Sourcing Trust and Transparency Through Shared Manufacturing Insights

How to Improve Manufacturing Collaboration With aP Workspace

Barton Phinney: Hello and welcome to our presentation on Sourcing Trust and Transparency Through Shared Manufacturing Insights. We all know the world of procurement today is more volatile than ever, and without adapting to it in a meaningful way, we’re sure to get left behind by those who do adapt. Increasing the trust and transparency with your supply base can help mitigate the risk this volatility can bring. Please join us in exploring just that and learn why trust and transparency with your supply base can be a mutual benefit. I’m Barton Phinney, and I’m a Senior Product Manager at aPriori. I’m responsible for our sourcing and procurement solutions. Today we’ll talk about a case study with Figma, followed by a discussion around the pre-quote process in today’s current RFQ processes. We’ll then talk about aP Workspace and how it’s laying the foundation for aP Source, which is gonna be the future of quoteless sourcing. Let’s talk for a minute about Figma. If you’re not familiar with Figma, Figma is a UX design product used by UX designers to design new software products. They were in the news a few weeks ago because they were acquired by Adobe for about $20 billion, or roughly 10% of Adobe’s market cap.

And there were a lot of commentators on CNBC discussing why Adobe decided to acquire Figma and why it was at such a high evaluation. Now, Figma is a direct competitor to Adobe. Adobe has a product called Adobe XD, and not only was Figma competing with them, but they were out-competing them, and that’s one of the reasons that Adobe decided to acquire them. However, one of the analysts on CNBC summed up pretty well why Figma was evaluated at such a high evaluation. His name is Lo Toney, he’s from Plexo Capital, and he said that the product Figma is so simple to use, it brings in people that are not designers as well, so from initial ideation of a product to the design, to everyone who needs to sell it, they can all get involved and collaborate over the cloud. You see, what Figma recognized is that there’s many, many stakeholders involved in the new product development process that need to contribute to that process, but they don’t have the tools and the information they need to in order to contribute to that process successfully.

Consider People and Technology to Enhance Manufacturing Collaboration

If we look at the new product development side on the manufacturing side, there are a lot of similar parallels, you have lots of stakeholders that are involved in the new product development process, mostly if you look at the people who are developing the product, these are people like cost engineers, design engineers, procurement, manufacturing engineers, the people who are directly touching the product when it’s being developed. But it isn’t just people that are involved in this process, we also have a lot of systems that are involved in this process as well – ERP, PLM, CAD, MRP, and many others. And then you have the people who are involved in the product and its success but are not involved in directly developing it. These are people like marketing, finance, sales, services, and others. And then you have the people who are responsible for making aspects of your products that are outside of your organization. Your suppliers, but not just your suppliers, but their suppliers as well throughout the supply chain.

Improve Supply Chain Collaboration With Accelerated RFQ Business Processes

So, let’s talk for a minute about the interactions between the supplier and the procurement groups, and I’m gonna refer to this process as the pre-quote process, and I’ll explain why in a minute. But to start, many customers’ current RFQ process looks something like this, and people do things differently, but the gist of it is that you start with a bid package, you send it out to your suppliers, and you get your quotes back from your suppliers, you get your should-cost estimates back from your cost engineer, as you do a bunch of comparisons, you select some of those suppliers to negotiate with, and then you iterate a bunch of times with those suppliers, between cost engineers, between design engineers possibly, until you finally get to that final quote from a specific supplier, and then you decide to purchase it.

There are a few reasons that customers use the RFQ process today, one is to achieve the best possible price. If they’re working and going back and forth with different suppliers and getting a lot of different input from the market, they’re more likely to achieve the lowest price possible for that component. They’re also trying to validate the producibility of a component. By sending it out to suppliers and getting a quote back, they’re getting some recognition that the supplier can make this part. And then they’re also trying to reduce risk in the supply chain by knowing ahead of time what the quote is gonna be from a specific supplier or group of suppliers, where they might have to have interactions with sub-suppliers, what regions they might have to source it from and so on. However, there are a lot of problems with this process today. The first of which is that it’s very long and tedious, you’re having to send quotations out to multiple suppliers, wait for their feedback, go through multiple iterations with negotiations, etcetera, and suppliers are not transparent during this process.

The suppliers know that whatever information they’re going to give you is gonna be used against them, so they try to provide the least amount of information possible. It requires multiple iterations with multiple groups, and that leads to information becoming disconnected and siloed. People have different ways of storing information, different ways of capturing decisions, and whatnot, and information quickly becomes outdated, that also leads into the audit trail and traceability. It’s hard to figure out when you have so many places of data being stored, what decisions were made, and why they were made, and so it’s hard to capture that audit trail, if it’s captured at all. And then, even at the end, significant risk remains, you don’t really know if your supplier is gonna be able to make that part. They might have just given you a guesstimate, and they might be figuring it out as they go.

Reduce Time to Market to Gain a Competitive Advantage

So even at the end of this process, while you’ve tried to mitigate the risk, there’s still a lot of risk that remains. aPriori recently did a state-of-the-market survey across around 330 different customers across different industries and sizes and whatnot. 96% of those customers say they are working towards accelerating this process within the one to two-year timeframe, 69% say it takes about three to 10 weeks or so to get a quote fully returned, and then 79% say it would be ideal to complete this process in 24 hours or less or up to a maximum of two weeks. Among the results of the survey, most companies were targeting increasing customer satisfaction to remain competitive in their marketplace, and the number one way that companies were looking to achieve this was to reduce their time to market. I actually purchased a refrigerator about a year ago, and it took about six months to have it delivered to me, and if we had the option to buy a similar refrigerator and get it here in two weeks, we probably would have gone ahead and done that. And so that’s one of the reasons why reducing time to market is so critical to remaining competitive in the marketplace is because it does increase your customer satisfaction.

The number one way that companies were looking to reduce their time to market was to decrease the risk in the supply chain. That has obviously been a big hindrance to procurement organizations around the globe, and so by mitigating the risk in the supply chain, the ability to get to time to market and to do that as quickly as possible increases dramatically. One of the ways that our customers are helping to decrease the risk in their supply chains is to greatly increase this trust and transparency with their suppliers, and the way that they’re going about doing this is they’re trying to create a quoteless sourcing process where they create their own bid packages, they quote their own bid packages, and then they send those quotes to the suppliers for re-evaluation. Now, sometimes the supplier has to make some edits or some tweaks to those, and that’s fine, but the iterations are usually much, much shorter than what is happening in the current RFQ process. In fact, customers that do implement a process with a high degree of supplier trust and transparency are actually seeing a 10X reduction in the time it takes to procure new components. So, if it used to take 10 weeks to procure something, it’s taking one week.

Importance of Trust and Transparency in Supplier Partnerships

If it used to take 10 days, it’s now taking one day, and that’s the scale of the reduction in time that customers in a general marketplace are looking for to improve their procurement processes. Now, what do we mean about trust and transparency? What does that actually mean? There’s actually a pretty big scale in terms of the levels of trust and transparency that customers are able to achieve with their suppliers. It kinda starts at the basics, price, material cost, manufacturing cost, tooling cost, just the price and the general information that’s needed to justify it. Right, but some customers have taken the next step, and they’re looking at how their supplier is actually making it and at least trying to agree on those assumptions, assumptions around routing, assumptions around cycle time, utilization, nesting, and machines.

And then there’s the next level up, which is looking at the financials, so labor and overhead rates, material rates, tooling breakdowns, things that start to help justify and explain the pricing from the supplier side so that they can work towards a fair price using the manufacturing assumptions and the rates that the supplier is using. And then you have full disclosure, SG&A, margin, scrap buybacks, things that would be used to beat the supplier down in a negotiation if they provided it, and so this requires a very specific and very high level of trust with your suppliers, but the benefit of being able to get to this end result of the spectrum is that customers can do the quote with sourcing, they can put these items into aPriori today and generate a quote that is in line with what the supplier would be expected to provide.

And so that’s the benefit of getting to that level of transparency. Now, some of you may be thinking, my organization would never go for this, or I could never get my suppliers on board with this, here’s how some of our customers and suppliers are positioning with each other to try and improve these processes since there is such a high benefit to the reduction in time for the procurement process. The OEM gets to pay a highly confident price, they’re probably not gonna pay the lowest possible price that they would get from outsourcing to several different suppliers for quotes and trying to use those suppliers against each other and etcetera, but they can be confident that their supplier is not going to be overcharging them for prices and that they are gonna be getting a fair price for their components. The next is that they significantly reduce the risk. In the previous process, we saw people trying to reduce that risk by just getting quotes from the suppliers, in this process, the suppliers will actually give manufacturing feasibility feedback and also confirm whether or not they have capacity on those machines or whether they have the right routings for those parts.

And so, you actually are reducing significantly the risk in the supply chain because your supplier is involved very early on in the process. And then it also dramatically shortens that RFQ process that we were just saying. But what about the supplier? How do you get the supplier on board? The supplier is gonna get significantly more business by providing these details to you. They’re gonna be a go-to supplier for you, and they’re gonna be able to turn around quotes a lot faster than some of their competitors. And so, for them, they’re gonna end up with a lot more of your business. They’re also significantly reducing the risk on their side. When they’re providing the quotation for you, they are looking at the manufacturing feasibility, the designs of the parts, and making sure that they can actually make this part comfortably. And because of that, they can also have a high confidence in profitability, they know that they’ve mitigated the manufacturing complexity, the manufacturing unknowns in this process, and so they’re able to have a much higher confidence in the profitability of the business that they take from you. Let’s talk a little bit about what we’re doing on the product side to help enable this transaction between our customers and their suppliers.

Real-Time Collaborative Manufacturing Insights for Better Teamwork

Well, let’s start with aP Workspace, which is the foundation of the technology that we’re using to bring those two people together. If we take a look back at that slide for the stakeholders of the NPI process, we can see that there are many stakeholders that need to be involved in order to make this process successful. However, where we’re starting with aP Workspace is really focusing on that inner circle of people who are directly working on the product, and that would be the cost engineer, the design engineer, the manufacturing engineer, and procurement. To that end, aP Workspace is just the basics, you can share scenarios to collaborate on with members of your organization that have an aPriori license, you can comment on data and 3D models, you can configure your view so that you’re seeing the right level of information for your role in the organization, and you can do some simple task management, differentiate between read and unread conversations, looking at what needs your attention through assignments and mentions versus what’s just informational across all of your different collaborations.

Some of you may be wondering why not use other tools to collaborate on the aPriori data? Let’s look at Teams, for example, the lack of context in Teams provides a real issue. You’d have to describe everything that you’re collaborating on in such a great amount of detail so that people understand what you’re actually talking about. It also leads to data becoming siloed and staticked very quickly. Things update so quickly with the decisions that people are making, that data that those conversations are based around quickly becomes outdated, and you’re also having to store that data in multiple different locations, making it very hard to keep it up-to-date and synced. At the end of the day, the biggest mark against Teams is the poor traceability, if you have something going on in email, you at least have a chance to find something that you made a decision on in the past, but if you’re looking for anything that was involved in about a month ago or so on Teams, you’re not gonna be able to find it.

And so, it’s very difficult to see what decisions were made and how they were made using Teams to collaborate on this data. Now, you can use PLM systems to collaborate around three-dimensional data, but even in that case, you’re losing the data richness that’s associated with aPriori, the manufacturing information, the cost information, the sustainability information. And so, if you wanna just collaborate on the 3D model, great, but if there’s any other information in aPriori that you wanna collaborate around, it’s the same problem as Teams, you’re losing the ability to drive context and richness in the conversations of your collaborations. So aP Workspace is based on helping connect the current users of aPriori, but how do we get to the next level of stakeholders, specifically the systems and the people who are outside of the direct development of the product?

And that’s where aP Source comes in, is that while we’ve been developing aP Workspace, we’ve been laying the foundation to provide things like better integrations and orchestrations between customer systems, and also being able to collaborate with those users who are not directly involved in the product development process, whether that be internally or externally. So, let’s take a look at aP Source and how we intend to have that drive the future of quoteless sourcing. aP Source has a few different goals, one of which is to provide a simplified view of scenario data to sourcing users so that they’re only looking at the information that they really care about. The other piece is being able to easily validate supplier feedback by exposing the assumptions that are used to cost within aPriori and bringing that information to the forefront so that they can see that information that they wanna have discussions with their suppliers on. And then next, of course, is empowering buyers to facilitate the quoteless sourcing, and we’re gonna go through a workflow in a second that illustrates how that would work.

And then finally being able to manage and contain all of those conversations both internally and externally within a single system, so that you can easily see what decisions were made along the journey of this scenario, and why those decisions were made. Let’s take a look at a quick example on how aP Source would be used in the quoteless sourcing process. In aP Source, you’ll have the ability to create a bid package of components and then share that with a specific supplier, you can do one or more suppliers and different users within the suppliers. You can also set their permission levels, so if you want one supplier to be able to see certain information and another supplier to see different information, that’s fine too.

Automation, Team Members, and Traceability Drive Collaboration and Decision Making

It provides the flexibility so that you’re only sharing the data that you want to with specific suppliers. Next, you get into the iteration a little bit, and again, it depends on the amount of trust and transparency you have with your suppliers, but the important piece is that suppliers can give you feedback directly on the scenarios of things that they would suggest or changes that need to be made, and you can also have your teammates look at that information as well, so they get context about some of the things that the supplier is saying. And then we get into making updates, so you can make overrides on variables, you can make overrides on the machines that a supplier is using, and you can also have a more finer detailed routing adjustment that will be included with aP Source. Once you get past the iteration point, it’s time for everybody to mark approvals, and then once things are approved, we can send a PO directly from the ERP system to a supplier. aP Source is tentatively scheduled to come out next year, however, you don’t have to wait for aP Source to come out to start with quoteless sourcing today, many of our customers are looking to implement a Zero RFQ Process, and Ishan and Tyler are gonna talk about how to actually go about doing that today with the tools that we already have available.

If there are three things that you take away from this session, it’s to remember that the NPI process requires alignment of internal and external stakeholders and systems. Faster time to market requires easy collaboration and transparency with all stakeholders involved in the process. And aPriori can get you there today by providing the tools and data that stakeholders need to contribute to this process. That’s all we have for our presentation today. If you’re interested in additional presentations in the sourcing track, Ishan is giving a presentation on A Guide to Building Supplier Relationships Using a Digital Factory, and Tyler is giving a great presentation on The Road to Zero RFQ and what are the steps that you need to take in order to implement it. Thanks very much for your time today.