Configurator brings uninterruptible business

7 mins read

When UPS manufacturer APC wanted to move from engineered projects to semi-modular systems, it did an exemplary job. Brian Tinham talks to the firm's director of engineering about the how's and why's

The purpose of a configurator is to eliminate as much engineer-to-order [ETO] as possible." So says Soren Jensen, director of engineering and product marketing for infrastructure and enterprise solutions at global uninterruptible power supplies (UPSs) designer and manufacturer American Power Conversion (APC). "But," he adds, "it needs to be a catalyst to rethinking your processes right across the business, because going truly configure-to-order [CTO] has implications for everything from sales and marketing to engineering, new product development, production, the supply chain, project installation and service." APC's is a fascinating story of transformation all the way from expensive ETO of complex, high variety projects to almost entirely low cost CTO systems. It now uses a sophisticated web-based configurator front end built using 'to-order' ERP developer Cincom's Knowledge Builder, leading into integrated pull- and forecast-driven mass production, with late assembly and the rest at distribution centres – and it's founded entirely on company-wide lean thinking. In the face of a fast changing, high tech environment, it demonstrates just how much can be achieved with good people, management commitment and automated systems – and provides lessons for all of us treading the to-order journey. Complex variety Headquartered in the US, but with manufacturing sites in the Philippines and India backed by assembly at distribution centres around the world, including one in Galway, Ireland, Jensen's APC business unit provides power protection systems for data centres. It is customers' sheer variety of back-up requirements – as well as the twin drivers of price and the constant pace of engineering change – that together prompted its combination new product and configurator initiative. "Four years ago, we introduced PowerStruXure as a revolutionary and systematic approach to building flexible, high-availability data centre infrastructures, using standard, pre-assembled components," says Jensen. The idea was to create an on-demand semi-modular product range, as opposed to the traditional ground-up project engineering approach – and thus to offer customers benefits like rapid delivery, greater reliability and reduced capital cost. To get it right meant stripping time out of sales engineering, quoting and delivery promising, using the configurator, while at the same time simplifying and rationalising components and options where possible, and flowing make-to-forecast (itself also improved) and to-stock (min/max trigger, pull-based) at the component level through its main factories. Not only was all that fundamental to making the new product viable, but to sustaining the business volume and cost model, with the configurator also pivotal in enabling what are potentially complex and critical beasts to be sold not only by internal sales people, but by channel partners. Jensen makes the point that APC was already very familiar with configurators – having used systems at various levels of sophistication on products ranging from its Netshelter rack systems to its accessories, cables, dc and air conditioning systems. This latest web configurator would, however, have to be by far the most ambitious, he says. He defines levels of complexity. First there are off-the-shelf items that can be stand-alone or integrated into other systems. Examples include racks and breakers. Next there are pick-to-order (PTO) bundled items involving, for example, a UPS, surge strip and some software. "Then there are ATO [assemble-to-order] combinations of finished goods and PTOs – for example a power distribution unit. For this level, you need to build a BoM [bill of materials] through an open tree structure of option classes, defining the requirements for a frame, chassis, distribution panel and the various breakers." The latter could be done by a person, but a system results in several advantages, from the obvious speed, cost and error reduction to validation and the less obvious automatic generation of associated manufacturing instructions and the rest – as well as improving detailed forecasting. "If you have a system, you start building a history of the aggregated component run rates, so it's much easier to forecast at the highest level… For us, forecasting has improved big, big time." Above that level of complexity, where the variance from standard options goes beyond the limits of the configurator alone, we're back into ETO. "When something reaches that level, we have to go back to conventional engineering involvement," says Jensen, although even here, APC maintains links with the, say, 90% pre-configured system. "Everything is documented and saved on a Lotus Notes template attached to the order, with all documentation held electronically," he explains. There is one more level for APC – what it terms ITO (integrate-to-order), where the firm's own products need to be integrated with third party products and systems. "There may not be any design engineering issues, but we need to accommodate, say, specific diesel generators to be provided as part of the solution," he says. Huge savings "ETO and ITO elements are harder to handle, so we keep them away from the configurator." And he indicates another truism worth bearing in mind: "Where customers go through the configurator, they get a unique solution that's fit for purpose, and we can demonstrate proof of robustness and quality because all components have been tested and all engineering knowledge captured. As soon as they move away from standards, they start incurring cost, waste, prototypes, additional system proving, extended timescales. Currently, we're down at about 15–20% of orders still going through ETO/ITO." That said, internal sales staff and APC's resellers are using the system to great advantage for 80—85% of orders. And Jensen indicates that the savings are huge. "We reckon that without the system, an experienced technical sales operator would take six to eight hours to complete configuration and quoting. With the web configurator that takes less than 30 minutes." He says all quotes for all equipment are preferentially forced through the configurator. That not only results in the automated procedures for which it was intended, but produces detailed history that in turn determines material procurement and build scheduling for components and subassemblies in the factories, under Oracle ERP production control, as orders and delivery dates are confirmed. At the next level, the configurator also automatically generates manufacturing instructions that enable kitting and assembly at the distribution centres fast and efficiently. "Configured-to-order systems involve about 40–60% unique work instructions depending on the variants selected, but the rest is always standard," explains Jensen. "Standard work instructions are in the Oracle ERP system, and the web configurator generates the variants as a Solution Number, which has the BoM, shipping instructions, floor layout details, site installation information and so on – everything that is required for that customer project, not just for production." There's no doubt that APC has done a creditable job here, but it's worth noting a couple more important points. On average APC finds there's a window of 90 days from configuration and quotation of an order to approval and receipt of a purchase order. In that time internal ECOs (engineering change orders) do not stand still. Says Jensen: "There might be quality feedback issues, old products being phased out, new products phased in, core functionality changes and so on. So a quoted sales configuration could become invalid – which you want to avoid." The solution: "In the web configurator, we elevate SKUs to the highest level." In essence, instead of the configurator holding multiple level BoM data down to the minutiae of product definition, it only holds what amounts to a simplified product model. "The details are hidden, if you like, in the ERP system, at the level below that." He indicates that it cannot be a total solution, and that a configurator on any complex range that's subject to change is going to need constant TLC. Benefits rest on change His advice: "Simplify the product variant master where you can. Look at overall engineering and production: if you attempt to keep everything as it is, your configurator may well be hard to maintain." And there are plenty that would argue we should all be doing that anyway – customer analysis permitting. All very efficient, but what was involved in getting there? Jensen agrees that setting up the configurator is no mean feat. "You need people with a combination of high level business process understanding, people skills and software engineering skills – all three – to get the information out of engineers and sales people's heads, get it structured according to the business needs, and into the system. We hired six knowledge engineers for the first phase and it took them about eight months." And that was to structure the system, based on Knowledge Builder, for APC's power products, cooling products, management systems, rack systems and the rest – setting up the rules for the entire physical infrastructure of around 500 SKUs with potentially millions of combinations, and integrating it all within a data warehouse that also links to customer-specific pricing. That being the case, when does he think it makes sense to go for a configurator to this level? "If your company is experiencing a lot of waste; if there are human errors in design, building and quoting products; if your domain experts are becoming your bottleneck and your products are getting more complex or there are more variants – then you need to consider a configurator." But – and this is important – he insists that to get real benefit, "it is essential to consider your key business processes and involve their owners from day one." And for him, that's at least engineering, sales, production, forecasting and finance. Beyond the configurator itself, Jensen concedes that APC had to embark upon considerable business process re-engineering. "We realised we weren't ready to take the output of what would be very advanced web configurator software into other key departments of our business. We needed to think through our systems… If you don't, you're not going to improve your ability to make-to-order efficiently and cost effectively, or to gain additional business benefits: you'll just automate the estimating and quoting elements and some of production." Since the new vision needed to begin with sales opportunity identification and end in post-sales service, changes would have to be made across every level and supporting system. So APC used the Centre for Quality Management to audit its high level business processes, subsequently drilling down into sub-processes and detail, and establishing current and future states and a gap analysis – given the new tools and its proposed product and service offerings. Jensen repeats that all departments had to be involved – from sales and opportunity management, through configuration generation, to quote/proposal, order entry, pricing, project co-ordination, field service, order fulfilment, shipping, execution, inventory management and accounts receivable. Also involved were the supply processes – engineering, purchasing, planning, shopfloor execution and receiving – and all of finance. We're talking top to bottom. His advice: "Identify the key business process owners, look for the gaps, but don't try to resolve it all at once. Define a road map before you start and before you make any significant investment. You need to ensure this is in the hands of the right people." It clearly worked. Indeed, Jensen says that, with the configurator in control of customer service, operations, supply chain and project services, the next target is moving on to lifecycle management of its sold systems. "It's about how we help run customers' data centres, how we move to the support economy where payment revolves around service, not only the delivery of finished goods and projects. The next development for us is to extend our configurator and associated systems and business processes to include delivering configured-to-order 'value' over, say, a 10 year period."