With the ever-growing pressure in the modern electronics manufacturing environment, Original Equipment Manufacturers (OEMs) are under increasing pressure to provide accurate financial projections. As global supply chains get more convoluted and component prices increase and decrease at an alarming rate, it has never been more important to be able to make informed and data-driven procurement decisions.
With the help of CPQ analytics, OEMs have an opportunity to achieve better insight into procurement trends, price dynamics, and customer demand, which opens the door to more reliable and strategic financial planning.
What Is CPQ Analytics and Why Does It Matter for OEMs
The term CPQ analytics means the data and knowledge obtained through configure price quote software for electronics, which are used to automate and simplify the complex product configuration and accurate pricing. To the OEMs, CPQ platforms are part and parcel of dealing with all the complexity related to custom product configurations and enforcing consistency in pricing and quoting practices.
There are key procurement insights that can be identified when this data is analyzed, including seasonality of demand, responsiveness of suppliers, and cost variations over time.
Financial Forecasting Challenges in Electronics Procurement
Procurement of electronics has a number of issues that make financial forecasting very difficult:
- Volatile Component Pricing: The cost of semiconductors and other critical components is regularly changing because of the shortage of supply, geopolitical issues, or swift technological development.
- Disruption in the Global Supply Chain: Natural catastrophes, trade controls, and logistic problems may abruptly affect the supply and delivery schedules and disrupt the balance of forecasts.
- Great Product Complexity: OEMs usually deal with thousands of components in various combinations. It is simply hard to forecast correctly what structures will be requested, and at what price.
- It is getting increasingly difficult to rely on past sales to project future needs as more customers are demanding custom electronic solutions.
All these variables can be managed through OEM procurement software from Luminovo. Otherwise, procurement departments tend to use last period numbers or even intuition, which may result in incorrect CPQ in electronics manufacturing.
How CPQ Analytics Improves Financial Forecast Accuracy
CPQ analytics minimizes these issues by providing clarity and predictability to the process of forecasting. Here’s how:
- Real-Time Pricing Insights: CPQ systems combine pricing information received directly from suppliers and internal cost databases, which means that forecasts made are always made using the latest figures available, as opposed to using fixed price lists.
- Quote-to-Close Data Analysis: Analyzing the quote-to-order close rates can enable the OEMs to have a more accurate forecast of future sales volumes and make adjustments in the inventory procurement.
- Recognition of Demand Patterns: The CPQ analytics can determine patterns in customer requests and show which configurations are becoming popular.
- Scenario Modeling: With Advanced CPQ analytics, scenario modeling can be simulated, e.g., price increase or demand shifts, to have OEMs experiment with various forecasting assumptions prior to procurement decision-making.
With these insights as input to the financial planning systems, OEMs may shift from reactive to proactive forecasting.
Strategic Benefits Beyond Forecasting
Inaccurate sales forecasting can result in at least 1 missed sales forecast per quarter. Although better forecasting is a fundamental CPQ analytics benefit, CPQ analytics can provide a series of strategic benefits to OEM procurement organizations:
- Heightened Cost Saving: The correct forecasting means less over-ordering and underutilisation, which translates into a leaner inventory control and consequent holding cost saving.
- Quicker Time-to-Market: Having superior visibility into the demand and supply cycles permits the OEMs to plan further and hasten the delivery schedules of the products.
- Better Cross-Departmental Cooperation: CPQ software enables sales, finance, and procurement to be aligned on the same data and assumptions.
- Improved Customer Satisfaction: Proper delivery schedules and product availability will improve customer experiences, thereby resulting in repeat business.
CPQ analytics changes the procurement cost center to a strategic activity that drives long-term growth and competitiveness.
Key Metrics to Track in CPQ Analytics for Forecasting
In an attempt to get the best out of CPQ in electronics manufacturing when it comes to financial forecasting, OEMs ought to keep an eye on the following key highly valued metrics:
- Quote Conversion Rate: It is a rate that shows how frequently the quotes are approved and transformed into orders. The greater the conversion rates, the better the predictability.
- Configuration Popularity Trends: Shows what product configurations are becoming popular or are losing popularity so that it can be used in inventory and production planning.
- Lead Time Accuracy: It determines the accuracy of suppliers in relation to the expected delivery schedules. Fluctuation in this measure affects the certainty of purchase strategies.
- Quote Cycle Time: Holds the average amount of time that is required to produce and approve a quote. Quicker cycles are usually associated with increased sales nimbleness and responsiveness to clients.
The tracking of these KPIs makes the financial predictions based on operational realities and existing market behavior.
In Conclusion
CPQ analytics is emerging as a tool that OEMs can hardly do without in their quest to introduce accuracy and dexterity to their financial projections. When every penny counts and every misstep costs a fortune, access to data-driven, real-time insights can mean the difference between successful existence and simple survival.
Whether it is optimization of procurement processes or being able to recognize a market trend before it takes off, Luminovo CPQ software can enable OEMs to be on the right side of the curve and help them make informed decisions with confidence.
