=Paper=
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|title=Impact on cost accuracy and profitability from implementing product configuration system – A case-study
|pdfUrl=https://ceur-ws.org/Vol-1453/03_MyrodiaKristjansdottirHvam_ImpactOnCostAccuracyAndProfitability_Confws-15_p11.pdf
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==Impact on cost accuracy and profitability from implementing product configuration system – A case-study==
https://ceur-ws.org/Vol-1453/03_MyrodiaKristjansdottirHvam_ImpactOnCostAccuracyAndProfitability_Confws-15_p11.pdf
Impact on cost accuracy and profitability from
implementing product configuration system – A case-study
Anna Myrodia and Katrin Kristjansdottir and Lars Hvam
Abstract. 1 This article aims at analyzing the impacts from function PCS enables improved decision making in the early
implementing a product configuration system (PCS) on company’s phases of engineering and sales processes [6]. Furthermore, the
profitability and improved cost estimations in the sales phase. system can be used as a tool that allows the salesperson to offer
Companies that have implemented PCSs have achieved substantial custom-tailored products within the boundaries of standard product
benefits in terms of being more in control of their product architectures, thereby giving companies the opportunity to be more
assortment, making the right decisions in the sales phase and in control of their product assortment [7]. As the various benefits
increasing sales of optimal products. Those benefits should have a are described from implementing a PCS, it can be concluded that
direct impact on improved profitability in terms of increased those benefits will have direct impact on the company’s
contribution ratios and more accurate cost estimations used to profitability in terms of increased contribution ratios and more
determine the price in the budgetary quotations. As the literature accurate cost estimations in the sales phase. However the link
describes, there are various benefits from implementing a PCS, between implementing a PCS and its effects on the company’s
however the effects on the company’s profitability have not been profitability has not received much attention from researchers, even
discussed in detail. This study analyzes the impact from though it is one of the most critical factors during the planning
implementing a PCS on the accuracy of calculations in the
phase of such a system. Ergo this article focuses on assessing the
quotations and the impact on the relative contribution ratios of
impact of the implementation of a PCS on companies’ profitability
products. For that reason, a configure-to-order (CTO)
by analysing the accuracy of the cost calculations in the sales phase
manufacturing company has been investigated. A longitudinal
study is performed where both the accuracy of the cost calculations and the profitability of the products in terms of their contribution
and the profitability is analyzed before and after the ratios. Based on this, the following propositions are developed:
implementation of a PCS. The comparison reveals that increased
profitability and accuracy of the cost estimation in the sales phase Proposition 1 The accuracy of the cost calculations in the
can be achieved from implementing a PCS. quotations is increased by the implementation of a PCS.
Proposition 2 The contribution ratio of products is increased when
1 INTRODUCTION they are included in a PCS.
In today’s business environment companies are forced to offer
customized solutions without compromising delivery time, quality Aiming to investigate these effects, a longitudinal case study
and cost [1]. In order to respond to those challenges mass was performed. In 2009, an analysis of the product’s profitability
customization strategies have received increasing attention over the and accuracy of the cost calculations in the quotations generated in
years, both from practitioners and researchers. Mass customization the sales phase was conducted. The results from that analysis
refers to the ability to make customized products and services that indicated that the performance of the sales processes could be
fit every customer through flexibility and integration at cost similar improved by the implementation of a PCS. That recommendation
to mass-produced products [2]. Utilizing product configuration was adopted by the company; hence a PCS was developed and
systems (PCSs) is one of the key success factors in order to achieve implemented in 2011. Three years later, the same analysis was
the benefits from the mass customization approach [2][3]. performed in order to determine the impacts on the company’s
PCSs are used to support design activities throughout the profitability that could be related to the implementation of the PCS.
customization process, where a set of components along with their The comparison of the results before and after the implementation
connections are pre-defined and where constrains are used to
of the configurator is assessed and discussed in relevance to the
prevent infeasible configurations [4]. This is one of the reasons
propositions.
why configurations systems are considereded to be among the most
successful applications of artificial intelligence [5]. This paper is structured in 5 sections. In section 2 the relevant
Once implemented, the PCS usually supports the sales and literature will be analyzed in terms of PCSs and the benefits that
engineering processes in various dimensions, which can lead to can be achieved from implementing such a system. In section 3 a
numerous benefits such as; shorter lead-times, more on-time case study will be presented where the influence on company’s
deliveries, improved quality of the product specifications, less profitability and the accuracy of the cost calculations from
rework and increased customer satisfaction. Besides, its supportive implementing a PCS will be analyzed. Then, in section 4 the
conclusions from the case study are discussed. Finally, in section 5
1
discussion about the findings of this research work and future
Engineering Management Department, Technical University of
research are presented.
Denmark, Denmark
Email: annamyr@dtu.dk, katkr@dtu.dk, lahv@dtu.dk
11 Juha Tiihonen, Andreas Falkner, and Tomas Axling, Editors
Proceedings of the 17th International Configuration Workshop
September 10-11, 2015, Vienna, Austria
2 LITERATURE REVIEW improvement for the companies, as it has been measured 75% to
99.9% reduction of quotation lead time.
In this section the theoretical background of the present research is Another case study performed by Hvam [13] discusses and
reported. In order to find the relevant publications a literature quantifies the impact from the implementation of a PCS in the
review has been performed in the research area of PCSs. electronics’ industry. The main benefits from the use of
Forza and Salvador have performed extensive research in this configuration tools are considerably lower costs for specification
field. The authors present a case-study of an CTO manufacturing processes and production. The reason for that is that when
company, that identifies the benefits of the implementation of a specifications are generated in the PCSs, the actual working time
product configuration tool [8]. The benefits discussed are reduction for preparing offers and production instructions tends to be near
of delivery time, improved customers’ relationships and zero. The benefits in that case-study are quantified and show that
elimination of errors in Bill-Of-Material (BOM). They quantified the fixed production costs have been reduced by 50%.
the impact that the use of a configuration tool has on lead time, as Additionally, the variable production costs have been reduced by
reduction of manned activities in the tendering process (tendering 30%. On top of that quality has been improved, and is realized as a
lead-time from 5–6 days to one day). In addition to that, the errors reduction from 30% to less than 2% in the number of assembly
in the products' BOM, misunderstandings between salespersons errors, as well as delivery time has been reduced from 11 – 41 days
and customers are eliminated, while at the same time the level of to one day. After-sales services and installation are also positively
correctness of product information has been increased, reaching affected by the configurator. For instance, the time for replacing a
almost 100%. In a related study [7], the authors present a case- battery has been reduced from 5–6 hours to 20–30 minutes.
study of a manufacturer, who's production strategy is based on Hvam et al. [14] performed another case measuring the impact
customers' orders. After the implementation of a product of implementing a PCS in the ordering process of a CTO
configurator, one of the benefits identified is reduction to almost manufacturer. It is noted that only a 0.45% of the specification
zero of the errors in the configurations released by the sales office, process time is value adding. As a result the non-value adding time
in addition to savings in man-hours. There have also been noted spent on making the specifications can be reduced by the use of a
significant benefits in production, including manufacturing and configurator. By automating the process fewer errors occur, the
assembly processes, due to the fact that by using the configuration productivity of employees is improved and the quality of
tool correct information are received in the production. information and documents is increased. That is due to both
Furthermore, there has been an increase in technical productivity, reducing the standard deviation of the duration of the processes and
both regarding product documentation release and design activities. avoiding errors in quotations.
To this end, the benefits of using a PCS in the sales process are Similarly to the previous, another case-study is performed by
further investigated [9]. One of the main advantages discussed is Hvam et al. [15] in an ETO provider of cement plants. The benefits
that the configuration tool describes the possible configurations of of the implementation of an IT-supported product configuration in
the product in a way that they are simple and understandable by the the quotation process of complex products are aligned to those
customer. In that way, it can be ensured that there are no discussed above. In detail, a reduction in lead time from 15-25 days
contradicting requirements, no missing specifications and that to one-two days for the generation of quotations is noted. An
product configurations produced are valid. Moreover, since the increase in the quality of quotes as it is made possible to optimize
configurator deals with real time information, it helps reducing the cement plants satisfying better the customer’s needs, and
dialogue time between salespersons and customers. Finally, it is making less errors in the specifications made in the PCS.
highlighted that any kind of miscommunication between the Resources consumption for making quotations is reduced in the
salespersons and the customers is eliminated and possible errors engineering department from five man-weeks to one to two man-
are reduced. The reason for that is a possible source of errors in the days.
quotations due to the sales personnel lack of technical knowledge. Aldanondo et al. [16] identify the main benefits as the reduction
The use of a product configurator and its effect on product of cost and cycle time for highly customizable products. That is
quality is discussed by Trentin et al. [10]. The authors performed a due to the fact that without the support of PCSs iterative
survey in order to verify the relationship between the use of a procedures occur in sales and design processes. These activities
configurator and the quality of products. The results show a result in generating longer cycle time and increasing costs.
positive effect on product quality by using a product configurator. Slater [17] analyses the benefits of a web-based configurator in
Haug et al. [11] discuss possible development strategies for CTO environments. By using a PCS the company is able to offer
product configurator and evaluate the concluding benefits. the right product from the very beginning to each customer. The
Advantages identified are, firstly, the convenience of evaluating PCS assists the sales personnel to have an overview of the valid
information included in the configurator software before configurations and, therefore, avoid mistakes in the communication
implementation and ease of altering implemented product with the customers. This results in eliminating re-works on the
information. Facilitating the communication between product customers’ order. The same knowledge embedded in the
experts and configurator software experts is essential in order to configurator is used to provide unique manufacturing instructions
build a configuration tool. This results in minimizing use of and to make the rules for the correct configuration accessible to the
resources on documentation work and handovers of information, engineers.
and rapid implementation of gathered information. The benefits Gronalt et al. [18] outline the benefits of the implementation of
realized are both fewer chances of misunderstandings and errors, a PCS, such as personalized customer support, representation of
and faster processes. Haug et al. [12] performed another study in knowledge and distributed reusability of consolidated product
14 ETO companies, where the impact of implementing a PCS on configurations. To this end, Hong et al. [19] discusses the use of a
lead times is quantified. The results indicate significant configurator so as to reduce the information and attributes used to
configure a product variant in One-of-a-kind production (OKP).
Juha Tiihonen, Andreas Falkner, and Tomas Axling, Editors 12
Proceedings of the 17th International Configuration Workshop
September 10-11, 2015, Vienna, Austria
Fleischanderl et al. [20] provide empirical evidence showing was not using a PCS, and in 2014, 4 years after the implementation
that a configurator supporting the product development and of the configurator. The reason for selecting that specific period is
production process can reduce the cost of the product’s life cycle up to ensure that the PCS has been fully integrated into the business
to 60%. processes of the company, therefore increasing the validity of the
The implementation of a PCS in the sales and marketing process comparison. The data for this research was gathered from
has direct effects, such as number of errors, pricing, accuracy, time company’s internal databases and was verified with experts from
and cost to reworks, time to validate, reduce order cycle time, the company.
improve salespersons' morale, improve customers' satisfaction [21].
Empirical evidence from a built-to-order manufacturer claim
benefits such as increase on customer satisfaction, lower costs and 3.1 Background
higher productivity. In addition to these, an increase in the The company analysed in this case study is a Nordic company in
technical accuracy of orders entering manufacturing processes is the building industry that operates worldwide. In the year 2014 the
noted, which also leads to cost and errors’ reduction [22]. company had around 100 employees and yearly turnover of
Tenhiala and Ketokivi [23] performed a survey in make-to- approximately 15 million Euro. On average the company has
order (MTO) manufacturing companies and found support to the around 50 projects per year where the average turnover per project
hypothesis that the use of product configurator software in MTO is approximately 300.000 Euro. The company manufactures pre-
production processes is positively associated with product made structural elements for buildings. The product portfolio
conformance. Additional findings indicate that in general the use of consists mainly of six products; A, B, C, D, E and F. The first four
configuration management practices in MTO production processes products have standard product architecture that can be adjusted to
is positively associated with product conformance and delivery the customers’ needs. Products of type E denote to all the non-
performance, among custom assemblers and producers. standardized solutions and products of type F relate to additional
Another problem that product configurators should focus on, features or to the parts that can be added to the standard solutions.
according to Blecker et al. [5], is the customer perspective. They In 2009 the process of making budgetary quotation and the
claim that designers of configurators mainly concentrate on the accuracy of the cost estimation were analysed, which revealed the
back-end technical aspects. By process simplification and company’s performance of accurate cost estimations could be
personalization the wrong interpretation of the customer improved. The analysis also revealed that the company’s procedure
requirements by the supplier can be avoided. PCSs can therefore be of using Excel sheets to make the calculations of estimating the
beneficial both for the sales and engineering processes. prices resulted in many errors that could be traced to human
Tiihonen et al. [24] conduct a survey in Finish manufacturers mistakes. Based on this analysis the company decided to invest
with modular-based products. Their findings indicate that in 150.000 Euro to develop a PCS to improve the processes of
extreme cases 80% of the sales specifications are either incomplete generating budgetary quotations. The PCS used at the company is a
or inconsistent. At the same time, less than 20% of the total commercial PCS, which builds on constrains propagation. In
working time in the order processing is used for value-adding addition to that, the company also made process improvements and
work. By implementing PCSs there is a reduction to the number of changes in the product assortment that aimed to increase
errors related to quality and to quality costs. Moreover, the sales' standardisation. The implementation of the PCS also ensured that
specification produced by the configurator can be directly used as the salespersons are going to provide the customers with valid
an input for production, as it will not contain errors. Finally, the configurations from the standard product architecture.
configuration can assist the representation of products and product The development of the PCS took place in the period 2009 –
families that are often differentiated in different market areas, and 2010, and in beginning of 2011 the company had developed a PCS
also the transfer of up-to-date product configuration knowledge to able to handle most of the budgetary quotations. Only products of
the sales units and to enforce its proper use. type E, which are categorized as non-standard solutions, have not
Summarizing the findings from the literature review, it can be been included in the system. However, due to insufficient change
seen that the implementation of a PCS provides various benefits to management, not all employees were willing to change their work
the manufacturers, in terms of resources’ reduction, reduction of procedures and therefore they still used Excel sheets to make the
lead time, better communication with customers and product cost calculations for making the budgetary offers.
quality. However, there is a lack of empirical evidence on In this case study the impact from implementing the PCS on the
quantifying the impact of the use of a product configuration tool on company’s ability to make accurate price estimations for the
improved profitability and more accurate cost estimation. This budgetary offers and the company’s profitability will be assessed.
work contributes to that fact, by providing a longitudinal case The analyses were done both before implementing the system and
study, comparing the economic performance of the products and for the period of its utilization over, the past 4 years (2011-2014).
the accuracy of quotations before and 4 years after the Thereafter the accuracy of the calculations made by using the
implementation of a PCS in a CTO manufacturer. Excel sheets and the PCS will be compared.
3 CASE STUDY 3.2 Analysis of the Company’s Performance
In order to examine the propositions a case study is performed. The Before and After Implementation of
purpose of this case study is to illustrate the difference between Product Configuration System
cost estimation accuracy and product profitability, when using a In order to compare the performance before implementing the PCS
PCS and without one. Therefore, a longitudinal case study is (2009) and after the implementation (2011-2014), contribution
performed, by making similar analysis in 2009, when the company margins (CM) and contribution ratio (CR) were calculated for each
13 Juha Tiihonen, Andreas Falkner, and Tomas Axling, Editors
Proceedings of the 17th International Configuration Workshop
September 10-11, 2015, Vienna, Austria
project that had been carried out at the company within the 3.2.1 Analysis of Cost Structure and Deviations
timeframe of this research. Those calculations where both based on
the estimations of the budgetary quotations and both the real cost In this section the company’s cost structure and the deviations in
and sales prices calculated after each project had been closed. CM the estimated and actual values with regards to the main cost
and CR are calculated as follows [25]: elements is analysed. The purpose of that analysis is to identify
whether cost estimations have been improved after the
CM = Sales Price – Cost Price (1) implementation of the PCS by analysing the main cost elements.
CR=CM / Sales Price (2) The cost elements that are included in the analysis represent the
direct cost of making the product, which covers the expenses
Finally, the deviation in the CR is then calculated as actual CR related to materials, salaries, subcontractors and for the
minus the estimated CR. construction site, e.g. renting machines.
In 2009 a cost analysis was performed in order to assess the
DEV = CRactual - CRestimated (3) economic benefit by implementing a PCS. This benefit is highly
associated to the reduction of deviations in the cost estimation, as
If the real cost of the project is higher than the estimated cost, it the application of a PCS would thereby improve the budgetary
will result in negative deviation of the CR. Respectively, if the real quotations. In Figure 1 the results from the analysis are shown for
cost of the project is less than the estimated it will result in positive the deviation in the CM for the cost calculations of the main cost
deviation in the CR. The data for the analysis was extracted from elements.
the company’s internal database and verified with specialist at the
company. The cost prices of the projects were calculated as the
sum of the costs for expenses on construction site, subcontractors,
materials and salaries. The projects included in the comparison are
from 2009, when only the Excel sheets were used to calculate the
cost, until 2014. For the period 2011-2014 the cost calculations are
either done in the PCS or by using Excel sheets. In Table 1 the
main results from the analysis are listed.
Table 1. Overall analysis of the PCS contribution in terms of CR before
implementation (2009) and after implementation (2011-2014)
Performance indicators
Year ◊ □ ○ ◊◊
2009 -1.5% 5.4% 14.6% 25.0%
Figure 1. Deviations in cost estimations for the projects 2009
2011 -3.6% 7.7% 28.5% 25.5% distributed between the main cost elements
2012 -0.7% 4.9% 8.9% 27.6%
2013 -2.4% 4.9% 9.5% 28.8%
The figure above shows great deviations and irregularities in the
2014 -1.1% 3.9% 2.2% 28.6%
pattern, which indicate that only a few projects were realized at the
◊ Average difference in CR □ Average absolute deviation in CR ○
same cost as calculated. This means that the salespersons have
Percentages of projects with greater deviation than 10% ◊◊ Average CR per
project
estimated significantly lower costs for the projects than the actual
ones, as the deviations are mainly negative. That means that the
The analysis shows that the average CR has steadily increased sales persons underestimated the cost of the project. That refers to
from 25.0% in 2009 to 28.6% in 2014. However, the overall all different cost categories, as they all deviate towards the same
company’s goal is to have projects with CR of 30%. direction (positive or negative). Based on this it can be concluded
The deviations in the CR also show positive improvements as that the accuracy of the calculations for the budgetary proposals
the average deviations have been reduced from -1.5% in 2009 to - were inadequate in 2009.
1.1% in 2014. Regarding the absolute value of the CR, when In order to see whether the situation has been improved at the
analyzed, the deviations showed reduction from 5.4% to 3.9%. It company since implementing the PCS, a similar analysis was
should also be noted that the percentages of projects with greater repeated in 2014, three years after implementing the PCS. The
deviation than 10% have been significantly reduced from 14.6% in results from the analysis are shown in Figure 2.
2009 to 2.2% in 2014, as the calculations of the absolute values in
the CR indicate. However in 2011, which was the first year when
the PCS was utilized, the deviations in the CR increased
considerably. This increased in deviations can be traced to the fact
that the system had not been fully tested before implementation
and the users of the system were lacking training. But as the users
became more experienced in using the system and errors had been
fixed, the PCS started providing valuable results.
This analysis indicates that the calculations are now more
precise than before the implementation of the PCS and the
company is moving closer to the targeted CR, which is 30%.
Figure 2. Deviations in cost estimations for the projects in 2014
distributed between the main cost elements
Juha Tiihonen, Andreas Falkner, and Tomas Axling, Editors 14
Proceedings of the 17th International Configuration Workshop
September 10-11, 2015, Vienna, Austria
subcontractors. Under certain circumstances, time can be limited
As illustrated in the above figure, when comparing the deviations and the company’s employees might get closer to a deadline for a
in CMs of the projects from 2014, it can be clearly noted that there project and the construction team cannot finish on time. Then it
are far less fluctuations in the cost calculations than in 2009. might be necessary to outsource the work to subcontractors to
Beside a few projects, the majority of them have rather low finish on time and not delay the project, as that will also cause
deviations from the calculated budget. By comparing the results higher additional cost.
from Figures 1 and 2, it can be realised that the accuracy of cost It can be concluded from the above analysis that the main
estimations has been improved since implementing the PCS. This reasons for the deviations in the cost calculations were not due to
is also supported by the fact that the deviations from 2009 for all inconsistences of the PCS. Late changes from the customers,
the cost elements are not towards the same direction, meaning that unforeseen circumstances and outsourcing are some of the main
in 2009 the deviations were negative in their overwhelming factors reported by the project managers of the company, which
majority. when occur, cause deviations in the cost calculations.
The costs in 2014 are closer to the baseline; nevertheless, three
large negative spikes for the subcontractor category can clearly be
seen, on the same projects with the positive spikes for the salaries. 3.3 Comparison of Budgetary Proposals Made
From an interview with a specialist at the company the reason for in Excel and PCS
the large deviations in these three projects was due to the fact that In 2011 the PCS was first launched in the company. However, it
the construction work was outsourced to subcontractors. This has not been accepted by all sales representatives therefore some of
explains why the subcontractor category reveals large deviation them were still using Excel sheets for the calculations. The main
and at the same time there is a positive deviation in the salary reason for that is the lack of change management initiatives, which
category, as the work was outsourced and therefore salaries to own resulted in some employees resisting to use the PCS and therefore
employees could be reduced for the projects. sticking to their old work habits. In this chapter the yearly turnover,
In the project where there is a large positive deviation in the CR of the projects and the deviations of the CR will be analysed in
material category. The explanation given was that from the time terms of whether they were generated by the Excel sheets or the by
the proposal was given out and until it was finished it took several the PCS.
years and in the meantime a new steel structure was developed and The turnover generated by projects sold through the PCS has
implemented, which was much cheaper than the old structure. The been steadily increasing since 2011. In the year 2013 the point was
large positive deviations in the cost estimations that were noticed reached, where slightly more proposals were generated by the use
in the 2014 analysis have therefore been reasonably explained. In of the PCS. Figure 3 shows the yearly turnover for the proposals
the next section a more general explanation for the deviation is made in Excel and by use of the PCS.
provided.
3.2.2 Reasons for the deviations
In order to gain a better understanding of the deviations in the cost
estimations, a deeper analysis is performed, with the aim of
clarifying why these deviations are still occurring at the company.
The most significant deviations in the projects 2014 have been
explained above, however in this section additional factors that
influence the deviations will be further analysed.
The company aims to provide the customers with high quality
service therefore if a customer wants to make changes to the
specifications later in the process, the company will strive to adjust
the solution to satisfy the customer’s wishes. When such changes
occur, the additional cost is added manually to the total price. This
makes the actual cost of the project deviate from the initially Figure 3. Comparison of turnover generated for proposals made in
calculated cost, but does not affect the profitability of the project. Excel and by use of the PCS
Furthermore, the cost at the construction site is difficult to
estimate since there are frequently unforeseen factors which have As can be seen from the above figure, in 2011 and 2012, the
to be dealt with, such as difficulties to get the machines at the projects handled by the salespersons through the Excel sheets
building side. That can result in increasing the time that the contributed more to the turnover of the company; even though the
machines have to be rented and creating additional expenses due to PCS has already been implemented in that period. This can be
salaries of subcontractors, which were not taken into account in the explained, firstly, by the reluctance that some of the salespersons
original calculation of the estimated cost. However, this threat showed towards including the new PCS in their working processes,
could be reduced if technicians would examine the construction as they still used Excel for the cost calculation and quotation
site in order to make more realistic estimations of the cost. generation. Additional, the period 2011-2012 was the initial
However, it worth mentioning that the highest peaks in the introduction of the PCS at the company. However, the PCS did not
deviations of the cost calculations in 2014 are not caused by errors include all products at that point of time; therefore its utilization
in the quotations, or additional costs due to unforeseen factors at was by definition limited. As a consequence, during the trial period
the construction site but mainly because of the outsourcing work to the turnover contributed by the projects handled in Excel is higher
than the one from the PCS, but this fact was significantly changed
15 Juha Tiihonen, Andreas Falkner, and Tomas Axling, Editors
Proceedings of the 17th International Configuration Workshop
September 10-11, 2015, Vienna, Austria
in the following 2 years. So, in the period 2013-2014, when the
company managed to take greater advantage of the PCS, and its
utilization was strongly established, the turnover of the projects
worked out by using the PCS outnumbered the ones worked out in
Excel.
3.3.1 Sales Representatives and CR
The company’s goal is that all projects should have a CR of 30%.
An analysis of the overall performance of the company, (section
3.2) showed how the CR has been increasing since 2009. However,
in order to confirm that this can be traced to the implementation of
the PCS, a comparison of the CR for the budgetary proposal made
by using the PCS and Excel is performed. In Figure 4, the actual
CR is illustrated for the proposals made by use of the PCS and
Excel. Figure 5. Comparison of deviations in CR for sale persons using Excel
and PCS
As it can be seen from the above figure, the salespersons using the
PCS have less deviation in their CR than the ones using Excel, with
the exception of the year 2011 which was the first year the system
was used in the company. Moreover, in 2012 and 2014 the
deviations of the quotations made by the PCS are positive and
close to 0.
The analysis of the performance of the salespersons using Excel
and PCS therefore indicates that the PCS affects positively the
accuracy of the cost estimation as well as the CR. Summarizing the
results from this section, it can be seen that both the CR and the
accuracy of estimations are improved by the utilization of the PCS.
To this end, it can be concluded that the both propositions are
supported by the results of the case study.
Figure 4. Comparison of CR for salespersons using Excel and PCS
From this it can be concluded that salespersons using the PCS 3.4 Future Initiatives
contribute a higher CR, with an exception in the year 2012 where it In order to improve the company’s performance several factors
was slightly lower. Furthermore, it can be seen that the gap have been identified that could reduce even further the deviations
between the CR is increasing between the salespersons using Excel in the CR and increase the profitability of the company. The
and the PCS. In 2014 the average CR was 28.6%, where sale company intends to implement a check list in the end of each
persons using the PCS had average CR 30.1% while sale persons configuration in order to ensure that all the required information is
using Excel had 23.8%. In other words, the salespersons using the both gathered in the sales phase and up-to-date. By implementing
PCS have managed to achieve the goal of 30%. the check list, it is expected that errors made in the sales process
However as previously mentioned the products of type E, which will be reduced even further. Furthermore, the company is planning
are the non-standard products, are not included in the PCS to enhance a higher degree of standardization in their product
therefore in order to make the price estimation Excel sheets are range, as well as move towards modular based product
always used. Even though those products are not included in the architecture. Finally, the company has decided to invest 140.000
calculations for the proposals made in Excel, when they were taken Euro in further development of the PCS, in order to include more
into account they only affected the CR for the proposals made in products and have greater benefits from its utilization.
Excel by 0.2%. Therefore it can be concluded that the reason for
lower CR cannot be traced to the special orders.
Another important factor is to compare the deviations in the CR 4 CONCLUSIONS
between the proposals made in Excel and PCS. The results are
The scope of this case study is to quantify the impact of
illustrated in Figure 5.
implementing a PCS on product profitability and accuracy of cost
estimation. The research results in significant improvements in
both the CR of products sold through the PCS and the accuracy of
quotations. These results confirm the propositions made in this
paper. In detail, an improved performance of the margins of the
products is recorded, as well as a reduction in the deviation of
quotations. The comparison in the quotations’ deviation is made
between the same products, sold in 2009, before the company
implemented the configurator, and in 2014, when the sales process
Juha Tiihonen, Andreas Falkner, and Tomas Axling, Editors 16
Proceedings of the 17th International Configuration Workshop
September 10-11, 2015, Vienna, Austria
was supported by the PCS. Moreover, there is a comparison [6] L. Zhang, ‘Product configuration: a review of the state-of-the-art
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17 Juha Tiihonen, Andreas Falkner, and Tomas Axling, Editors
Proceedings of the 17th International Configuration Workshop
September 10-11, 2015, Vienna, Austria