27 Jan Simplus Product Series #10 — Bill of Materials
by Erich Rusch
Regardless of the features, options, attributes, or rules that comprise our product configurator, the most critical element is that we end up with a structured bill of materials at the end of our configuration experience. The bill of materials is a commonly agreed-upon medium of communication that allows us to answer several critical questions between buyer and seller:
What did I buy?
The bill of materials communicates to our customers not only the products but the broad structure of what they are receiving. This helps customers understand what will arrive on their doorstep when their order arrives. The sales bill of materials should have a more human-readable laymen’s terms description of the important configuration details. If there is a need to communicate more complex manufacturing-specific language that isn’t necessarily relevant for the customer but important for order conversion, fulfillment, provisioning, or manufacturing, some customers will have a second behind-the-scenes bill of materials often known as the Manufacturing BOM.
How much did it cost?
Customers will often need to know the cost of specific products. Parts that comprise the high-level assembly and in no way alter the core cost structure of the product are often omitted from the bill of materials. For example, no one cares about the specific internal wiring or power supply of the PC, and so it’s often not listed. However, the cost of certain important elements of their configuration is relevant, such as whether or not the processor was upgraded and what the additional cost would be relative to the original processor.
Just as important as including the things that were added is calling out the items that were either included free-of-charge or omitted. These can create valuable upsell opportunities down the road. Things such as advanced support or extended warranties are great opportunities for our clients to add a margin to a deal and increase revenue.
Who else needs to know?
Lastly, it’s important to establish a commonly agreed-upon standard for transmitting manufacturing, provisioning, or fulfillment instructions to the back-end, downstream, or boundary systems. Many product SKUs not only allow us to determine what was purchased but can also trigger many downstream processes based on the type of product it is.
For example, SKUs often map to different objects in the general ledger to trigger different processes that impact revenue treatments, accounting segmentations, or lines of business. In addition, our best-in-class customers literally have touchless ordering processes where the submission of an order from Salesforce can directly spin up a manufacturing line anywhere in the world to begin fulfilling an order without human intervention. Having a commonly agreed upon, automated process to generate an order is critical to giving your business the scale it needs to achieve frictionless revenue growth.
The bill of materials is a powerful tool, and your organization must not overlook it. The final article in this Product Series will look at integrating your Quote-to-Cash setup with AI, install base, and other exciting products shaping the future.
Erich Rusch is Director of CPQ Presales Solutions at Simplus. Co-founder and CSO of CirrusOne until joining Simplus, Erich has years of experience in the CPQ space and has unparalleled expertise in cloud solutions.