Digital Sales and Manufacturing - Implementation of CPQ

Updated: Dec 11, 2019

The Complexities implementing a CPQ

Welcome to the third article of the series “Sales Accelerators Technologies in the Manufacturing Digital Agenda: The role of DCMS & CPQ”

  1. DCMS and CPQ as enablers for competitive advantage

  2. Make the right choice: impacts of manufacturing environments and CPQ technology choices

  3. The complexity implementing a CPQ

  4. How to maximize benefits from a CPQ implementation

In the second publication we have:

  • introduced the four Manufacturing Environments (and foru variants) and their core characteristics;

  • analyzed how each environment influences the sales process;

  • identified the main requirements and constraints that a CPQ technology shall accommodate to fit successfully into each environment.

Now we will look in more detail at the challenges that an organization faces in a CPQ implementation project and how to avoid the most common problems: this article does not want to create fears, but wants to warn and give recommendations - based on real experiences - to avoid being on the wrong track.

Let’s go. Good reading!

Clearly set and communicate your objectives: avoid your project to fail

The lack of clear objectives and/or the lack of a clear communication of such objectives is a general risk for each type of project.

Clearly defining and communicating the project's objectives, aligning them with key operational priorities, then defining expected and measurable results and establishing a process to measure them is one of the most important steps to be taken in the project definition phase. Typical objectives for a CPQ implementation shall be

  • Increase the productivity of your sales team

  • Increase the number of “perfect quotes”

  • Increment the average deal value and margin

Increase the productivity of your sales team

Productivity is measured by the number of quotes a salesman can manage in a given unit of time. This involves reducing the average amount of work required to produce a quote. Simplified process, increasing level of automation can accomplish this objective.

Increase the number of “perfect quotes”

This objective can be measured by adapting to the purpose a typical Supply Chain KPI represented by the OTIF (On-Time-In-Full), obtained by measuring the number of quotes delivered on time, without errors, with the right conditions and the right documentation. This KPI allows you to measure all together the ability to achieve the main competitive priorities:

  • dependability, intended as the ability to produce a quote that is consistent with the customer expectations in terms of quality and timeliness

  • speed, intended as the ability to be responsive to customer request reducing waste of time within the process,

  • quality, intended as the ability to produce quotes without errors and omissions

  • agility, intended as the ability to adapt to sudden change in customer requirements while keeping the promised due dates with minimal impacts in the cost to serve

To align to this objective, a CPQ implementation shall be able to:

Reduce the overall Lead-to-Order lead time by:

  • Making easier and shorter the configuration process

  • Simplifying up to eliminating the approval process (automatic approval driven by rules)

  • Shortening the quote submission process

  • Removing barriers to the signature collection process

  • Automating and shortening the order entry process

Improve the percentage of quotations without errors: right products, right configurations, right price, right discounts and right documentation (proposal, T&C and attachments)

Allow for sufficient flexibility to simulate/change/adapt to different scenarios a and changes introduced by the customer to allow for agility

Increment the average deal value and margin

The KPIs to measure success in this area are the Average Deal Size and the Average Profit Margin per Quote.

Of course, these KPIs may suffer from external market and competition conditions, but if measured against an existing and consolidated customer they can provide an idea of the success of implementing the CPQ for these objectives. To achieve these goals, it is necessary to:

  • Achieve visibility of margins during the quotation process

  • Create conditions for up-sell and cross-sell

  • Prevent the application of wrong or out-of-policy discounts

Clearly communicate the objectives: overcommunicate around them

Do not underestimate the importance of communicating the objectives: while for ERP/MRP implementation there is a lot of literature that may help you recover from a wrong way, in CPQ there is much less documentation around best practices and it is harder to recover.

In conclusion keep these simple but important advices:

  1. avoid the mistake of not defining and communicating clear project objectives and expected results. Make the initial effort to define what you want to achieve in term of improvement, measure the initial baseline and keep on measuring. Without it will be difficult to get consensus as the results may be unclear or not accepted.

  2. Deciding about your core objectives, requires you to think strategically and to align those objectives to the competitive priorities: speed, agility, cost, quality, dependability. Make an analysis of your manufacturing environment and competitive priorities to choose the right objectives.

Reach clarity in the overall architecture design: minimize complexity and introduce "poke yoke"

Automate and poke yoke in CPQ projects

CPQ process may be extremely complex, especially in non-repetitive manufacturing environments. It connects – to different extents – sales team to engineering team, marketing team and operations in the factory.

The process, although with its own specification for each manufacturing environment, must manage different stages and information and different “poka-yoke” automation stages must be in place to avoid frequent human errors while handling many sources of information and constraints:

  • Is customer approved for transaction?

  • Technical and commercial constraints: Do I have processes and rules to avoid that wrong products/options/variants goes into a quote?

  • What the list price for products to be applied? Do I have processes and rules to avoid that wrong pricelists are applied?

  • Are there some contractual terms defining special pricelists and discounts? Do I have processes in place to recognize them?

  • What the target margin of a quote? Do I have in place processes for capturing planned costs and for quotation approval?

  • When can I promise an order? Do I have in place a processes for confirming availability (ATP) and delivery dates?

  • Am I ready to deliver to the required ship-to?

In other word the quoting process has connection with:

  • Marketing and CRM for the customer data (basic data, credit status, agreements, contracts, pricelists, discounts, etc)

  • PLM for the product configuration data: Options, Variants, ECNs, etc

  • MPS to get the ATP information to make delivery promises

  • TMS for shipping information

  • Controlling and ERP to get the product costs and margins

In conclusion:

  1. These connections must be clearly identified and synchronized in the quotation process to avoid problems and bottlenecks. It is important to involve the process owners in the initial phase of the project in order to obtain useful indications for designing your CPQ capacity

  2. As speed is generally one of the key objectives for the implementation of a CPQ, potential bottlenecks in the process need to be clearly understood and mitigated in the capability design

  3. Work to simplify as much as possible to avoid unnecessary overburden that may slow down the process

  4. Remember that gap in the upward feeding process will impact the CPQ: take consideration to improve upward stages to smooth your CPQ process: consider of having by-pass and way-out to mitigate impacts if something doesn’t work in your chain of automation

Lack of standardization and maturity of the technology

While there is a lot of literature and availability of standard best practice around manufacturing and production processes (from S&OP to Execution and Control of Operations via MPS and MRP) and these best practices are almost always incorporated into leading-edge technologies, around CPQ processes there is far less standardization and literature available, and also the technology and tools on the market do not provide the same level of standardization available as an ERP/MRP system.

It is quite evident that different vendors of CPQ technology have adopted different approaches to the problem:

  • Some have chosen to align themselves more closely with the CRM side, implicitly stating that native integration with CRM is the key success factor.

  • Others have decided to be less dependent on CRM platforms to provide more flexibility.

Personally, I believe that the core integration to be pursued - at least for industrial companies - is that with the ERP to be more effective in the overall order management process. This means:

  • Make sure that any configurable variants available in the CPQ are also defined in the ERP, to avoid problems when fulfilling the order.

  • Get the right ATP information from the MPS to close the loop in the quote and confirm the delivery dates to the customer.

  • Correctly quote the shipping lead times using TMS information.

  • Get costing information from ERP to measure the quote profitability and make decisions on discounts based on awareness

  • Smoothly create the order in the ERP with all the information needed to proceed with the order fulfillment

As the level of standardization are lower and the tools provide for less guidance, this remarks the importance of planning the right amount of time for a detailed capability and process design and then to execute a proper technology selection to fit the chosen approach.

Less is More

This principle propose to keep simplicity at the core of your design and can be articulated in different ways:

  • Focus on a Minimum Viable Product to start with and scale gradually

  • Don't get lost with exceptions

Focus on an MVP to start with - scale gradually

The product catalogue can be extremely wide both horizontally (many different product lines) and vertically (many end items for each product line) with different characteristics (technical and commercial).

It is extremely difficult to include everything in the initial project, with the risk of creating conditions for very long projects that can be extremely stressful if they do not give intermediate results.

I suggest planning for a smooth introduction of your brand new CPQ technology, launching on an MVP:

  • Start limiting to a specific portion of your catalog: for example, choose a specific product line,

  • Decouple OEM sales from Parts & Service Sales: they are different processes.

  • Start impacting only a portion of your best sales team

In this way you can quickly go to market, providing intermediate results that give morale to the team, and you can gradually extend and improve the capability to all product lines while you onboard new users.

Don’t get lost with exceptions

Design your processes around your core products. If you run an ABC classification you will easily discover than 20% of the products you have in portfolio accounts for nearly the 80% of your revenues. Then some gold-standard rules:

  • design your process to accommodate for that 20% in the first place

  • try to adapt the other 80% of items to that process.

  • ok for some adjustments to accommodate for the other items, but avoid complicating the main process if you risk damaging the overall performance.

  • if you have different product lines adopting different manufacturing environments do not try to accommodate everything into one solution as you will likely fail.

This last rule logically leads us to the next topic.

One Global template: driving the wrong way

It is not uncommon to hear that the programs of large Corporations aiming to define a Global Template to be propagated to different Divisions / Business Units fail or, at best, achieve poor results despite the profusion of large amounts of money.

Let’s try to answer why

We could argue because global programs are complex and shall find ambiguous agreement between many people and suborganizations involved/impacted by the project. This is partially true, but it is not the ultimate cause in my opinion.

The true and ultimate cause is often to be found in the lack of understanding of the specific needs that each business imposes. What defines a business model is its manufacturing environment: in other words, how I want to serve the market and the corresponding competitive priorities. We have already discussed how each manufacturing environment places specific operational requirements affecting the choice and design of the right CPQ. What does this mean?

Unless each business has similar characteristics and can be operated effectively with the same choices regarding the manufacturing environment, the chances that a single common global template can adapt to any division are minimal if any.

The project team who are asked to attempt harmonizing different business models that require different responses to different problems and needs, will be in a position to make such compromises between conflicting choices and trade-offs that it is more likely that in the end no one will be happy with the proposed capability and that many will be dissatisfied with the result.

The advice is to understand fully how each business is operated. Analyze:

  • The manufacturing environments

  • The competitive priorities

  • Their order winners and qualifiers

  • Their competitive strategy

Put each on a matrix and then you will be able to understand which are the process requirements that you shall accommodate for each to understand if you are in the conditions to adopt or not one global template. If nothing is common, think twice or trice before starting your adventure into a global template.

You will neve stop implementing

When planning your CPQ project is also important to keep in mind that marketing, commercial and sales practices are the ones that change more frequently within an organization, meaning that you will never stop updating your system.

The first implication is that you need to decide immediately how you want to prepare and deliver the continuous maintenance of your system: internally or by outsourcing the capability.

  • If you decide to insource the capability, then I strongly recommend preparing in time, already when you start the initial project. Doing a late onboarding can be a pain to recover capacity, skills and knowledge, leaving unmanaged a core capability of your company that is to sell your product.

  • If you decide to outsource the capability, then define correctly the expectations and service levels with your service provider to define properly the response times and have the service ready for your go live. Do not underestimate the lead-time to find the resources to create the capability: remember that CPQ skills and competences are rarer than for an ERP system. For this reason, be prepared also to pay more to source CPQ skills.

This leads us to the next recommendation

The importance of the right team

While on mature technologies, such as ERP, all major system integrators have - more or less - the required skills and capabilities, on CPQ technologies the story may be a bit different.

When launching your CPQ project it is extremely important to plan for a robust participation of the technology vendor, in order to assure the best usage of the product capabilities since the capability design.

  • Plan for a robust expert involvement in the project team

  • Plan for frequent quality review (from design to implementation)

  • Create strong cooperation background between your team, system integrator and technology vendor

A further warning: pay attention also to the stability of the technology vendor in order to be sure that it has adequate resources with proven experience. Risk factors regarding the availability of experienced resources can be a high turnover of resources (take a look at Glassdoor). Since we are talking about relatively young technologies, I recommend that you interview a previous client's project team to do the appropriate verification about the vendor reliability.

Plan for enough time to run your CPQ project

Keep the time for your CPQ project

Depending on the manufacturing environment, it is evident how a CPQ process can be complex.

With all the other complexities exposed above, it means that you have to carefully plan for a sufficient time to run a quality project:

  • Understand the key objectives your implementation must accomplish and define how to measure them

  • Assign the right time to design the capability to meet such objectives, including the organizational set up you shall do

  • Run a detailed technology selection, considering not only the current capability but the entire vendor roadmap and the dependability of your vendor-of choice. Keep in mind hot technology has to fit to your manufacturing environment

  • Carefully design integration points and integration processes to avoid bottleneck when speed is your key competitive force

  • Build and implement quality process and technology

  • Test carefully the process and technology

  • Continuously improve the capability

To plan for it, keep in mind that CPQ process impacts your ability to sell and directly exposes your company to the eyes of the customer, so you have little room to hide your problems.


We are experts in manufacturing environments as APICS certified consultants and we are experts in CPQ implementation as we have led some of the largest and most challenging CPQ implementations for industrial customers.

All these tips and recommendations are based on our real experience on the ground. We believe that following those simple and common sense advices you will simplify your journey toward an excellent CPQ.

If you are planning to launch a CPQ project and want to explore more and prepare for this challenge do not hesitate to contact us at WeeonD: we will be happy to help you in this exciting journey that, if well planned, can disclose to your organization powerful competitive advantage.


Tel: +41.763.655.355


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