Why speed matters in highly complex RfQ processes and how Hyvan can help
In the manufacturing and automotive industry, the RfQ process is crucial. To make that clear, let’s take the example of a Tier-1 automotive supplier. A Tier-1 supplier supplies, thus sells their products to automotive manufacturers while buying their raw materials from Tier-2 suppliers.
If the Sales guy or Key Account Manager (KAM) of our Tier-1 supplier has done everything right, he did some dine and wine with the Buyer from the customer side, figured out all the key data such as tentative SOP date, approximate lifetime volume, technical aspects and even the price range. And the Buyer from the customer has a good relationship with the KAM and believes in the supplier’s capabilities, so he promises to send over a RfQ.
Sometimes later the KAM receives the RfQ and realizes that the timeframe for a quote is one single week! Please don’t think this is an outrageous and unrealistic scenario, this is actually quite often the case in China, the world’s biggest automotive market!
As usual, the Buyer from the customer side wants a quote with a final price and detailed cost breakdown into raw materials, SG&A, D&A, sample costs etc. Now the KAM really needs to scramble haeavily to gather all the data, crunch the numbers and calculate a final price which the Buyer will find satisfactory. To make the matter more complicated, the Buyer didn’t give a target price, so it’s for the KAM to figure that out. Additionally, the suppliers’ C-suite has given some financial targets, let’s say 15% EBIT and 30% Gross Margin. To make the matter even worse, the Buyer from the customer side has sent the RfQ to multiple Tier-1 suppliers, knows the overall market very well and from seeing over hundreds of cost breakdown over the years, he knows exactly which KPIs influence the final price, so there is little chance of being too creative. And as usual, the requested product is similar to what the automotive supplier has engineered and manufactured over the years, but still different. Think of ECUs, a simple change of Hardware or addition of new diagnostic funtions will make a huge difference.
How to deal with this?
In our example of a traditional automotive supplier company, the answer is very straight forward and simple: the company will fail and will not deliver an appropriate quote on time.
What? How can that happen?
The reason lies in the company, especially its processes and tools itself. We will make this very clear as three things will happen after the KAM receives the RfQ:
- The KAM will approach all stakeholders within the company as quick as possible, giving out the urgent task and align with them on the numbers. The stakeholders are Purchasing, Engineering, Manufacturing Engineering, OPS, just to name a few. But here lie many pitalls: some guys are not available, some don’t know the numbers, some have difficulties to make assumptions, some need to check on the numbers from previous projects but can’t find the project files, some have forgotten how the numbers were calculated previously, some use the wrong Excel sheet, some use the wrong data, some have forgotten the KPIs influencing the numbers, some numbers are out of range thus out of the Buyer’s assumptions… so many factors to name. And then there is the Calculator. This is the Finance guy who consolidates all the numbers from various inputs and formats and calculates the profitability. And that guy could be ill or too busy, or he simply just doesn’t feel like supporting our KAM’s project. If this guy is not available, nobody will know if the project is feasible or not. The KAM will realize that he needs to inform way too many people and probably spending too much time answering the same questions about the RfQ over and over again.
- The KAM will call his Buyer friend and ask why the timeline is so tight and begging for a delay of the deadline. The Buyer will simply answer that this was requested by his boss and there is no change to the timeline. Now the KAM realizes that his company’s RfQ processing systems and processes simply lacks speed. And speed is crucial.
- The KAM will schedule a RfQ meeting with the company’s C-Suite to get approval for the quote, so that it can be sent to the Buyer. The C-Suite of course, will only approve quotes that have solid numbers, calculated under the right assumptions and using the right basis, and which achieve the profitability targets. Otherwise they will simply decline or request re-calculation. And all this can only happen if the C-Suite is available, otherwise there is no-one to make a decision Now the KAM realizes that the internal approval process is too slow and probably has multiple loops, too.
There is no way a traditional automotive supplier can deal with this situation. The Buyer’s timing constraint is so tight and the speed requirement so high that the KAM cannot deliver a quote on-time. And if he manages to deliver on-time, the quote was created quick and dirty, under false assumptions and full of errors, thus destroying the company’s business case. In a nutshell, our automotive supplier, just like many other suppliers, lacks speed and speed matters.
What are the reasons for lack of speed?
Here, we need to take a look at the processes and tools a traditional automotive supplier uses.
Process wise, there are several reasons for lack of speed:
- One reason why it is so time consuming is because the traditional RfQ process is heavily based on face-to-face communication, even though the information is very straight forward and doesn’t need face-to-face explanations. In our case, the KAM either needs to approach each stakeholder individually to present some information that can be understood without human interaction. The KAM could also schedule a RfQ kickoff meeting like many companies already do. But just like any meeting, some key participants will be missing and won’t even send a proxy making the whole process useless. So he will need some other form of information and communication so that every stakeholder is informed and most common questions are addressed. Specific questions of course, need to be addressed individually, but that should really only be a very small part.
- Another reason is the Calculator. Since he is the only guy for consolidation and final calculation, he is the ultimate bottleneck. And within the example of our traditional automotive supplier, there is no way to work around this guy. So our KAM has to fully rely on him to function. And this is absolutely less than ideal. The Company needs some intelligence that can do the calculations without relying on people.
- The internal approval process itself relies on too many factors and is too slow. Since the typical automotive supplier wants to avoid risk, the C-Suite wants numbers with solid basis, otherwise they will simply not approve it. In the case of our KAM, this is nearly impossible since he needs time for the stakeholders to provide these numbers. Here, the KAM would be helped if he could do some scenario planning and simulate profitability ranges under different assumptions. In that case, the C-Suite would know that even though the numbers are not the final ones and subject to change, the company’s profitability still will only move within a certain bandwidth as long as some boundaries are held. They could approve the profitability range and indirectly a set of assumptions, so that the KAM doesn’t need to wait on some stakeholders to provide numbers, thus heavily speeding up the whole process.
- Another aspect of the internal approval is again the face-to-face issue: our KAM would schedule a meeting with the C-Suite just like any other tradtional automotive supplier. Here, the C-Suite is the bottleneck. Yet, the data that needs to be approved is really very straightforward and doesn’t need much explanation. Thus, the approval process itself needs to become virtual.
Looking at the tools, it’s clear that the main issue is Excel, as used by our KAM and many other automotive suppliers. Excel comes with a set of problems that are related to it: versioning, accessibility, parallelizability, just to name a few. Using Excel, the aforementioned process issues will still occur and there will be no improvement. Take for instance scenario planning and profitability bandwidth calculation: this can be done in Excel, but only if you are an expert user and understand some basic VBA.
Some would use currently available CPQ tools as provided by you-know-who. The Problem is, you surely can use them if you are only selling standard, off-the-shelf products. For everything else, they are pretty useless. In the case of our KAM, a conventional CPQ cannot help; and this is actually the reason why most automotive suppliers don’t use them at all.
How can Hyvan help?
Hyvan helps by addressing the problems mentioned above. We don’t really care much about standardized, off-the-shelf products. We only focus on non-standard products, which is exactly what automotive suppliers sell, just like the KAM in our example.
Our CPQ solution offers many features for the manufacturing and automotive industry so that your company won’t face the problems mentioned above.
Especially with regards to timing, our CPQ solution is the ideal application to face stringent and tight timelines. Our web based solution allows massive parallelizability, in-depth analytics and provides features such as scenario planning, feed backward price calculation, KPI comparison and many more.
Interested? Feel free to contact us at info@hyvantech.com

