Unifying Manufacturing & Sales Using CPQ Technology

1. Unifying Manufacturing & Sales Using CPQ Technology ===================================== A CPQ for Manufacturing Buyers Guide Manufacturing technology has progressed more rapidly than business processes, and it’s time to redress the balance. Visionary CPQ technology is providing manufacturers the ability to configure, price, and quote faster and more effectively than ever before - while also helping to orchestrate the manufacturing process. Adopters are shortening sales cycles, strengthening customer relationships, and delivering greater efficiency by merging operational and information technology. Purpose of the Guide This CPQ buyer’s guide was put together specifically to help manufacturers define the base set of requirements to succeed with CPQ, and identify the ‘features to look for’ in best-in-class CPQ solutions. The guide provides a clear vision for manufacturers looking to digitally transform their organization with CPQ, and flourish in an ever-growing and highly competitive market that is demanding this new buying model. Table of Contents Why Should Manufacturers Care About CPQ? The Sales Challenge: Manufacturers’ Buyers Are Changing Their Behavior How CPQ Improves Manufacturing Sales Reps’ Performance How CPQ Improves Engineering & Production Efficiency and Morale The Four Major Factors Manufacturers Need to Weigh When Choosing Their Product Configurator 1. Will It Enable ‘Structured Selling’? 2. Is It Visual and Dynamic? 3. Is It Omni-Channel and Self-Service Ready? 4. Will It Drive Manufacturing Efficiencies? Why Should Manufacturers Care About CPQ? CPQ might just be your company’s newest competitive advantage - it’s digital transformation at its best: Customers receive a quick, guided, and controlled buying experience Sales reps configure products independently, with lightning -speed and accuracy Engineers are freed from the burden of tedious and time-consuming design tasks Manufacturing processes on the shop floor are better organized than ever before Do we insert a compelling Gartner quote or something here?

2. Example Gartner quote: “Lower costs and shorten time to quote by replacing back-office quoting and ordering functions with modern, cloud- based CPQ applications.” Gartner stats: In 2019, the CPQ application market grew by 15.5%, to an estimated $1.42 billion. The Sales Challenge: Manufacturers’ Buyers Are Changing Their Behavior B2B buying preferences in manufacturing have evolved in three fundamental ways: “Millennials Just Aren’t That Into You” Sole focus on an enduring relationship between a knowledgeable sales rep and a loyal customer is on the way out, and lighter-touch sales methods are on the rise. It’s partly the result of shifting demographics - millennials make up the largest generation in the US labor force, and they’re beginning to dominate decision-making buying roles within larger organizations. Having grown up around the internet, Millennials value IQ over EQ (i.e., advanced technology over relationship selling.) They self-educate, defining their requirements independently through online research, before engaging with a sales rep. And they want buying processes and products to be personalized (think Netflix, Spotify, and Google.) The “Amazon Effect” is spoiling buyers. Amazon is dominating B2C, setting the standard for seller service. Lines between B2C and B2B are becoming blurred. And buyers in the manufacturing industry now expect the same ease of purchase when buying for work. It’s little wonder, therefore, that B2B eCommerce is in the ascendancy. B2B eCommerce is a massive force. This buying channel is forecast to reach $1.8 trillion by 2023 (accounting for 17% of all B2B sales in the US) with a compound annual growth rate (CAGR) of 10%. That’s a considerable increase, and these are pre-COVID-19 figures. In light of the changes we’ve all witnessed in our working lives, and with many jobs forced entirely online, this growth rate is likely to be a gross underestimate. Manufacturers that fail to provide eCommerce channels risk becoming separated from the pack. “OK, so, what has this all got to do with CPQ for manufacturing?” CPQ, with its configuration optimization capabilities, complex product and pricing rules, and automated sales document generation, has the potential to transform the way buyers interact with manufacturers. It enhances buying experience quality, supercharges responsiveness to quote requests, shortens sales cycles, and increases satisfaction and retention across the board. Warning: Not all CPQ solutions are created equally. The best-in-class options out there provide a robust rules engine & admin, visualization, integrations with your key business systems, and CAD automation to help drive your shop floor.

3. How CPQ Improves Manufacturing Sales Reps’ Performance As manufacturing becomes increasingly advanced, custom options in ordering become the expected norm from customers. However, product complexity frequently outstrips sales reps’ capacity to keep up. It’s no longer realistic for reps (particularly new hires) to carry around every possible part number, assembly rule, and price in their heads. How could they? Instead, they stick to what they know best - suggesting a narrowed range of products to customers that may not generate the most profit or best satisfy that customers’ needs. Sales representatives also find themselves working under immense time pressure. They’re bogged down with massive product option lists and complex pricing, in addition to tedious, repetitive sales tasks when they should be out doing what they’re good at: selling. CPQ automates all the formatting and number-crunching, saving vast amounts of precious selling time while eliminating the errors inherent in manual processes. It’s impossible for reps to configure technically or financially nonviable products. They’re “guided” through a series of calibrated questions and prompts (via upsells and cross-sells) that ensure every configuration is perfectly optimized. Prices are calculated instantly (with discretionary discounts and automatic approval requests), and all necessary sales documents, from quotes to proposals and product renderings, are generated automatically. For manufacturers operating on paper-thin margins, CPQ for manufacturing can be the difference between surviving and thriving. The Benefits in Brief: Manual, labor-intensive sales tasks, such as pricing calculations and document generation, are automated, shortening sales cycles, increasing productivity and performance, and freeing up more time to actually sell. Configuration and pricing mistakes are eliminated. Greater accuracy means reps feel confident they’re providing value when buyers push back on prices. Reps gain an in-depth visual understanding of products, becoming trusted advisers to customers. New hires can be onboarded rapidly. Guided selling increases deal size. All reps can become top performers. Up-to-date price lists are easily managed and maintained, with any changes filtering down instantly to sales reps in the field. Collaboration, efficiency, and transparency are enhanced by having a centralized platform to which all parties have access. Approval requests are sent to managers automatically, who can then approve or reject at the touch of a button—no more confusing email threads.

4. How CPQ Improves Engineering & Production Efficiency and Morale To satisfy the market’s demand for rapid responses to quote requests, engineers need to turn around technical drawings faster than ever before. It’s a monumental challenge. And one that’s exacerbated by sales reps and their unintentional mistakes. Reps are submitting technically nonviable configurations (often little more than “wish lists” scribbled on the back of a napkin), which engineers are forced to reject, or fix and adapt. Customers have to be consulted, and inevitably there are additional requests and changes. This lack of ability to properly handle change management creates an endless back and forth that results in long delays, canceled orders, refunds, rework, penalties, and dissatisfied customers. With the right manufacturing CPQ solution, product rules ensure configurations are always correct the first time and can bypass this entire cycle. Controlled configuration powering CAD design automation presents a big engineering win. Best-in-class CPQ enables sales reps to automatically generate technical drawings and CAD files (for common CAD platforms SolidWorks, AutoCAD, Autodesk Inventor, or PTC Creo) without ever having to call on the expertise of the engineering department. A significant bottleneck in the sales cycle is removed, leaving engineers to focus on what they actually enjoy - R&D - increasing your company’s future profit-generating potential through innovation. The Benefits in Brief: Sales reps submit fewer technically-nonviable configurations Accuracy and control is enforced during the ordering phase, instead of by engineers after-the-fact CAD and design automation allows engineers to spend more time on the work they actually want to do - improving retention of your best engineering talent The Four Major Factors Manufacturers Need to Weigh When Choosing Their Product Configurator The product configurator is a core element of CPQ that users will interact with to configure the ideal product for the customer. Here are some common, and not- so-common features that you should look for when assessing CPQ solutions - specifically for manufacturers who demand the most complex engineer-to-order capabilities. 1. Will It Enable ‘Structured Selling’? The end configuration of your product is reliant on the rules governing how it’s sold and manufactured. Unfortunately, many CPQ solutions aren’t designed to handle the variability and complexity of manufactured goods. The common approach? Use custom code. Is it a good idea? No. This approach is expensive, locks customers into service deals, and makes it difficult to maintain internally (or even by the vendor themselves). In contrast, best-in-class configurators allow for highly-structured product rules that are set up and maintained in a proper rules engine, ensuring every

5. configuration is optimized from an engineering standpoint. It’s the magic ingredient that allows sales reps to serve customers, or customers to serve themselves, with no lengthy design cycles, pricing approvals, or other bottlenecks that slow the sale. The Pains: Clearly defining the business rules that guide your sales and production Virtualizing your rules into a product configurator that can respond to them Risk of falling prey to a custom-code solution for this rule virtualization process The Gains: Buyers receive personalized service and products tailored to their needs Buyers gain a deep visual understanding of the products they’ve configured, which eliminates abandoned miscommunications Structured selling means for structured outputs, too, with the ability to control and inform the remaining technical design and manufacturing processes deals, ordering mistakes, and 2. Is It Visual and Dynamic? Users should be able to intuitively point and click and drag and drop components within a user-friendly interface to assemble or customize products from a potentially vast and highly complex product/catalog. As the user changes dimensions, upgrades parts, and adds features, the product options, display, and pricing all change in real-time. This is ideally suited to the modern buyer who prefers to self-serve. The best product configurators also are visual and 3D. They provide a fully immersive experience for buyers that’s more compelling than most showrooms. Users can experiment with different options within a realistic 3D scene, zooming, spinning, and even “using” their customized products with the addition of VR and AR. Buyers become invested in their choices, and deal sizes increase as a result. The Pains: Beware of an overly-rich experience that negatively impacts user behavior or browser performance - keep it simple and efficient with focus on selling You’ll need high-quality and accurate 3D models and components to virtualize into the configurator that represents the entirety of the product offering Once again, there is risk of introducing a custom-code solution for this 3D visualization; beware of web design firms who don’t understand manufacturing and its sales and production complexity

6. The Gains: Buyers receive a fully immersive shopping experience that increases conversion rates (40%), deal size (??%), and customer retention (??%) Selling online dramatically broadens the addressable market, allowing for global reach into a new network of buyers through internet search and advertising, at a remarkably low Cost Per Acquisition (CPA) 2D, 3D, VR, and AR visual configuration can satisfy nearly any buyer’s desire to interact personally with a product, solidifying the purchase decision 3. Is It Omni-Channel and Self-Service Ready? Best-in-class solutions allow manufacturers to extend the buying process beyond the internal sales team to reach more branches, distributors, partners, and even the end customer. A key functionality to allow for this is the ability to embed product configurators into their websites and private portals. Visual configuration supports these additional channels effectively, allowing each buying audience to play around with product configurations independently, at their own pace, and through any device. Sales reps, retail locations, and distributors should be able to leverage your configurator to take control of sales independently without any input from your in-house sales or engineering team. There should be no barriers to embedding your configurator into your website to allow customers to "self-serve," wherever they are, and through any device. The Pains: Without the right solution, it can be difficult to centralize product configuration while also effectively varying the experience for multiple buying channels or audiences - look for software with easy-to-maintain rules and visual configurator logic Rules and UI must be tightly coupled and well tested to ensure that any user configuration possible in the visual configurator can actually be manufactured in the end The Gains: Sales cycles are accelerated as buyers can get to know your products without a sales rep breathing over their shoulder; proposals and quotes can be turned around in minutes rather than days No more reliance on technical teams for quote drawings, validation of a design/pricing, or standard customizations - all now self-managed in the product configurator Submitted orders are controlled and respect your manufacturing rules, so the outputs can be leveraged to improve efficiency and accuracy in back office, engineering, and manufacturing processes

7. 4. Will It Drive Manufacturing Efficiencies? You want to streamline and connect your customers, sales, and engineering teams to the shop floor in an automated end-to-end process that begins with the customer and ends with the finished product. But sales reps are frequently submitting product configurations that are optimized poorly from an engineering and profitable standpoint. And engineers are bogged down with requests and rework that slow down sales cycles and restrict innovation. This often leaves gaps in manufacturing’s understanding of what and how they produce the final output. Best-in-class manufacturing CPQ solutions enable structured ordering through controlled product configuration, but then take it one step further. Once a product configuration has been finalized, sales reps’ actions should be all that it takes to automatically generate the documents required to initiate and support manufacturing. Technical drawings, CAD files, CNC cut sheets, bill of materials, and product renderings can and should be created without any input from engineering, because all the relevant production decisions have already been made by the buyer! Harnessing the complexity of your product rules is the only way to ensure only valid configurations make their way through sales and engineering to the production team, eliminating the time-wasting back-and-forth that causes deal- threatening delays. Sales feels confident that products will be built to customers' exact specifications, and customers always get what they want, on time. The Pains: Integrating the people, processes, and technology demands high-level buy- in by company and department leaders, and takes careful planning and dedication to realize success Changing minds and procedures to systemize “the old way” into something structured, reproducible, and scalable The Gains: Companies introducing this level of automation are experiencing productivity increases between 20% and 35%, with error reduction rates of up to 82% Generate CAD files to aid in engineer-to-order processes, to further customer customization, or to send to other systems Generate document outputs for the shop floor to initiate and support production, parts picking, assembly, and shipping But don’t feel overwhelmed; we’re here to help. Our KBMax team has helped countless manufacturers define their requirements for their CPQ projects and identify the features critical for their success. The result: They have digitally transformed their organization with CPQ and are flourishing in an ever-growing and highly competitive market.