Right from the birth of their processing plants, manufacturers have had their own set of challenges of coordination between operations, designs, equipment manufacturing and production. Gradually, as the technology advanced, design communication and design needs from the operations team have been taken care of.
But rising competition, equipment customization and pricing have become new concerns. Configure-price-quote (CPQ) solutions, which have become a hot-selling item in discrete manufacturing and other verticals of manufacturing, also have the potential to resolve these issues for manufacturers of equipment produced for process manufacturers. Such equipment can include pressurized tanks used to store chemicals or other materials produced by process manufacturers.
Let’s take a look at three main challenges facing the process manufacturing industry.
1—Intensive approval methods
Process industries are very complex as far as equipment designs are concerned. Many smaller parts of larger assemblies are customized as per applications, usage, and exposure to operational conditions. And each of these customized parts needs multiple “go-aheads” from process engineers, mechanical and industrial design engineers.
So when the equipment fabricators receive the production requests, manufacturing drawings are subjected to last-minute fundamental design changes. These changes are uneconomical for fabricators since they result in material scrap, and wasted human resources, power and time.
2—Fluctuating supply of raw material
Another major factor contributing to fabrication delays is a fluctuating supply of raw material. For example, the availability of steel—a widely used material for industrial equipment—depends upon coal extraction, which in turn depends upon land conditions, natural weather conditions and much more.
These factors, even when slightly unfavorable, cause fluctuation of steel prices, which directly affects equipment fabrication costs to fabricators and manufacturing firms. Thus, for manufacturing firms to be profitable, it is important that the right pricing and knowledge are readily available to the sales team and distributors.
3—Rigidity of manufacturing cycles
On top of these roadblocks, the fabrication industry is not flexible enough to respond to the agility of all the above-mentioned unexpected delays. Most of the fabrication orders miss the delivery schedules because of the inability of manufacturing cycles to accommodate the last-minute changes. Missed deadlines not only results in loss of business for the equipment manufacturer but also adversely affects the reputation of the manufacturing firm.
Initial computer-aided design (CAD) adoption and manufacturing annotation have proved to be a relief for manufacturers by essentially getting designers and manufacturers on the same page. However, it couldn’t resolve the upstream supply chain challenges of raw material supply and competitive pricing strategy.
Also, increased customization needs cannot be appropriately addressed with standalone CAD. The traditional practices of long man-hours spent in creating manufacturing drawings with custom needs are very time-consuming and uneconomical with today’s scenario.
So how does the switch to CPQ from traditional practices of CAD approval help equipment manufacturers?
While the industry restlessly looks for an answer within its design and internal request flow processes, the solution lies in adopting CPQ—in an omnichannel digital platform—by allowing all disciplines to contribute during engineering intelligence and pricing.
The simplest instance can be of custom pressure tanks, equipment extensively used in the process manufacturing industry. These tanks, made of stainless steel, carbon steel or any other steel alloy, have very specific design needs in terms of geometrical dimensions, applications, etc. Their geometrical design depends upon the intended applications, and manufacturers are often incapacitated and unable to meet deliverables against pressing deadlines. Following are two ways CPQ helps:
1—Interactive product configurator
With CPQ, the interactive 3D product configurator eliminates design customization challenges for any equipment design or tank in this case. The mechanical and industrial design engineers along with chemical engineers can provide their design needs.
The configurator creates error-free manufacturing drawings with a bill of materials as per the custom needs requested by all the different stakeholders. The predefined logical rules of the product configurator will capture the design intelligence from the master models and create a new custom model each time a new request is generated.
A pressure vessel manufacturer implemented CPQ for vessel and accessories design and uplifted the firm’s deliverable quality by reducing the design error ratio to almost zero. The design cycle was shortened by 70%, by eliminating the back-and-forth process of drawings and automatic sales quote generation.
2—CPQ-based price optimization for addressing material supply
Another significant benefit of CPQ is price optimization, which is a governing factor for deciding the profitability and sales of the equipment manufacturer. An integrated product configurator can be connected with other business systems such as enterprise resource planning (ERP), customer relationship management (CRM) and supply chain management (SCM) to read data in these systems and analyze them before creating quotes.
Once silos between these data sets are eliminated, the configurator can display pictorially with dashboards to drive insights on data. The embedded machine learning techniques and artificial intelligence within the CPQ suites help sales teams have the right pricing techniques based on market demands and all the factors on the shop floor and in the warehouse.
An industrial equipment manufacturer based out of Australia and dealing in the design and manufacturing of custom pressure tanks faced major pricing issues during 2017. Cyclone Debbie wrecked major parts of coal mines in Queensland, which brought a short-term standstill in steel production and an overall upsurge in steel prices.
At this stage, CPQ-backed price optimization could have helped achieve sales orders and still be profitable to a certain extent. The unified solutions of CPQ analyze data from stocks, machine schedules, material supply, and future demands, which helps set up the final sales prices and offer discounts as per customers’ past records.
Democratized data sets of ERP and SCM can together drive actionable insights for price strategy by accounting for factors like demand and inventory, and also maintain organizational hierarchy. Now, any sales personnel with CPQ can configure the product, and the data analyzed can generate accurate quotes at the time of sales and the quoting process becomes error-free. Also, the connected ERP systems will fulfill the order and handle billing needs for final delivery.
The automatic dynamic quoting accelerates the sales cycle with up to 90% accuracy with the right data availability each time a sales order is placed and calculated. The pricing optimization module can further be made more user-centric in the case of recurring customers by offering sales offers, discounts, and AI-based upselling and cross-selling features.
Turning adversities into favors
Process industry, undoubtedly, is very critical, and fabrication for process equipment becomes even more difficult as the customer’s needs are clearly specified. Much has been done by the industrial design engineers to keep manufacturers abreast of what design needs are right from the start.
But there is still greater scope for further refinement to help manufacturers stay on track irrespective of how much customization the users need or what factors are affecting the pricing strategy. Instead of re-steering our design processes, we need to re-steer our internal request flows and their paths with CPQ for establishing greater visibility from sales to manufacturing.
Manufacturers are hesitant to implement CPQ-backed price optimization owing to higher implementation costs. But what may seem costly today will come down as much as 80% given concurrent advancements and technological development, predicts technology research and advisory firm Gartner Inc.
If the industry wishes to stay lean with the changing technological landscape, it needs to turn its adversities into its favors by adopting the CPQ solutions—as already embraced by other verticals of the manufacturing sector.
Usha B. Trivedi is an engineer at Hitech CADD Services, a provider of computer-aided-design services. She frequently writes about mechanical and industrial equipment designs, furniture designs and the fabrication industry for manufacturers and engineering professionals. Follow her on LinkedIn.Favorite