Key elements of RfQ processes

Sales guys from the Manufacturing industry are well familiar with the RfQ (Request for Quotation) process. It’s a quite complex process, and even though repeated many times and being the key element of the Sales deparment’s processes, it’s still challenging every time.

Let’s take the Automotive industry as an example. In a typical setup, some guy from the Purchasing department of an OEM (Original Equipment Manufacturer such as VW, Toyota or GM) sends a RfQ to the Sales guy of an Tier-1 Automotive supplier. The OEM Purchasing guy expects the supplier Sales guy to answer with a Quote, which consists of a technical and a commercial offer.

The commercial offer is of more importance than the technical one for 2 reasons, and they are very straight forward. First, the technical offering is already more or less clear since an initial TR (Technical Review) has been conducted by the OEM and the potential supplier’s solution has been found technically feasible, prior to the start of the RfQ process; in order to save time, the OEM simply won’t let anyone quote who is not technically capable of fulfilling their product requirements. Secondly, the Purchasing guy sends the very same RfQ to different suppliers due to duo/multi-sourcing strategies and in order to leverage suppliers against each other, much like a bidding war. Because at the end of the day, the Purchasing guy from the OEM has some price targets as well as some cost saving targets that must be achieved.

The commercial offer is not just a piece of paper and it’s definitely far more than simply piece price, annual volumes (if committed at all) or elements like annual price downs. The OEM’s Purchasing guy wants to see far more than these, they want to understand how the price is composed and calculated. That’s why the OEM also demands a Cost Breakdown.

The Cost Breakdown includes factors such a labour hours, wages, machine efficiency, depreciation, prototyping materials and many many more. Thus, the Automotive supplier must have a fully clear picture and full transparency on these factors itself before the Cost Breakdown sheets can be filled out. In particular, the Sales department must be familiar with these elements and have a sound technical understanding.

Before the quote can be created and the Cost Breakdown sheets can be filled, an internal approval process for the quote needs to be conducted. Herefore, the Sales department kicks it off through a RfQ kick-off Meeting, so that all stakeholders become aware of the RfQ and some of its general data such as SOP date (Start of Production date), annual volumes, price target, profitability target etc. Having understood the general data and the limiting boundaries, these stakeholders will be involved in providing data so that an integrated piece price can be calculated. And many stakeholders will be involved, wether it’s Manufacturing Engineering to provide machine efficiency, yield etc. or Engineering to provide sample costs and validation efforts etc. or Purchasing to calculate the BoM (Bill of Materials), they all need to contribute to the quote and need steering through the Sales department. When all the elements are calculated, the internal process ends with the approval through the supplier’s CxO-level.

It’s pretty obvious and there’s no need to mention that there a many internal iterative steps and errors and wrong data and so on. Additionally, the OEM could change its requirements itself. And Of course, the OEM will need a quote within a short timeframe, sometimes it’s 2 months, sometimes it’s no more than just 1 single week. Miss the OEM’s deadline means loss of business.

How to deal with these challenges and complexity? Hyvan Technologies offers the right CPQ solution to increase the effectivity and efficiency of the RfQ process. Specifically designed for the Manufacturing industry such as the Automotive industry, we fully understand the challenges and pitfalls of the RfQ process and the industry’s requiremens. Being first to market, Hyvan Technologies offer CPQ applications far beyond what current CPQ solutions can offer.

Interested? Feel free to contact: info@hyvantech.com