Configure, Price, Quote
CPQConfigure, Price, Quote (CPQ) is software that helps sales teams create accurate quotes for complex, customizable products.
Configure, Price, Quote (CPQ) software is a sales tool for generating quotes for products with multiple options. It guides salespeople through product configuration, applies pricing rules, and creates quote documents. The software uses a predefined set of rules to ensure that every configuration is valid and manufacturable.
CPQ systems work by presenting users with a series of choices for product features and options. As selections are made, the system automatically validates the combination against engineering constraints. It then calculates the price based on the selected components, quantities, and any applicable discounts. The final output is a professional proposal document for the customer.
On the shop floor, CPQ connects sales directly to production. An accurate quote from a CPQ system can automatically generate a Bill of Materials (BOM) and routing instructions. This process reduces order entry errors and ensures that what is sold can be built efficiently. It prevents the sales team from quoting impossible product combinations or inaccurate lead times.
Manufacturers implement CPQ software by integrating it with their Enterprise Resource Planning (ERP) and Customer Relationship Management (CRM) systems. The implementation process involves defining product configuration rules, pricing logic, and approval workflows within the CPQ tool. This requires close collaboration between sales, engineering, and production departments to ensure all data is accurate.
A salesperson for a custom conveyor manufacturer uses a CPQ tool on a tablet with a customer. They select a 30-foot length, a high-torque motor, and an optional safety guard package. The CPQ system confirms this is a valid engineering combination, calculates the price at $47,500, and generates a quote with an 8-week lead time.
How is CPQ different from an ERP system?
ERP systems manage core business operations like finance, HR, and manufacturing. CPQ is a specialized sales tool for product configuration and quoting that often integrates with an ERP.
Can CPQ help reduce quoting errors?
Yes. It uses pre-set rules to prevent invalid product configurations and automates pricing calculations, which reduces manual mistakes.
Does implementing CPQ require engineering input?
Yes, engineering teams help define the configuration rules. They ensure all possible product combinations are manufacturable and meet performance specifications.
Can CPQ software generate a Bill of Materials (BOM)?
Many CPQ systems can automatically generate a BOM based on the selected configuration. This BOM can then be sent to an ERP or MES for production planning.
How does CPQ affect lead times?
CPQ shortens the time it takes to create a quote. By providing accurate order data to production sooner, it can also help shorten overall order fulfillment lead times.
Engineer-to-Order
ETOEngineer-to-Order (ETO) is a production method where a product is designed and manufactured only after a customer order is received.
Make to Order
MTOMake to Order (MTO) is a production strategy where manufacturing starts only after a confirmed customer order is received.
Bill of Materials
BOMA Bill of Materials (BOM) is a complete list of the raw materials, components, and assemblies required to build a product.
Enterprise Resource Planning
ERPEnterprise Resource Planning (ERP) is a software system that integrates a company's core business functions into a single, shared database.
Sales and Operations Planning
S&OPSales and Operations Planning (S&OP) is a management process that aligns a company's sales forecasts with its production, inventory, and supply chain plans.