8 Ways to Improve Your RFQ Process
Chintan Sutaria and David Paschall continue their monthly "Scratching the Surface Mount" webinar series to discuss 8 ways to improve the RFQ process. Pulling from CalcuQuote's experience working with 50+ EMS companies across North America, they identify traits that signal successful quote teams and process improvement initiatives.
DAVID: Hi everybody this is David Pascal I'm VP of Sales at CalcuQuote and welcome to another edition of scratching the surface mount in our webinar series. Today's topic is eight ways to improve your RFQ process. We're going to do things a little bit differently this time. We've got some poll questions that we're going to be, issuing throughout the webinar, so kind of keep your webinar window open that way you'll get the poll questions as they come in and our speaker today and again the topic is eight ways to improve your RFQ process. Our speaker today is Chintan Sutaria. He is president and founder of CalcuQuote. Chintan, why don't you tell our audience today a little bit about your background and how you came to start this company?
CHINTAN: Sure! Thank you, David, very much. A little background on myself. Got to grow up in the EMS industry ever since I was young. I got to spend a lot of time, whether it was soldering boards or just learning the ins and outs of the business, so definitely have a little bit of experience doing quotes. That's kind of how CalcuQuote got started as having done quotes myself. I thought there must be a better way and CalcuQuote was born. Through CalcuQuote, we've gotten to work with a lot of EMS companies across North America and this webinar series is really an opportunity for us to share some of the things we learned as we go across the industry and talk to different people about how, how they do quotes. And with that what I'd like to do is get started and the first thing we're going to do to kick things off is open with a quick survey question. This will give us a good chance to test the survey here, as well.
- 1) Get Everyone Involved
I'm going to launch the poll here and let me know I'll see it here in a second, if we're able to have people vote. Okay it looks like I am seeing some responses coming in. That's good. Well, so the reason for this survey question of who is responsible for a well-run RFQ process is because what we typically see is that most organizations will have a single person or a single department or a quote manager somebody say that this is the person responsible right? And, you switch over here. What I would say is, what we find to be more common in the more successful companies that we worked with that are improving the RFQ process is that if you're making any kind of improvement to the RFQ process it's very important to get everybody involved and not treat it in isolation. If you have somebody that cannot reach across departments then we tend to see a lot of risks and challenges in terms of how they're going to get all the stakeholders on board and how effective the change is going to be. Let me just end the poll here as well, so you can see the results and you should be able to see the results of the poll. It looks like a lot of people said that sales is responsible while that's true; what I would argue is that it's the share of responsibility of a lot of different people coming together, right? as shown in the diagram over here on the right-hand side, that there is across the end... Across the organization there's a lot of different people involved in the RFQ process.
What I'd like to do is talk through some of these roles here and why they are a key stakeholder as well as very central to designing and improving the RFQ process. I'll start at the top with the customer. The customer is basically the source of the requirements, right? they tell you how they're going to submit Raft’s to you and sometimes they'll even tell you how they need quotes delivered back to them because they prefer it or that's how they use to compare their suppliers or sometimes there's even regulatory reasons for why they need quotes in particular format. And, sales which is right next to customer in this diagram, is the voice of the customer in a lot of cases. Based on the survey results here, sales definitely does play a very critical role because they represent the voice of the customer. Engineering and supply chain are the next two boxes there and the reason they're very involved is as you can probably guess they're the ones working on the quote in a lot of cases. Some organizations have separate quoting teams entirely from those departments and others will just say; well, it's a shared responsibility, they wear two hats.
They'll do purchasing and quoting or something like that. Either way they're the ones working on the quote, so they absolutely have a vested interest in any changes that are made to the RFQ process and changes can be in the form of promises that you make in terms of when the quotes going to go back to the customer or even in terms of how you accept Raft’s from customers.
The next two operations and quality assurance. Those we don't tend to see everybody including those in the RFQ process, but I include them here because we find that organizations that really haven't mature RFQ process or including these departments. And, the reason for that is because there are outputs of the RFQ process that are very relevant to operations and QA when you win the order. If you're quoting to win, then when you win the order, it's very helpful to have some kind of documentation around what the expectation is of what will be required to build it, as well as where you can source the materials from things like that. Absolutely very important to have both of those things and the second part of that is quoting can be a great way to identify risks with the assembly. If you discover that there is risk with the assembly, whether it's a gap in terms of capabilities or it's a risk in terms of shop load, absolutely both operations and QA would want to know that.
IT is over there on the top left and that is because IT organizations can be critical in terms of how the RFQ process integrates into other systems. For example, if you have a finance system where you want to keep track of what your margins are or you have an MRP system, where you want to balance your quoting activity against what your material requirements are, IT can help integrate those systems, so that they're all working in sync with each other and other added benefit of having IT involved in designing the RFQ process, is we see it all the time where somebody who has a good understanding of the technology available to the organization can actually make suggestions on how to improve the efficiency of the RFQ process. For example, there might be certain tools or softwares available or there might just be a way to have some custom programs written, so that you can improve the efficiency with which you complete RFQ's.
The comic over here on the left-hand side really sums it up. Well, where there's a lot of different stakeholders, the diagram on the right encompasses some of them, but there are others that I didn't include just for the sake of space and time.
Finance Organizations typically care about maintaining consistent margins, there's a lot of different stakeholders that can be involved in the RFQ process.
- 2) Reduce Communication Friction
With that I'm going to move on to the second way to improve the RFQ process which is reducing communication friction; and what I mean by that is, it's very important in the RFQ process especially if you have multiple people involved, if you're a small company and if there's only one person who's doing sales quoting and operations management, then communication might not be as big an issue, but as you start to get into teams and organizations, and departments, communication starts to play a larger and larger role. One of the ways that you can significantly improve the RFQ process and how quickly you can turn quotes, is to improve communication between stakeholders.
Now, the way that I'm talking about here is in terms of tools, but there's also as we'll get into later, process documentation and templates that you can create, but specifically on tools I want to start by addressing email. Email, is one of the things that a lot of people talk about as their method of communicating on an RFQ. For example, sales person gets a quote request and they email the quote package to somebody and they work on it and then they email it over to somebody else; and they work on it and so on until the final quote is ready. The thing about email is as you can see by that comic it piles up, right? I could probably put out a survey here about how many emails each person gets a day, but the point here is that everybody's getting a lot of emails these days and the other thing about email is it doesn't really let you prioritize or move things around as quickly as possible, so you're basically waiting to get to it in the queue which brings me to my third point on email which is that there's already a set expectation around email which is that it might take a day or two to get a response if you email somebody. That's why I really encourage people to get out of the mold of using emails for internal quoting needs and instead would suggest a tool that works for your organization, right? something that works for your team can be in the form of a workflow system. It can be a task management system, so there's tools out there like Asana or Todoist or something, where teams can collaborate on a list of tasks. There's also Scrum Boards, so you could literally just have a white board with some sticky notes on it and keep track of the progress of quotes that way, so that everybody is on the same page of what's being worked on and then a chat room; or something like that which basically creates a culture of a more instant response because what you don't want is you have a question about a quote and now you're sitting on it for two days waiting for an email response rather than getting a quick 30 second answer from somebody.
Okay, so what I'd emphasize here is it's very important to find something that works for you and your team. Don't implement something understanding just the features of it, consult all the stakeholders again.
- 3) Automate Transactional Tasks
We are going to move on to the next survey question here. Let's see I can do that. Okay, so you should see the next survey question coming out here which is on what tools do you use to reduce communication friction for RFQ's? going back to the slide we were just on, to use a workflow software, to use task management. Do you have chat solution that lets you get a faster response? Are you using email? And, there's other options out there, as well. If you have other options, we'd be happy to hear about those. You can use the queuing a box to share some of those and we'll go over it at the end.
While that's going on I'm going to move on to the third way to improve the RFQ process, which is to automate transactional tasks. One of the inspirations behind CalcuQuote as I mentioned earlier is that coding can be a very tedious process sometimes, right? Going line by line through a group of material to identify how much a component costs or where it's available. It just starts to feel very tedious and so what I would recommend is consider automating some of those repetitive tasks that aren't really adding a whole lot of value. Now, when people read automated transactional tasks they think big expensive software and developers involved in a six-month, twelve-month timeline. It really doesn't have to be that. It can be in the form of an Excel macro or shortcut keys on the keyboard, formulas in your excel file. I'll give you an example here, when I was doing quotes we used to have this customer that would give us bombs in a particular format and to reformat that bomb it would take 20 minutes or so to do that. Well, what I would do is I would record a macro of myself formatting the bomb and once I did that once, every time after that that I got a bomb from this customer, all I had to do was click a button and everything would happen on its own in 30 seconds to a minute, right? What that would mean is granted it took me double the times it took me 30 to 40 minutes to set up the macro, but once I did that I was saving almost 20 minutes every single time that I got that bomb. I bring up that example to show you how accessible it is and if you're not familiar with Excel macros, talk to your IT department or you can go online. There's plenty of tools out there to explain. There's plenty of resources out there to explain what macros are in Microsoft Office, and then there's also softwares out there, so CalcuQuote being one of them that help you automate some of those transactional tests, as well. Whether you're looking at part, want to have a labor template that's easier to navigate through. There are software solutions out there, as well.
- 4) Document the Process
On to number 4, which is documenting the process. A lot of times we will come across companies that that have an RFQ process, but it hasn't been documented and the outcome of that usually is if there's more than one person involved in doing quotes, then each person has their own methodology of how the quote gets done, and so when you talk to one person they say; 'Oh yeah! It takes about five days to get a quote back to a customer.' Talk to another person, they say; ' Oh yeah! It takes a couple of weeks to get a quote back to a customer. It's because the process isn't documented, so that there's really not a clear, consistent way of doing it. And this doesn't apply only to the RFQ process. In general, it's very important to document your processes because documenting processes means having consistent processes. It makes them repeatable, so that you can achieve the same result repeatedly.
The other benefit of documenting processes is that you can reduce training time. If you have somebody new joining the team or somebody who's forgetful and forgets how you're supposed to do things, then it will reduce the time because it becomes a reference point to say this is how we as a team or we as an organization handle RFQ's and then it also allows you to analyze your process, right? overtime you can see how it's evolved. You can see how... How it's improving overtime and that's helpful to make sure that you're trending in the right direction. While most people will have basic documentation of the processes, I would suggest involving these five areas that are listed on the slide and I'll go over them briefly here. I'll start with boundaries. Having boundaries defined in your process documentation means that you're defining what the scope of the processes. Most people define the RFQ process scope to be, when a customer requests a quote all the way to calculating the quote and sending the quote back to the customer. What we see organizations that tend to be more successful in terms of their when ratio doing is that they will also include in the RFQ process the activity that happens after a quote is sent to a customer and before an order is delivered to the company. Think of it this way is if one of the primary objectives of quoting is to win the quote, then you don't want to just stop it sending the quote back to the customer. You want to include the part of the process where you're following up with the customer to get the purchase order or to disposition the quote as lost and identifying the reason for why the quote was lost. Having a clear definition of what the boundaries of the process are really helps in framing what level of involvement each stakeholder is going to have.
Inputs and outputs that's basically saying what inputs are allowed, what formats are allowed in terms of requesting a quote, how our quotes requested and then processed; and then outputs, most people treat the output of the quote process to be a quote when in fact there's other things that can come out of it come out of it, as well. Some organizations might say that during the quote process we update our target pricing in the MRP system. Others will say, we use the RFQ process to establish a risk assessment baseline, so that when we win the order we are prepared for it. Depending on your process documentation you might define additional outputs that are value added to other departments.
Activities, this is basically just what happens to the quote, right? How are you preparing the quote? How are you following up with the customer? on roles as the stakeholders which we kind of talked about already and then a flowchart is it's a basic diagram to show the sequence of activities or the sequence of tasks or events; or whatever needs to occur for the end to end RFQ process.
- 5) Have Conventions
On to the next point number five have conventions. We talked about documenting the process, but process documentation has its limits, right? It's sometimes it's difficult to maintain overtime. Sometimes it gets filed away. One of the things that we see more, agile companies doing is they're okay with building conventions on top of formal documentation and what I mean by that is the formal documentation might encompass every possible scenario, but there might be some unwritten rules, so to say which the team uses to collaborate better, right? And, this happen organically. They happen naturally, but what happens out of that is that they become a great source of ways to improve the process, right? if you can establish some current kind of cadence, then you might consider updating your documentation because you've found a best practice that works for your organization. An example of this might be that your formal documentation might say that RFQ's can come in the form of an email, a form on the website or a phone call or something else, but really the cadence becomes that even if it comes through a bunch of different mediums we're going to convert it into a standard template that we can share. Now, the template might be part of the process but converting it might not have been originally. And, then you can incorporate that later when you get to a point of maturity in that convention. Oh! And, I forgot to end the poll, so let me go ahead and do that and share the results with you here. Looks like you should be able to see the poll results here. A lot of people are using email and workflow software here. That's good.
- 6) Set Goals
Next survey question, so switch over here. The next survey question, is what is your target response time for quotes? this one we kind of curious. I want to compare it against what we see from some of our customers to see where the industry is trending because if you had asked in if you'd asked ten years ago then the answers I think would look very different compared to what it is today. I could give you guys a moment to fill it out and in the meantime, I'm going to move on to the next slide here.
The next slide is about setting goals. A lot of times we'll ask companies that we're working with, “What's your goal in terms of turn time; or win ratio? And, setting goals if you're in the EMS industry is not something that you... That should be new to you, right? It's a very common thing in the EMS industry to have goals, to work towards goals and using goals to know if you're being successful or not. There's really no secret sauce to that. Now, what is a little bit unique that we see only in a subset of our customers is setting good goals and then setting great goals, right? a good goal would be establishing a standard of success or failure to say; ' Well, this is what we expect and if we're below that then there needs to be corrective action or something like that.' But, a great goal is something that you're reaching towards. You're saying, yes, I'm aspiring to get my quote turn time to this level even though it is currently at this level where we define failure. Ideally, you're keeping the reach goal something that's higher than where you're landing otherwise you should consider moving your reach goal up a little bit.
The next thing I'll say is you can get a little bit more specific about defining your goals. While it might be fine to say we get five days turn on a quote instead what you might want to say is, on turnkey quotes we have five-day turnaround but on consigned quotes we try to do a same day or next day. Similarly, if you have a win ratio you can be a little bit more specific to say on new business, we have a win ratio goal of 20% but on repeat business it should be 80 or 90 percent. You can be a little bit more specific about defining your goals and then two other things that I've seen a few of our customers do and I thought they were good idea so I wanted to share with everybody here. One is consider setting quality goals, so first pass yield is something that if you're familiar with production and operations you're probably familiar with here. It's basically saying what mistakes are found in a quote the first time through, right? Because you want to reduce the opportunity for error here largely because it lets you look unprofessional in front of a customer. You want to make sure that it gets to the customer's hands and looks very professional without mistakes. First pass yield.
The second thing I would say is volume goals. A lot of you may find that quote activity is a leading indicator of sales and the more quotes you're doing the potentially the more sales you're winning; and so, in that situation you might consider setting volume goals in terms of how many quotes you're able to put out in each month and that involves again various stakeholders including sales.
And this poll here and share the results. Looks like the most common answer here was three days turn and after that we have one week and two-week and other. I don't know if that means the same hour or if that means more than two weeks.
- 7) Quote to Win
Okay, next one! this one might seem a little obvious quoting to win. It's very easy to forget why we quote sometimes. The objective is to win business, right? You're not quoting just for the sake of quoting. We actually had a customer once tell us that; 'Oh! Well, we just do these quotes, but we don't really expect to win any of them. We're just going to be busy for the next month quoting this thing.' Well, in that case stop quoting it, if you're not planning to win it or if you're not trying to win it. You'd be surprised how often though we do come across customers that are just going through the quoting motions, right? And, I don't mean the entire organization, I mean people that are doing the activities day-in day-out they don't have an appreciation for what their activity results in, in terms of the greater picture. What I would say is you can use quoting to demonstrate a few things to the customer and that's why it's important, right? If you're quoting to win, you're demonstrating to the customer your willingness to be their partner. That might come in the form of identifying improvements to the bomb; or that might come in the form of recommending improvements on their product design or anything like that, right? Consulting them or having them consult you in terms of supply chain needs so on.
The second thing you're doing is you're demonstrating your expertise, so that they have trust in you to build the product. And finally, you're demonstrating your ability to deliver. We hear it all the time that customer didn't award us the business because we were late delivering the quote and we lost the business. Well, quoting is your first impression with the customer to show that you as an organization can meet the requirements that you... Your customers passed you. Delivering is a big part of that.
One way to set the mindset of quoting to win is to share success. If you win an order let your let your quoting team know that; 'Hey! Because of the effort that you put in, because of how competitive we were due to your hard work, now we have an opportunity to win this business.'
- 8) Make Continuous Improvements
On to the final point here which is make continuous improvements. I have this little comic of the fax machine on the right-hand side. It's funny I haven't even heard of people using faxes for a very long time until somebody asked me about a fax number today, but the point is the fax machine hasn't changed over time and it became the dinosaur of the communication world. In the EMS industry, what we see is those companies that take continuous improvement seriously they are growing, they're flourishing in this economy and it's because they're staying on the cutting edge of what processes are, what technology is, what their expectations are in terms of how... How they perform for their customers. Continuous improvement is a very important thing and it's important to make sure that as a company, you're not becoming a dinosaur. As a result of that. On the flip side of that it's very important to be looking at the interactions between activities and how effective your cost model and your templates and the tools that you're using are, and then also addressing some of the risks and issues that you found over the course of implementing a new process. With that I'm going to pass it over to David here to close us out.
DAVID: Yeah! Thanks really for attending today. If you’d like to continue this conversation about ways to improve your whole process that’s a conversation we always love to have, so why don't you contact us at this information to set up a customer discovery call. If you're not our customer we can talk a little bit about our solution CalcuQuote which incorporates a lot of what Chintan was talking about today and automates it for... It can automate it for your company’s whole process. With that, thanks everybody for your time and we're going to go ahead and conclude the call now.