As one of the top makers of power protection systems, $1.7 billion American Power Conversion Corp. (West Kingston, RI) goes by the motto, "Always on, always available." So, when APC senior management planned the launch of its On Demand Data Center product line back in 2000, they knew the ability to quickly generate accurate quotes and configure products was crucial.
Founded in 1981, APC for years made stock cooling components for uninterruptible power supply (UPS) systems. But by the end of the 1990s, the market began to shift away from a supply-driven model, in which companies made products and offered them for sale, to a customer demand-driven model in which customers set the tone with their individual preferences.
Designed to cater to those preferences, APC's InfraStruXure line consists of data center infrastructure, highly configurable power distribution systems, software management systems, fire protection equipment, security systems and services -- everything you might need to outfit anything from a modest wiring closet to a 50,000-square-foot state-of-the-art data center. In putting together a layout for a mid-size data center with about 250 racks, for example, a highly skilled engineer would have about 2,000 different configuration variations to choose from.
"Using manual methods, it would take at least two or three hours to put together the ballpark quote. And then there's no guarantee you would actually get that business," says Soren Brogaard Jensen, director of software engineering for APC.
To avoid the need to hire more highly skilled engineers to support the new solution, APC in 2000 implemented a quotation management/ configure-to-order knowledgebase system from CINCOM Systems Inc. (Cincinnati, OH). The system, called Socrates, aimed to smooth the ordering process for the InfraStruXure line, which averages $150,000 for a configured solution. The system has paid off, allowing APC to cut quote turnaround times, keep staffing levels under control and even increase average selling prices on InfraStruXure line implementations.
From the simplest consumer packaged good to the most complex jet aircraft, the trend is toward customers calling the shots. Customers not only want it their way, they want it yesterday. To cope with rising customer expectations, manufacturers of complex products like APC are turning to robust product configurators that not only speed the time to quote but also handle highly detailed product configuration with ease. In some cases, the product configuration engine is fully integrated with the company's ERP system, creating an integrated process that reaches from the customer demand signal to manufacturing and order fulfillment.
"The configure-to-order software space is very small right now, but it's growing," says Marc Halpern, research director of product lifecycle management for Gartner Inc. "They're going to be increasingly important because markets want customized goods. We've gone from supply-driven markets to demand-driven markets."
Better Quotes, Faster
Since APC had always built to stock, company leaders were rightfully concerned that the launch of highly customizable integrated solutions would require a sea change in the company's request-for-proposal and manufacturing processes.
The first step in any customer inquiry is to put together a high-level rundown of the product's benefits and a rough estimate of its cost. And yet even without covering for every future contingency, the initial estimate can still take a few hours and several calls to get the engineer with the right product knowledge on the phone. Managers worried that with the new product line the human element involved in the quoting process would be swamped right off the bat.
"The mandate from senior management was that this solution cannot be put on the market without a strong configure-to-order tool," says Jensen. "Our tech support and configuration support teams were stretched thin." If APC had used conventional methods, Jensen says, "the ROI wouldn't have been there. It would have taken ages if we had to support this with human beings."
Help arrived in the form of CINCOM's Socrates (then called Knowledge Builder). The knowledgebase runs on a variety of platforms, including APC's Sun Unix box, and serves as a modeling environment for the complex data center infrastructure products. In addition to governing the thousands of possible choices of features and layout, the system queries APC's logistics systems to gather fulfillment details such as freight quotes.
"We extract lead times out of the [logistics system] so the user can make intelligent choices on what he is choosing," says Jensen.
APC rolled out the Web-based quote management/configurator in 2000 to its 500 global dealers, who are responsible for most InfraStruXure sales. Rather than having to spend hours absorbing the details of the configuration options for the highly complex line, the dealers instead went through two-day training sessions on how to use Socrates. Once the product hit the street, the dealers were ready to handle it.
"When APC rolled out its [InfraStruXure product], the sales tools including the configurator were part of that," says Jim Wilson, program director for order-to-quote strategies at CINCOM. "A lot of companies will create a new product and try to push it out to a sales channel that is not ready to sell it. But knowledgeable buyers require knowledgeable sellers." By keeping the time-to-quote to an absolute minimum and enabling accurate and speedy configuration, the system enabled APC to shift to a demand-driven strategy.
The system achieved payback within six to eight months, according to Jensen, in part because it has helped boost average selling prices by 10% to 15%. The system prompts the dealer to make richer suggestions, resulting in cross-selling and up-selling opportunities. The system also saves money for the customer, since the increased accuracy helps avoid problems down the line.
"If the requirements change just before the data center is installed, that is incredibly expensive. Even a simple change like moving a rack can trigger back orders. That is where the bulk of the defects are," says Jensen. The configurator creates a tighter understanding between APC and its customers of exactly how the customized product will end up.
The configurator contains all the information about the product order from bidding and sales through detailed configuration to manufacturing and fulfillment. But it is not yet fully integrated with APC's Oracle ERP system. Transferring orders to the ERP system, according to Jensen, "is still 80% manual. We've had that integration on the road map for years, but it always seems to get pushed back" as resources are needed for other things. APC, he says, selected the CINCOM configurator before a similar offering was available from Oracle.
The lack of integration between APC's ERP and configuration systems has not proved a problem, thanks to the efforts of the team of 10 to 15 people who enter the orders by hand. "The data quality and speed have been good. We all thought [not having full ERP integration] would be a nightmare as the system scaled, but it hasn't," Jensen says. Wilson of CINCOM says about half of the vendor's Socrates customers have integrated it with their ERP system.
Now, about 20% to 30% of APC's overall orders have a customized element and, thanks in part to the automated configurator tool, the turnaround time, even for customized orders, is 48 hours.
A Living System
Though the system has been fully operational for four years, it is still evolving. For instance, as APC has gained experience configuring data centers, its understanding of related best practices has grown. Now, the CINCOM tool incorporates these best practices so all customers can benefit.
"We have a lot of theories on how to do optimal data center design," Jensen says. "Our team has a lot of best design principles. Those are now making their way into our product configurator." The system will now prompt, for example, when a choice is not the most favorable or when the customer could save money with another option.
Another new aspect: APC is beginning to save its customers' orders in the configurator. This is useful, since the InfraStruXure line is so modular. The customer can place a small order initially and later build off that first order. With InfraStruXure, "you don't have to buy capacity for 10 years from now. Now the tool allows people to go in and pull up an old configuration and make modifications. They're not just starting from scratch," says Jensen. This capability will be up and running in the first quarter of 2006.
One unforeseen benefit of the system has been an increase in product quality. Because APC management now requires that an online configurator be included with every new product launch, the designers and R&D personnel are finding errors and potential problems at a much earlier stage.
"The configuration forces questions the engineers may never have thought about," says Jensen. "It helps eliminate post-production errors."
While so many manufacturers are now struggling to adjust their supply chain models, APC has managed to cross over to the demand-driven side. In the process it has eliminated errors, improved quality, boosted speed and, most importantly, become more responsive to customers. Says Jensen, "We reduce the number of errors and waste in our process. And the customer gets a highly customized system much faster -- one that is made for his needs and solves his problems effectively."