How to Overcome the 3 Major Pitfalls in Responding to Supplier RFQs

“We need to respond to the RFQ how soon!?”

That may be the panicked question you first ask when receiving a request for a quote (RFQ), followed by thoughts of working through a large bill of materials with complex parts you’ve never seen before and a bulk of components you’ve quoted numerous times.

“I hope I don’t forget to add in the purchased components or inspection cost this time,” you think to yourself while your co-worker asks, “I know we’ve quoted this part before. Do you remember which quote package we’ve seen it in?”

This is just another day in the life of a cost engineer.

So how can you move from “how soon” to “I’ll have a complete RFQ first thing tomorrow”?  First, we must understand the major pitfalls when responding to an RFQ.  Here are three major pitfalls companies make without automated quoting software.

1. TAKING TOO LONG TO RESPOND TO SUPPLIER RFQs

One of the biggest hurdles when responding to an RFQ is the turn-around time. Time to quote is critical in winning new business and establishing strong customer relationships. You can spend weeks preparing an RFQ response but if your competition responds first or you don’t meet your customer’s urgency, you lose not only that bid but time you could have spent winning other business. If your organization is chronically behind on responding to RFQs, then they may start to see a decline in profitability.

2. DISCREPANCIES IN QUOTES FOR THE SAME COMPONENT

Inconsistency in costing methodology can have a number of downfalls for an organization. For example: if two people cost the same component with different manufacturing assumptions like annual volume or machine tooling processes, they can quote the same part at vastly different prices. If your customers notice the inconsistency, then you lose credibility and they may start to scrutinize the quotes provided.

Inconsistency can also lead to creating unprofitable quotes. Because there is no standardization, it becomes difficult to improve upon or evolve quoting methodologies to become more accurate or representative of internal manufacturing costs.

Additionally, if there is no standard way of quoting a part that is shared within an organization, institutional knowledge may get lost over time. As key members of the cost estimating team leave, the expertise they have leaves with them. As junior members are brought on board, there are gaps in knowledge that must be built, and a lack of legacy knowledge can make their learning process challenging and incomplete.

3. HUMAN ERROR

Human error can have a large impact on overall profitability. Though easily made and solved for, these mistakes are often uncovered after a quote has been submitted to the supplier. Automated costing software or a mature Should Cost solution can alleviate the manual entry required for quoting and reduce risk for human error.

Get aPriori’s guide to should costs: build more cost-effective products, conduct more effective negotiations, and build collaborative long-term relationships.

HOW TO GET IT RIGHT THE FIRST TIME IN QUOTING

When it comes to quoting, we find that best-in-class suppliers embrace automation in their RFQ process. This allows them to generate quotes based on specific product configuration requirements, leverage product CAD data, have real-time visibility into cost, and provide that real-time visibility to their customers (OEMs).

Having the right automated solution can not only help resolve the major pitfalls when responding to RFQs but allow you to respond to more RFQs and potentially increase business. There are two main shifts we start to see in organizations, as they embrace automation in their quoting process: their business shifts from tactical to strategic and they become the go-to supplier for their component lines. 

So if you find yourself panicking each time a request for quote crosses your desk, it may be time to rethink your quoting process with help from aPriori.

If you’d like to speak to someone at aPriori, email us at [email protected].