The COVID-19 pandemic has wreaked havoc—unevenly and painfully—on supply chains around the world. In the first year of the pandemic, 57 percent of businesses reported that their operations were reduced 25 percent or more due to supply chain disruptions, according to 2020 Infosys industry research. With continued uncertainty over supply chains as a result of the pandemic and a host of other reasons, businesses need all the help they can get to more effectively manage and control their supply chains.
Unfortunately, most businesses rely disproportionately on data and insights derived from their ERP system to make informed supply chain management decisions. Indeed, businesses have configured their ERPs to manage a wide range of functions, including product configuration logic, pricing rules for quoting, and product and revenue forecasting. The challenge is that the insights provided by ERP data help businesses identify primarily reactive solutions—as opposed to proactive solutions. In other words, ERP data generates insights about supply chain issues as orders are processed and fulfilled, which is very late in the sales cycle—at a stage when businesses’ hands are tied in terms of their options for alleviating supply chain disruptions. By contrast, CPQ (configure price quote) systems are designed to generate insightful data much earlier in the sales cycle, at a stage where businesses can use CPQ data to mitigate and prevent supply chain disruptions meaningfully. Let’s explore how using configuration data from CPQ can help businesses optimize how they manage and control their supply chains to optimize outcomes:
CPQ data forecasts supply chain bottlenecks before the business is impacted
With ERP data, businesses gain insights into bottlenecks and other supply chain issues as orders are fulfilled. That means there’s little that the company can do to minimize supply-chain problems; the orders have already been placed and need to be fulfilled, regardless of what the supply chain issues are. By contrast, CPQ data provides these same insights at the moment that prospective customers are requesting quotes. That means businesses gain a significant head start: They can run forecasts and analyze CPQ configuration data from quotes to identify potential supply chain problems on the horizon before customers have placed orders. With these early insights, businesses have more viable options for meaningfully intervening to resolve supply chain issues before the business is impacted. Specifically, businesses can disincentivize and prevent customers from placing certain types of orders that will be affected by supply chain issues. Businesses also can work directly with their supply chain partners to alleviate forecasted supply chain disruptions or eliminate them altogether.
CPQ data helps identify which suppliers to source from and when
Modern businesses cannot afford to source from only one supplier. Especially as customers demand more customized, prescriptive configurations for their orders, businesses need to be able to source from a range of suppliers to fulfill orders. The problem that businesses face is that they don’t always know when they should be sourcing from which suppliers. As a result, businesses often choose the wrong supplier at the wrong time, leading to customer orders that are only partially fulfilled or not at all. CPQ data helps inform the critical decision point where businesses must select their suppliers. Instead of making decisions based on intuition and instinct, CPQ data allows businesses to use hard numbers—specifically, sales forecasting data—to ensure that a prospective supplier has the capabilities to fulfill future orders of a given size and type. Not only do these CPQ-derived insights help businesses better vet suppliers and ask more pointed, specific questions about a supplier’s capabilities, but the more meaningful interactions with suppliers enable the business to build stronger relationships with suppliers. These stronger relationships, of course, become essential when unforeseen supply chain disruptions inevitably force the business and its supplier to put their heads together to resolve these issues.
CPQ data informs how to align supply chain partners to configuration options
Although customers increasingly are expecting more flexibility and diversity in how they configure their orders, businesses do not need to respond by ballooning the number of suppliers they work with—and the diversity of source supplies ordered—to meet these expectations. On the contrary, the key to thriving in this environment is to build product lineups and configuration options that are aligned to the supply chains themselves. In other words, product lineups and configuration options should be based at least in part on what is feasible for the business’s supply chain to reliably deliver, especially when push comes to shove. Thus, CPQ data is critical in helping to align supply chain partners’ capabilities and offerings to the business’s product lineup and configuration options. When CPQ data is used effectively, businesses can build product families and configuration options around the combinations of suppliers that the business can rely on to deliver supplies on time and to exacting specifications.
CPQ data empowers businesses to incorporate supply-chain risk into pricing
When companies make pricing and discounting decisions, they consider a vast range of factors, from the size of the account to what their competition is charging. Unfortunately, pricing decisions often don’t consider the financial impacts of a potential supply chain disruption. CPQ data helps businesses quantify the financial ramifications of supply chain problems more precisely. Businesses can use CPQ data to predict how many customers will be affected, how many refunds will need to be issued, and what quantities of supplies will be wasted if one particular leg of the supply chain suddenly fails. With these insights, businesses can make better-informed pricing decisions that consider the company’s total cost of supply chain disruptions.
Supply chain management is never easy or obstacle-free, but businesses can be strategic about understanding and effectively managing the aspects they can control. The journey to more strategic supply chain management starts with using CPQ configuration data effectively. By relying on the insights provided by CPQ data, businesses can forecast supply chain bottlenecks before customers are impacted, intelligently identify which suppliers to source from and when, align their supply chain partner networks to their own product lineups and configuration options, and incorporate supply-chain risks into their pricing strategies.
Simplus specializes in helping businesses work through supply chain management challenges using Salesforce’s industry-leading CPQ solution, Revenue Cloud. To learn more about how to extract meaningful, actionable supply chain insights from CPQ data, please reach out to Simplus today. We’ll be glad to apply our deep experience and expertise with Salesforce Revenue Cloud to optimize how you manage your supply chains.