Product Configuration Guide

I will admit, I am a raving fan of Product Configurators. Yes they have been around for years and using today's terminology they were an early application of Artificial Intelligence. Except, now if you pair your Configurator algorithm with an AI Chat Bot you could have the ultimate Order Entry Processing engine. I do not care about the size of your business, you can most likely utilize a Configurator.

Product configuration makes it possible to customize products without designing each order from scratch. By using predefined options and rules, small manufacturers can offer more choice to customers while keeping production repeatable and manageable.

What is product configuration?

Product configuration is the process of customizing a product to meet a customer’s needs, while staying within the manufacturer’s technical and business constraints. It relies on predefined rules to ensure that each product variant can be made. Product configuration rules also determine the correct materials, production steps, costs, price, and lead time for each order.

Product configuration allows manufacturers to tailor products according to specific customer needs, without having to fully customize designs. It’s essential to mass customization, a strategy aimed at manufacturing personalized products at nearly the same cost and efficiency as mass production.

Sales configuration vs product configuration

While sales configuration and product configuration are often used interchangeably, there’s a distinction to be made between the two terms. 

Product configuration defines what you sell. Businesses use product configuration to define the options, features, and accessories that customers can choose from.

Sales configuration is the sales-facing part of product configuration. It determines how you sell product variants to customers. This involves using CPQ tools to choose product options for customers, calculate costs and prices, and generate quotes.

Types of product configuration

Options-based product configuration

Option-based product configuration is where customers choose from a predefined list of product options. 

It works like a product catalog, where customers choose a base product and then have a list of options they can add on. For example, consider the example of buying a car. You can choose the model of car you want, but you are then given options to choose the color, engine size, or car interior. 

Option-based configuration is common in configure-to-order (CTO) manufacturing, where the customer selects from predefined options and the manufacturer builds the finished product according to those selections.

Rule-based product configuration

When product configuration is rule-based, product options are automatically allowed, blocked, or enforced based on predefined logic. For example, a rule-based production configuration for a laptop manufacturer might look something like this:

• Customer selects product option: High-performance GPU

• Product configuration system blocks: Standard power supply

• Product configuration system enforces: Upgraded power supply

In another situation, selecting a specific chassis size might automatically limit the available processor options. The system handles all of these constraints without the user needing to understand the underlying dependencies. This type of product configuration works best for complex products with lots of dependencies, such as electronics or industrial equipment.

Knowledge-based configuration

Knowledge-based product configuration is mostly used for complex, highly engineered products. This form of product configuration relies on a knowledge base of engineering rules, product logic, and business constraints to determine production feasibility. 

Instead of just selecting from predefined options, knowledge-based configuration reasons through complex inputs. For example, a knowledge-based configuration system might determine whether a selected motor is strong enough for the required load or whether chosen materials can withstand moisture.

Knowledge-based configuration fits well with engineer-to-order (ETO) manufacturing, which requires a configuration system to handle incomplete requirements, system-level dependencies, and cases where engineering work is still needed before production can begin.

Benefits of product configuration for manufacturers

Operational efficiency

One of the main benefits of product configuration is that it can make your production more predictable and reliable. Because teams are working from preset configurations, not one-off designs, work within each department becomes more efficient. 

Engineering doesn’t need to verify specifications with production, production doesn’t have to work on fully customized products, and procurement can accurately plan purchasing without last-minute changes.

It also makes sales more efficient. When a customer places an order, your sales teams can use Configurator Softwareintegrated with manufacturing software to automatically validate the sales order. The system immediately shows if the materials and capacity are available to fulfill the order, and no orders are placed unless there are the materials, labor, and capacity available. This makes quoting faster and more accurate, and minimizes bottlenecks and late orders down the road. 

Quality improvements

If you’re dealing with fully customizable products, quality control can be a challenge. Because designs, components, and production processes differ from order to order, every inspection requires a fresh evaluation. This makes it harder to spot mistakes, as there are no established benchmarks to work from.

With product configuration, however, your quality control teams are consistently testing the same components, which makes it easier to standardize quality control procedures, identify recurring issues, and improve testing accuracy over time. 

Less rework and scrap

Product configuration also reduces rework and scrap, because product variations are predefined and standardized. Teams work from validated designs, configurable BOMs, and well-understood production processes. Because the same configurations are produced repeatedly, potential issues can be identified and resolved early, rather than rediscovered with each new order.

Because product variations are predefined and standardized, you also run into less rework and scrap. Product configuration lets you work from validated designs, configurable BOMs, and well-understood production processes. The same product variants are made repeatedly, which makes it easier to identify and resolve issues early, rather than rediscover new issues them with each new order.

Reduced inventory costs

Having excess stock of finished goods can drive up carrying costs, tie up capital, and increase the risk of dead stock (especially for slow-moving variants). Product configuration can reduce these risks. 

Instead of stocking every possible product variant, you can stock only components and subassemblies, then assemble them into finished products when customers order specific product variants. This approach is known as assemble-to-order (ATO). Using product configuration in this way, you can reduce the risk of dead stock, reduce carrying costs, and free up capital.

Customer experience

Product configuration can also improve the customer experience. First, product configuration can speed up your sales and quoting process. Sales teams can use Configurator software to determine pricing, order feasibility, and lead times. This not only makes quoting faster, but also ensures customer orders can actually be fulfilled, and fulfilled on time. 

It also provides customers with more personalized products. With product configuration, your customers can choose from different product variants to find a product that best suits their needs.

Finally, because manufacturers can test repeatable components and catch issues earlier, customers are more likely to receive products that meet expectations, resulting in fewer returns.

You need, but what is a configurable BOM?

A configurable bill of materials (also called a matrix BOM) is a production planning tool that allows manufacturers to customize the bill of materials according to each individual customer order. Whereas a typical bill of materials contains the materials to produce one fixed product, a configurable BOM contains all the parts, options, and rules needed to manufacture a range of product variants. When customers place their order, they can choose from various product options and the configurable BOM will change to reflect their choices.

What’s an example of a configurable BOM?

An example of a configurable BOM is a furniture manufacturer that builds dining tables with different options, such as tabletop material (oak or walnut), tabletop size (small or large), and leg style (modern or rustic). A configurable BOM is a single bill of materials that includes all product options and their combinations. When a customer chooses their table configuration, the system generates the correct BOM, showing exactly which materials, dimensions, and leg components are required.

Key takeaways

• A configurable BOM, or matrix BOM, allows manufacturers to manage many product variants from one BOM structure. Instead of creating a separate BOM for every possible combination, the system generates the correct parts list based on the options a customer chooses.

  
  

• When product configuration is connected to Configurator and manufacturing ERP software, sales teams can calculate prices, lead times, and feasibility using real production data. This reduces manual checks and lowers the risk of quoting products that cannot be feasibly built.

  
  

• Product configuration keeps sales, engineering, purchasing, inventory, and production aligned around the same product data. This reduces back-and-forth between departments, prevents miscommunication, and makes it easier to manage all product variants.

  
  

• Manufacturers can offer customer-specific product variants without designing every order from scratch. Customers choose from predefined options, while configuration rules ensure each variant is valid, compatible, and manufacturable. This allows for product customization at scale.

  
  

• BOMs, material costs, routing times, inventory levels, and pricing rules must be accurate. As product variants increase, manufacturing software becomes important because it can keep data up-to-date across departments, which reduces errors in quotes, purchasing, and production.