Quoting in a Changing Industrial Landscape

The way shops quote is changing due to turnover in industrial buying and quoting roles, along with Industry 4.0 technologies. 

The manufacturing industry is experiencing a number of transformations, from demographic change to digitalization and AI. These changes are affecting all aspects of manufacturing, including quoting. While these changes might require manufacturers to rethink their quoting processes, it can also present job shops with new opportunities for growth — if they’re willing to adapt, says Francois Gau, founder and CEO of industrial marketing firm GrowthHive.  

Francois Gau is the founder and CEO of GrowthHive, which helps companies in the industrial space with business development, marketing and sales. Photo provided by GrowthHive.

A Changing of the Guard

Shops that have been around awhile are likely accustomed to working with industrial buyers with strong engineering backgrounds. “They had a good understanding of what needed to be bought, from whom and for what reason,” Gau says. As those industrial buyers started to retire in the mid-2010s (a trend accelerated in the early 2020s by the COVID pandemic), he says a new generation of industrial buyers with different backgrounds and ways of operating entered the industry. “This is a changing of the guard,” he says.

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For example, Gau recalls consulting for an automaker who hired a former employee of a large tech company to be head of the commodity purchasing of finished goods and MRO. He points out that while this doesn’t mean these new buyers aren’t good at their jobs, they might need some guidance on the nuances of different manufacturing or inspection methods. This new generation of industrial buyers also does business differently than the previous generation (for one, you’re less likely to find them on the golf course).

As this new generation of industrial buyers steps into their roles, they’re reconsidering their supplier bases. “Some of the old guard were kind of happy with the status quo,” Gau says. And as industrial suppliers are retiring and being replaced with new employees, the same is happening on the manufacturing side. If the salesperson a buyer has been working with retires and the buyer is going to be working with a new person anyway, the buyer might as well do a procurement and consider other options. All of this has resulted in declining supplier loyalty, particularly in industries that don’t have strict specifications.

Gau emphasizes the importance of speed in quoting, citing early data from quote engine Paperless Parts showing a win rate of over 90% for shops that return quotes within two hours, compared to a win rate of less than 5% for quotes returned after five days or more.

The Need for Speed

These new industrial buyers prioritize speed, according to Gau. He recalls early data from quote engine Paperless Parts showing that manufacturers that return quotes within two hours of receiving it have a 90%+ win rate, while shops that wait five days or more to return quotes have a win rate of less than 5%. When industrial buyers don’t have the ability to easily compare prices, they often go with the supplier that gives them a price the fastest.

At the same time, Gau cautions that speed in quoting must be balanced with accuracy. “Be aware that if you miss something during the quotation process and you accept a PO you have a legal agreement to abide by those terms,” he says. Missing a callout for a process might mean the difference between a job that makes money and one that loses money.

To build a new quoting process, start by mapping how information and material flows through a shop from quote to finished part. Shops can then identify bottlenecks in the process and address them.

Engineering a Quoting Process

When it comes to establishing a quoting process both fast and accurate, Gau encourages shops to start by appointing a quoting champion. He says a continuous improvement mindset is helpful here, so people with Lean and/or Six Sigma training make good candidates. The quoting champion’s first task is to establish the current process. “You have to untangle that spaghetti ball,” he explains. Workflow mapping tools such as Lucidchart, a SIPOC (suppliers, inputs, outputs, customers) diagram or VSM (value stream mapping) can help with this step. Basically, shops should trace the flow of information and material from receiving an RFQ to finished product. After mapping the current process, the quoting champion can find bottlenecks and address them with shop management.

When it comes to establishing a quoting process, “Automation is a key tenet because we have hours, not weeks” to turn a quote around, Gau says. But automating the quoting process in a job shop isn’t a one-size-fits-all situation. “There’s so much variation it’s almost impossible to provide a general conclusion as to which automation solution is going to be most efficient,” he says. Shops have a number of tools to choose from to help them automate quoting. Some ERP programs have the capability to generate quotes, but Gau says these systems might not have the necessary details for accurate quoting, or they just aren’t dynamic enough. For example, if a shop has multiple models of the same machine on its floor, ERP often doesn’t have information on exactly which machine was used or how many hours it spent making a part, or it might not have that information logged in a way that’s easily accessible for quoting. Shops can also build spreadsheets to use in quoting or invest in third-party quoting software.

Once shops have a system for quoting, Gau says they should connect it to the rest of the shop’s ecosystem, creating what he calls a business digital thread. A shop’s quoting team needs “to make very quick decisions with a host of information that’s scattered around your systems,” he says. “So, if you want to quote fast, you need to have a fast and agile system to access information.”

This includes information on machine productivity, cycle times, changeover time, tool life, inspection reports, outside processing time and more. “It’s minute details that you have to plan, and all the systems that provide that information need to be tied together,” he says. For example, machine monitoring data displayed on a monitor on the shop floor can benefit shopfloor employees, but it won’t benefit the quoting team without tying the machine monitoring system into the shop’s business digital thread where they can access the data. Or if a shop has a quality management system that’s connected to the business digital thread, the quoting team can determine how certain quality specifications will affect a job’s production and quote it accordingly. “All those systems spit out a bunch of information. What do we do with it?” he continues. “As a shop owner, this is probably one of the top strategic decisions.”

Investing in connecting these systems can be a tough sell for shops, Gau acknowledges. “‘Working on your business from time to time’ versus ‘working in your business all the time” is still a relatively new concept to most of the folks I talk to, and it’s where you can make the huge difference,” he says.

The Future of Quoting

The quoting process has gone through so many changes recently, but more changes are on the horizon — particularly considering the potential impact of AI. While Gau sees applications for AI in manufacturing, particularly in the front office, he encourages shops to be cautious about using AI chatbots for quoting. “The limitations are more business risks and IP mitigation than the capabilities,” he explains. “These systems are not CMMC or ITAR compliant. Not even close.” Shops should not put customer names or any information related to parts they are quoting into chatbots. While he suggests discretion for now, he sees potential for AI to revolutionize quoting. “I don’t doubt this thing’s going to eventually work,” he says, once security concerns are addressed.

Regardless of how the quoting process changes, it remains a vital aspect of any manufacturing business. “Quoting is the heart of the operation,” Gau says. “This is what feeds the rest of the business.”