Broken Request for Quotation Process

[QA_Newbie2000]

At the company that I work our internal RFQ process is broken, or at least in need of improving.
It is a struggle to get RFQ’s answered to our external customers on time and with the correct level of detail/information.
We have taken the task of improving this process and have begun to track OTD as a measurable data point.

A straw man of the process is as follows:
Business Development presents an opportunity to Operations, Engineering, and Finance along with a due date
Operations/Engineering provide inputs to Finance that cost the activity (labour/material/NRE/etc)
Finance provides a cost to Business Development
Ops/Eng provide other data to Business Development (schedule, etc)
Business Development does a bid review with senior staff
Business Development presents the bid to the customer

We were thinking of developing a questionnaire/survey for the internal stakeholders to try and determine where the process breaks down.
Some questions might be:
How do you determine if your output is what the next person in the process requires?
Do you have all of the required information to perform your portion of the process?
If you can’t meet the due date requested, what do you do?
????

I would be very interested if any of you have gone through something similar or if you could suggest any other questions

Many thanks in advance

 

[dsanabria]

For clarification purposes - what type of company is this?

Is the company certified to a known standard?

Are the players competent or properly trained

have you done a gap analysis and an internal audit.

let us know so that we could provide focused opinion.

 

[Wes Bucey]

I posted the following ten years ago. Maybe there is something here which may work in your operation.

Instead of sitting down to quote the part, we turned traditional contract machining marketing methods upside down. We picked up the phone and called the customer with questions like:

1. Do you currently use this part?
2. How many do you use a year?
3. Do you currently make it yourself or buy it?
4. Why are you seeking a quote?
   (If the chooch said anything remotely resembling, "Just checking the market." We replied, "Sorry, we only deal with folks who need the product. No quote. Goodbye!")

If it was an existing part, the one answer we wanted to hear was that they were unhappy with their current supply, either for price or quality. We then went into our concurrent engineering mode and asked them to elaborate. If it was a quality problem, we asked them to send us samples of the nonconforming parts with their inspection sheets so we could "diagnose" the problems. Our whole stance was to position ourselves as "partner" first, before WE ever quoted.

If price was the issue, we'd ask, "How much do you need to buy it for?" Then we said, "That might be doable. If not, we'll tell you straight out that it isn't. If we suggested some design changes which would make it less expensive to manufacture, but still have same fit and function, would you be able to work with that? Are there mating parts which would be affected? Can you send us the assembly drawing and the drawings for the mating parts so we can look at that as part of our analysis?"

Usually, by the time we were finished with the introductory give and take, we had several phone calls, talked to design engineers and manufacturing managers. Soon, the problem of "price" was the furthest thing from the mind of anybody at the prospect's organization. We were busy establishing ourselves as the "go to" folks.

If it was a new part, never made before, we asked about potential real use (we didn't quote a blind spread of quantities and price breaks.) We asked about mating parts, end use, etc. Finally we asked the big question, "What do you think you need to buy this for to be able to have a marketable product yourself?" Then we went into our pitch, "That might be doable . . ."

If we spent as much as an hour qualifying a prospect, it was much more cost efficient than sending quotes out on the fax like oysters spawning in the ocean. We had names, extension numbers and "rapport" established. We would call up before we sent out a formal quote with the oral one, telling the recipient to go to his fax machine and pick it up, stay on the line and then tell us if it came through clearly. Our quotes NEVER got lost in the shuffle. We asked for a target date when he would have the answer and the order. We followed up, eager to help if there was a glitch at their end.

By our third year, our regular customers would call us first, ask if we had time to look at a drawing, then send it over by fax while WE waited for it to arrive. Often, they said, (before we went into our interrogation):

1. We currently use this part.
2. We use ____ thousand a year.
3. We've been buying it from John Doe, tell us if we're getting a good deal or not. We currently pay $_____.
4. We're asking you to look at it - if you can come close on the price, we'd rather deal with a known quantity like you. Sometimes these guys act like they don't need us as a customer.
5. What more do you need to know?

Sometimes, just sometimes, the plan works! Our plan was for our customers to think of us as partners with whom they could share confidential information. It worked because we never betrayed the confidence. Many times, we'd tell them they were already getting a good deal. If the quality was a minor problem, we'd offer to consult with their current supplier to help him overcome the obstacle to good quality. Our pitch to the "competitor" would be that we were partners with them in satisfying the customer. A happy, satisfied customer was easier for everyone to deal with. We sometimes used these "competitors" to outsource some of our overflow once we got their quality systems up to snuff. Our point was, "If you have similar machines, you should be able to do similar work. Let us help you tackle the quality and service issues."

Most folks don't realize the true expense of quoting a part "in the blind." The most important thing to nail down first is whether the product will be bought at ANY price, then the most probable quantity, finally the details of actually making the product.

 

[Marc]

Robust and Explicit Quotation Process

<snip> By our third year, our regular customers would call us first, ask if we had time to look at a drawing, then send it over by fax while WE waited for it to arrive. Often, they said, (before we went into our interrogation):

1. We currently use this part.
2. We use ____ thousand a year.
3. We've been buying it from John Doe, tell us if we're getting a good deal or not. We currently pay $_____.
4. We're asking you to look at it - if you can come close on the price, we'd rather deal with a known quantity like you. Sometimes these guys act like they don't need us as a customer.
5. What more do you need to know?

<snip>

Assuming volume business:

The only thing I see that is missing is terms and conditions if a customer asks for a quote on x number of parts where let's say x = 100,000 per year but separate orders are placed for lesser quantities over a year. What if the customer ends up only ordering 30% or 50% or 70% (or whatever) of the number of parts per year the quote is based upon.

At the very least there should be a condition in the quote that addresses that type of issue. I've seen a lot of companies "promised" business but post-quote "things changed" and the customer ordered many fewer parts than the quote was based upon. With the lesser number (let's say they want a quote for say 100,000 per year but only order 45,000 that year) I have seen companies lose money by not addressing this type of situation.

 

[PaulJSmith]

Re: Robust and Explicit Quotation Process

Most of our suppliers give us quotations with multiple levels based on quantities; different prices for, say, 25 pcs vs 50 pcs vs 100 pcs of fabricated metal parts.

Our business operates around sales of our product designs, and not custom stuff for customers (well, not much, anyway). So, our RFQ process is much different than yours.
Sales Team gets info from prospective (or existing) Customer
Sales Team gets production lead times from Production Manager
Sales Team uses preset prices from Price List (minus any discounts)
Sales Team relates info to Customer
Sales Team writes Sales Order

Easy-peasy lemon-squeezy.

 

[Marc]

Re: Robust and Explicit Quotation Process

I only opined upon Wes' post with regard to "high volume" manufacturing. Admittedly, the definition of "high volume" comes into play here. I don't consider 100, or even 1000, a "high volume" contract.

Just putting in my about the quote process which is a contract for all intents and purposes, especially these days.

Your quote process for the volumes you quote for is obviously robust and you address my "concern". I commented because I've seen some serious problems with that aspect of quotes based upon - Well, as I said in my post above.

 

[Wes Bucey]

Re: Robust and Explicit Quotation Process

Assuming volume business:

The only thing I see that is missing is terms and conditions if a customer asks for a quote on x number of parts where let's say x = 100,000 per year but separate orders are placed for lesser quantities over a year. What if the customer ends up only ordering 30% or 50% or 70% (or whatever) of the number of parts per year the quote is based upon.

At the very least there should be a condition in the quote that addresses that type of issue. I've seen a lot of companies "promised" business but post-quote "things changed" and the customer ordered many fewer parts than the quote was based upon. With the lesser number (let's say they want a quote for say 100,000 per year but only order 45,000 that year) I have seen companies lose money by not addressing this type of situation.

I only opined upon Wes' post with regard to "high volume" manufacturing. Admittedly, the definition of "high volume" comes into play here. I don't consider 100, or even 1000, a "high volume" contract.

Just putting in my about the quote process which is a contract for all intents and purposes, especially these days.

Your quote process for the volumes you quote for is obviously robust and you address my "concern". I commented because I've seen some serious problems with that aspect of quotes based upon - Well, as I said in my post above.

Great and good questions. In the longer thread from which I took the quote, it was made clear that we were a "contract machining" company making products to someone's custom design, not selling off-the-shelf. Therefore, EVERY product we made had a target quantity per week/month/year. Delivery quantities were negotiated, but suffice to say, financial considerations made it imperative we were NOT a "stocking warehouse" for a customer unless we were paid in advance for product AND storage.

The reality of life for us and our customers was that we strove to achieve JIT (just-in-time) production and delivery so neither of us was out of pocket for unsold product. The other reality was that designs in the kinds of products our customers made could change in a heartbeat, making designs of the components also change, creating obsolete parts which could only be used for repairs of previously sold and/or installed assemblies. Nobody wanted to be stuck with excess inventory in cases like that.

This kind of dynamic regarding quantities made it imperative we (the supplier) were kept in the loop with the customer on how his product was selling, what design changes were being tested, etc. This is where following Deming's System of Profound Knowledge (SoPK) gave us a marketing edge over competing contract machinists content to send out quotes to anyone and everyone who asked, never calculating the drain on profit the cost of quoting was making.

 

[PaulJSmith]

Re: Robust and Explicit Quotation Process

Agreed, Marc. Volume definitely affects the process.

To the OP's point, though, it seems to me that there are "too many cooks in the kitchen" in their process. One person is sending the info to others, who then send that to yet another, to get information that should be available if not to the first person, then at least to the second. Too many layers in the quotation process gives too many opportunities for delay. People get busy, and that may not be at the top of their priority list.

Not knowing the nature of the OP's business, I'd still suggest that most of that info doesn't change on a regular basis (material costs, labor costs, etc.). When I did all of the pricing at an organ company (again, very small volume), I had a large ring binder that contained everything we did and its associated cost ... parts and labor. The only info I ever needed from anyone was production time to figure the labor.

Perhaps the OP can find a way to consolidate common information in a place that's easily accessible to the person doing the quotations, to help cut down time spent waiting for other people.

 

[QA_Newbie2000]

First off thanks to everybody that replied, I value your input, although I think we got a bit off topic (or at least my intended topic)
Wes brings up a very good point about customer engagement (really understanding what the customer needs), and building a solid partnership based relationship. Although we do pretty good job of this sometimes with existing customers, I feel all too often we quote a job/task without really understanding what our customer needs/wants. This is certainly a problem, but not the one I intended to tackle with this post
To answer some of the questions posed:
What type of company is this? ?We are an aerospace company that deals with both Commercial and Military Customers. We are both a Production and MRO facility.I would classify our Production as Low Volume but High Complexity (If we build ~250 units per year we consider it high volume) Our MRO business is predominately for products that we build, although we do perform some 3rd party repairs
Is the company certified to a known standard? ? AS9100. We are also certified by Transport Canada as an Approved Maintenance and Manufacturing Organization (CAR561/571/573)
Are the players competent or properly trained? ? Yes
Have you done a gap analysis and an internal audit? ? No to the gap analysis/ yes to the audit. We have an RFQ process that meets the all of the standard requirements and the required personnel dutifully follow the process, but the process is inefficient

We recognize that although our process meets all of the requirements, it is too cumbersome /laborious /inefficient /?insert adjective here?. We want to streamline the process. To that end I want find out from the stakeholders what works and what doesn?t, but I was trying to structure it in such a way that the points addressed would be consistent and it wouldn?t turn into a bitch session

 

[Kronos147]

We have an RFQ process that meets the all of the standard requirements and the required personnel dutifully follow the process, but the process is inefficient

The standard talks about measuring process effectiveness.

In section 0.2 the talk about the P-D-C-A cycle:
Plan:
Establish the objectives and processes necessary to deliver results in accordance with customer requirements and the organization's policies
Do:
Implement the processes
Check:
Monitor and measure processes and product against policies, objectives and requirements for the product and report the results
Act:
Take actions to continually improve process performance (continual improvement of the quality management system)


There are tools as described in AS9100 reference documentation (AS9101) describing the process flow and flow charting and turtle diagram the process. The stakeholders must be engaged and contributory to the success of increasing the efficiency (and effectiveness) of the process.

With a strong, well developed turtle, a checklist can be developed to help account for all details of the quote review process. During implementation, additional documentation could include initiation, acceptance and completion time sign offs for their part of the process, further highlighting where there are hold ups and potential training or process development issues.

Remember, there are so many good references for good old fashion problem solving and time measurement and process efficiency tools out there at our disposal, and many of them are less effort to implement than one may imagine.