When an automotive manufacturer issues a Request For Quotation (RFQ), the clock starts ticking.
Suppliers usually have two weeks to respond to an RFQ. This short window can significantly impact their bottom line and shape their success. Their response doesn’t just provide pricing—it sets the foundation for a business relationship with the OEM that could last five years or more.
What steps must automotive suppliers take to ensure their quotation process is well-informed and carefully executed? What are the risks if this process is not handled effectively?
Read on to learn about the best quotation management practices for automotive suppliers and OEMs.
CONTENTS
- What is the difference between RFI and RFQ?
- Understanding the importance of RFQ for OEMs
- The high stakes of quotation management for automotive suppliers
- Best practice for suppliers to respond to RFQs
- How can suppliers efficiently break down costs and transfer quotation data automatically?
- Four advantages of calculation and quotation software
WHAT IS THE DIFFERENCE BETWEEN RFI AND RFQ?
Requests for Information (RFIs) and Requests for Quotation (RFQs) are key tools for automotive manufacturers and suppliers to communicate effectively.
UNDERSTANDING THE IMPORTANCE OF RFQ FOR OEMs
OEMs use the quotation process as a key instrument to achieve their strategic goals. Here is how:
Finding the best suppliers through competitive bidding
Automobile manufacturers rely on RFQs to identify the best suppliers of essential components, materials, and services for their production process.
They collect bids, evaluate offerings, and choose partners who align with their standards for quality, cost efficiency, and delivery timelines. By inviting multiple suppliers to compete, RFQs drive fierce competition. And this is how manufacturers can secure the best value and reliability for their production needs.
Accurate costing for smarter budgeting
RFQs give manufacturers detailed cost estimates for parts and services that they use to create precise production budgets. This clarity helps them make smarter decisions about pricing their vehicles.
Matching quality standards and compliance
OEMs can clearly outline their quality requirements through RFQs, driving suppliers to meet specific standards and comply with regulations. This process helps maintain consistent quality across all components so the final product aligns with legal mandates and customer expectations.
Optimizing supply chains
RFQs help manufacturers evaluate supplier capabilities and capacity to build efficient, reliable supply chains.
By fostering long-term partnerships with dependable suppliers, OEMs reduce risks of disruptions and production delays. By diversifying their supplier base, they can mitigate the risk of supply chain disruptions caused by natural disasters, geopolitical tensions, or economic downturns.
THE HIGH STAKES OF QUOTATION MANAGEMENT FOR AUTOMOTIVE SUPPLIERS
These figures underline the necessity of a robust quotation calculation process.
For suppliers, quotation management is not merely an administrative task; it is a high-stakes, strategic effort directly impacting their bottom line and long-term partnerships with OEMs. Winning quotations hold the key to substantial revenue.
For OEMs, selecting the right partner is equally critical, as these contracts establish collaborations that will shape operations for years. Both parties must approach this crucial process with precision and rigor.
BEST PRACTICE FOR SUPPLIERS TO RESPOND TO RFQs
Let's take a look at some best practices automotive suppliers can use to build a strong and effective quotation management process:
Make those data easy to use
Although resources like previous quotation data, financial databases, and various simulation tools are often accessible to staff handling RFQs, they can be difficult to use.
Having these resources available isn’t enough. Suppliers are not likely to use these resources unless they clearly recognize their value. Access to intuitive tools during the quotation is one of the main conditions for their use.
Prioritizing RFQs
Juggling up to 2 RFQs daily makes it impossible for suppliers to give each one the attention it needs.
To maximize profitability, they must identify the RFQs that offer the most value to the company. By concentrating time and resources on these high-impact opportunities, suppliers can lead their efforts to the best possible outcomes.
Data quality
The quotation process is often held back by issues like inaccurate or incomplete data, time pressure, and internal inefficiencies. These challenges prevent it from fully meeting the needs of both suppliers and their customers.
Data storage
Suppliers often fail to use existing information when responding to RFQs. Instead, they create new data even when similar data already exists.
This usually happens because they don’t know where to find the information. The bigger issue is that much of this “existing information” isn’t stored in databases but in employees’ minds.
This makes it hard to share knowledge, especially across different locations. It prevents the company from building an institutional memory that lasts through employee turnover.
Using an organizational approach like Enterprise Product Costing can be a critical solution to this problem.
Leverage tech (especially for multiple product variants)
Creating a quotation costing and its cost breakdown involves a separate process for each product variant.
For example, if a component is offered in 15 different versions, you must create 15 individual quotation costings. Each costing must then be manually entered into the OEM's template.
This process takes about an hour per costing to ensure no mistakes. All 15 quotations add up to nearly two full working days spent just on transferring and checking data.
Not only is this repetitive and prone to errors, but it also takes time away from more critical tasks like analyzing and improving costs.
Using quoting software can eliminate these inefficiencies. The software simplifies the process, saving time and allowing teams to focus on more strategic work.
Perfect your pricing strategy
An accurate and realistic cost calculation is at the heart of a winning quotation.
A well-crafted pricing proposal not only convinces customers but sets the foundation for economic success.
However, future costs are often hard to predict due to incomplete information and fluctuating inputs like raw materials and labor. Overpriced proposals push customers away, while underpriced ones risk long-term losses.
Our quotation calculation white paper outlines suppliers' steps to build precise, competitive pricing strategies.
HOW CAN SUPPLIERS EFFICIENTLY BREAK DOWN COSTS AND TRANSFER QUOTATION DATA AUTOMATICALLY?
Suppliers need a fast and secure way to handle their quotation data. A costing software reduces manual data processing and simplifies the breakdown of costs for each customer.
With quoting and costing software, automotive suppliers adapt internal costs to sales requirements, making them plausible for OEM requirements.
The software processes everything that’s needed to generate a tailored quotation, including:
- The OEM's calculation logic
- The agreed or prescribed purchase prices
- Cost rates
A software solution for quotation costing in the automotive supply industry should address the following business needs:
- Mapping internal costing in a company-specific costing sheet
- Mapping costing for the OEM in the costing solution
- Link or synchronize the two resulting cost estimates.
Efficient collaboration on quotation data is easier when teams use transfer and synchronization features.
- Data transfer from internal costing to quotation costing.
- Synchronization between internal costing and quotation costing.
- Automated data transfer from the quotation costing to the OEM's final template.
FOUR ADVANTAGES OF CALCULATION AND QUOTATION SOFTWARE
- Audit-proof working and archiving: Team members determine, edit, and document the OEM quote in a central application. Changes in the original internal calculation can be adopted via the synchronization function.
- Accelerate costing processes: An automated process can reduce the time required to transfer data from an estimate to the OEM's quotation template to a maximum of five minutes.
- Avoiding incorrect data: Suppliers transfer the data from the external calculation into the quotation template in one click. No manual transfer is needed.
- Preserved context and conditions: The OEMs' conditions and transformation rules are consistently taken into account during an automated data transfer, and the OEM quotation template remains technically unchanged.
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