO production orders BOM’s based on the selected characteristics during product configurations. Some of these characteristics must be copied from the CX CPQ configurator.

Therefore, the alignment of the CPQ configuration model between CX and ERP is important, the following picture gives an overview;

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The service management functionality (e.g. service orders, working hours, spare parts) between the CX and ERP platform must also be aligned, The ERP platform is responsible for the logistical and financial profitability of the services orders. All relevant data must be synchronized between CX and ERP.

An microservice-based integration platform should facilitate the integration of the ERP variant configurator with all relevant applications like the legacy pricing calculation engines.

3.3 Impact on the Asset cloud platform

The asset cloud platform (SAP AIN) platform has multiple integrated applications but the application which are the most relevant for SMART asset management are; Asset central master data (digital twin), IoT time series data on assets at the customer sites and asset management to maintain and support the asset.

After the configured product has been manufactured and shipped to the customer, it becomes a connected asset which is managed through an Internet of Things-based network of digital twins. The connected asset senses telemetry and usage data.

Together with its as-is configuration, the collected IoT data is analyzed to provide feedback and discover insights, enhancing the product design process and augmenting the design options that designers, R&D, and engineering have as they go through their ideation process.

Asset central captures the digital twin, which represents each physical machine or product along its asset life-cycle. It provides a digital representation of the industrial equipment used in the field to enable customer insights, performance analytics, and new digital services. For configurable products, the telemetry and data of each serialized product asset, represented by its digital twin, are leveraged to build a real time representation.

SMART Predictive Maintenance and Service facilitates the collection, connection, and orchestration of data with the goal to detect patterns, predict outcomes, and suggest actions.

SMART asset operations can also obtain logistical data in order to improve and support the logistical supply chain, e.g. refill the vending POS machines based on inventory levels.

3.4 Impact on the IoT Edge platform

Edge computing helps to handle high-volume data formats such as IoT sensor information, video for facial and object recognition and quality control.

The large data set within the edge computers must be evaluated on relevancy by data stream analysis algorithm to avoid an overload of the IoT data on the asset cloud platform. The IoT sensor metrics can for example be temperature and vibration time series but also on real-time inventory levels for refill purposes.

The edge computer should also be able to fulfill predictive analytics algorithms for small maintenance and autonomous operations.

3.5 Impact on the ITSM platform

The ITSM platform should manage all incidents which are related to the company owned IT assets which are captured within the CMDB. The ITSM platform should also be able to monitor the End to End workflows, to quickly responds to business, applications and IT asset (IoT sensor) incidents and generate alerts in required.

The SMART configurator requires enterprise-wide API based workflow integration across CRM, ERP, PLM, Pricing engines, Asset management and IoT edge systems. The ITSM platform should be able to monitor the API integration workflows and raise alerts when required.

4 Detailed agenda of the meeting on 23 January;

1 Visit to the Royal Boon Edam factory (Royal Boon Edam is a world’s leading manufacturers of revolving doors, security access gates and entrance solutions)

No alt text provided for this image

2 Introduction to the SMART configurator solution architecture (overview of this article) and introducing the follow-up presentations

3 The impact of SAP CPQ within a spectacles company (focus on the capabilities of CPQ configurator in the C/4 HANA platform with the integration towards S/4 HANA)

4 The impact of the SMART SAP advanced configurator on Royal Boon Edam (focus on the S/4 HANA advanced variant configurator and the impact on the supply chain (e.g. PLM) and the integration to CPQ)

5 The business impact of SMART configuration program in a global manufacturer. (Focus on the business transformation required to implement an integrated SMART variant configurator platform within a large PLM based manufacturing company)

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