What is CPQ?

CPQ stands for Configure, Price, Quote and CPQ software helps sellers quote configurable, multi-option products. 

The core reason for using CPQ is when products have too many possible combinations to prepare them in advance.

Consider a product that is configured by five questions with five answers each that can be combined freely. The number of combinations for these five questions is 3 125. Now, increase the number of questions to ten. This increases the number of combinations to 9 765 625 and is commonly referred to as a combinatorial explosion.

Having all combinations prepared in advance is no longer an alternative and a streamlined quote-to-production process requires a system.

By using CPQ companies can generate personalized prices and quotes quickly and accurately for each customer.

The CPQ guides the seller or customer through the process of selecting and combining features meanwhile making sure that no incompatibilities have been selected and that all necessary questions have been answered.

The CPQ system might also visualize the configured product in 3D which is increasingly common especially for configurable consumer products like cars, wardrobes, and garages.

The challenges for companies with multi-option products don’t stop when the quote letter has been sent. Once a customer places an order a bill of materials (BOM) is needed for purchasing, planning and production, and configured instructions are needed for assembly and testing.

The customer might also request personalized data sheets, CAD drawings and spare parts lists. Therefore, many CPQ systems go beyond Configure, Price and Quote and help companies with other challenges that are related to complex products.

CPQ systems are also often integrated with other software such as ERP, CRM and e-commerce systems. Through integrations, duplication of work can be avoided and other systems can take advantage of what is automated by the CPQ systems.

The list below includes functionality that most major CPQ vendors supports, while niche areas like 3D visualization have been excluded.

1. Expansion of the sales network
   When it becomes easier to create quotes, the same skills and experience are no longer required, and new sellers and resellers are easier to find.
   
   
2. Faster response with quote
   The sellers are guided through prepared questions and the system generates the quote letter automatically.
   
   
3. Error-free orders
   Rules prevent selections that do not work technically and ensure that all necessary questions have been answered.
   
   
4. Automation in the order process
   BOMs with linked operation sequences are created automatically and other production order information such as assembly and testing instructions can be automated.*
   
   
5. More standard sales
   By guiding and presenting alternative standard solutions, the number of orders with special solutions that require development is reduced.
   
   
6. Unloading of R&D
   As the sellers are guided and the rules prevent errors, R&D normally does not need to be involved in the sales and order process.
   
   
7. Reduced administration for sellers
   Sellers no longer need to write quote letters and accurate prices are automatically calculated.
   
   
8. Easy handling of repeat orders
   Previously submitted quotations or placed orders can be copied with automatic update of prices and BOMs, so that the seller only need to consider any new questions/options.*
   
   
9. New options and products get instantly available
   New options and products are prepared in the modeling tool and upon release become instantly available to the entire sales force.
   
   
10. Orderly introduction of new price lists
    The system keeps track of which version of the price list is used, recommends the correct version but allows older price lists based on the set grace period.*

* This description applies to how Combinum CPQ implements the particular benefit.