Getting The Most From Your Quotations
Many small manufacturers complain that they spend a lot of time quoting jobs that never turn into orders. There is no doubt that quoting takes time and many customers still insist on getting written quotations before awarding jobs.
Executive Director, Center for Manufacturing Systems, New Jersey Institute of Technology
Many small manufacturers complain that they spend a lot of time quoting jobs that never turn into orders. There is no doubt that quoting takes time and many customers still insist on getting written quotations before awarding jobs. However, there are tools available to simplify the quoting process. Everything from simple, yet versatile commercial spreadsheets, to sophisticated quotation software packages designed specifically for job shops, can reduce the time you have to spend "crunching numbers." However, just developing a quotation is only the first part of the process. What you do with this information once the quotation is finished is critical and something that should be given a great deal of consideration.
Many manufacturers are not making good use of the information they generate during the quotation process and, as such, find themselves generating the same information over and over. Here are some ways you can put your quotation information to good use.
Build a database to be used for future quotes. No one wants to continually reinvent the wheel, so if you can build a database of quotation information, you can reduce the effort required on future quotations. Information can be stored in a number of ways, depending on the sophistication of the quotation process being used. Quotation data can be saved and sorted by customer, type of manufacturing operations required, type or configuration of part, quantity of part, type of material, total cost of the quote, and more. The easier it is to access this quotation database, the more likely you will be able to retrieve it for future use. For this reason, you should give a great deal of thought to how best to build your quotation database.
Maintain a running summary of all quotations completed. Such a summary should include date of quotation, customer, dollar-value of quotation, and whether the quotation was awarded. You may also wish to include any special notes about the quotation that might prove useful in the future. This running summary can then be sorted to determine such important information as quotation conversion rate (number of orders awarded divided by total number of quotations), average value of quotations, and quotation history for a particular customer. An accurate measure of your quotation conversion rate may lead to changes in your present quotation practices. For example, a very low conversion rate may lead you to reduce prices, cease quoting to certain customers who are just "price shopping," or change the way you approach a certain type of quotation. A high conversion rate may lead you to increase prices, or to at least evaluate your pricing structure. Whether or not you actually make changes to your quotation process, knowing (instead of guessing) your conversion rate will equip you with the information necessary to make an informed decision.
Analyze the quotation activity. Analyze the type of quotes you are being awarded, the types of customers you are landing, and more. What better predictor of future business is there than the jobs you are quoting today? If you find yourself frequently quoting a certain type of job, there is a strong likelihood that this is the type of job you will be getting some time in the future. A sudden increase in the volume of quotation activity is an indication that you may be getting an influx of new business. If you consistently "no quote" due to the lack of a certain type of process capability, you may want to add that capability to your operation, or find it elsewhere. Clearly, you can at least "roughly" forecast future business based on a simple analysis of your quotation activity and conversion rate.
Provide the quotation information to your sales force. Armed with quotation information, your sales force (whether they are your employees or independent sales reps) can see which customers are responding to their selling strategies. A customer asking for a quotation is a customer who has a need and one worthy of a follow-up call or even a visit. Providing your sales force with information on quotation activity will help them to sell more effectively and close more business.
So don't just put those completed quotations in a file drawer somewhere and hope that the customer issues a purchase order sometime in the future. If you develop a system to record and manage your quotation information properly, you will soon realize that no quotation is a wasted effort, but rather an opportunity for additional business.