Case Study

How Alstom Reduced RFQs to Zero Using aPriori

Introduction

The Zero RFQ initiative has dramatically accelerated Alstom’s sourcing process by automating supplier selection. By collaborating with suppliers to configure aPriori’s digital factories to reflect each supplier’s cost structure, Alstom benefits from near-instant quotes without sacrificing accuracy.

What is Zero RFQ?

Zero RFQ is an initiative Alstom started where instead of sending RFQs to suppliers for quotes, they nurture the relationship with the supplier, and use aPriori’s highly-accurate cost modeling systems, to instead send a PO directly. The accuracy of aPriori’s product costing and the strong relationship with the supplier enables them to skip the RFQ step altogether and send a PO.

Company Details

Industry

Transportation Manufacturing

Number of Employees

75,000

Revenue

€17.6 billion

Website

https://www.alstom.com/

aPriori Product

aP Pro

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The Problem

Generate Time-Sensitive Manufacturing Cost Models for a High Volume of Diverse Components

The Solution

Alstom Uses aPriori Digital Manufacturing Simulation to Model Manufacturing Costs for 20,000+ Parts Per Year

Understanding Alstom’s Product Costing Problem

Within the Rolling Stock Division, the largest in the company, Alstom’s Design to Cost Department is charged with both evaluating new projects and developing cost models to facilitate more effective supplier negotiation.

“Alstom's Design to Cost Department costs electrical parts, climate controls, interiors, batteries, motors, brakes – everything in the Alstom train is cost by this team.”

The group works with different branches of the company spread across the entire globe. They needed a tool that could generate manufacturing cost models for a diverse variety of train car components.

“With over 280 customers, we sell trains all over the world. Our Design to Cost Department is responsible for innovation and a global vision in the market for negotiation.”

The problem? A single rail car requires thousands of distinct parts, and Alstom’s global operations offer many different car designs. The right tool would need to offer detailed manufacturing cost models that could cover the shell of the rail car and everything inside.

“aPriori helps the Alstom team to negotiate, to innovate, and to support different initiatives.”

The Problem with Traditional RFQ Processes

Every new RFQ introduced a risk for delay, as suppliers could take up to three weeks to return a quote. Rushed RFQ processes limited Alstom’s flexibility in garnering multiple quotes for maximized savings. In the past, with RFQs going out at the last minute, Alstom could not afford to wait for every bid to come back. This time crunch often forced them to simply accept the first bid returned. The Design to Cost team faced the challenge on how to support an urgent timeline while ensuring the most cost-effective option possible.

“Sometimes it’s not possible to wait for all the offers to come in. The team needs to order parts. There’s no time for negotiation or to check the results given by the suppliers.”

The Solution: aPriori

Alstom’s team selected aPriori as the technology capable of modeling manufacturing costs for the huge variety of components that go into our rolling stock products.

The digital manufacturing simulation technology offered by aPriori is an essential capability for a team charged with generating a high volume of manufacturing cost models across a number of sub-systems. aPriori has proven to be the technology solution Alstom needed.

In this 2-minute video, Sebastien Girardot, one of Alstom’s key aPriori users, shares why aPriori was chosen for Alstom’s Zero RFQ process.

What is Digital Manufacturing Simulation Software?

Digital manufacturing simulation software enables design to cost teams to simulate the manufacturing process and develop a product cost quote in mere minutes (sometimes even seconds). Savvy digital manufacturing software will also allow you to customize your CAD model for real-time product costing.

Alstom uses aPriori for both simple parts and extremely complex assemblies like complete rail car body shells.

How to Save Time and Resources with aPriori

In many cases, Alstom needs to source simple components at the last minute, leading to a scramble to find savings and source the part without delaying product development.

Alstom frequently sends 100-200 small parts for costing. And the bigger problem is that these parts are often identified and designed very late in the process.

With aPriori, Alstom is able to save time and efforts from both internal resources and supplier resources.

Alstom has been using aPriori since 2013 with global users in France, India, the US, and South Africa. Since their initial implementation of aPriori, the Design to Cost team has used it to generate manufacturing cost models for hundreds of thousands of parts. In fact, during a recent 12-month period, aPriori handled around 26,000 different parts.

Tips for Achieving Zero RFQs with aPriori

The Zero RFQ initiative has dramatically accelerated Alstom’s sourcing process by automating supplier selection. It significantly reduces the purchase process lead-time while also directly enabling better cost efficiency. With aPriori, the Alstom team can now compare simulated quotes from a variety of suppliers without imposing a delay.

How can you achieve Zero RFQ with your suppliers? Alstom has some advice.

Determine which suppliers you want to work with to share your goals for Zero RFQ and follow these steps:

Zero RFQ Implementation Process

Supplier Selection

Carefully select your suppliers. Alstom chose suppliers they already had strong relationships with.

Digital Factory Demo

Present the mutual benefits of using technology like aPriori to automate product costing. Choosing a specific product to demo can be a powerful example. Demonstrate to the supplier that configurations such as raw material prices, machine calibrations, process times, hourly rates, and other costs are customizable. Of course, you also need to come to an agreement on overheads, margins, packaging, transports, and lead time so that your quote is as accurate as possible.

Financial Agreement

You need to have a discussion with the supplier about the goals you are trying to achieve and how you are trying to find a mutually beneficial outcome for the relationship. If you simply ask for lower prices, this is a short term solution and is likely to cause friction in the relationship. But by sharing the details that come from aPriori, a more fact-based conversation can happen.

Test

Use real products and compare the costs you get from aPriori with what the supplier is quoting you. Try to reconcile the two processes so it’s as tight as possible.

Process Launch

Once your Zero RFQ process is in place, simply send a new PO to the supplier, who will start manufacturing the part within days.

End-to-end process

Overall, the end-to-end process to establish Zero RFQ with a new supplier takes the Alstom Design to Cost team about four weeks.

Want to learn more about this process? Hear directly from Alstom along with one of their suppliers as they describe how they achieved Zero RFQ togheter with aPriori:

“Alstom’s team estimates that the Zero RFQ process is driving a 40% savings on recurring costs.”

By collaborating with suppliers to configure aPriori’s digital factories to reflect each supplier’s cost structure, Alstom benefits from near instant quotes without sacrificing accuracy. As a bonus, Alstom’s suppliers collaborating in the Zero RFQ process report significant improvements for them through efficiency savings in resources on responding to RFQs, stronger relationships, and enhanced win forecasting.

What’s next?

Alstom is rolling out aPriori to additional users across its global operations. In addition to a high volume of manufacturing modeling work, this expanding team continues integrate new suppliers with Zero RFQ capabilities.