Non-Integrated Processes Put Profits at Risk

By Ken Bassey, CEO of Saphran Solutions, a CSM Worldwide solution partner

Finance, operations and sales planning leaders look at much of the same information from different perspectives. Many companies have decided these perspectives are so fractured that they require different systems to analyze and present the information. Rarely do these systems ever talk to each other. This exposes the company to inconsistent and arbitrary financial calculations.

So, where do these key roles meet?

The one business process that cuts across all commercial aspects of the business - financial, operational, advanced engineering and purchasing - is the Request for Quote (RFQ) process. The process of costing and quoting is core to nearly every manufacturing entity. It involves identifying market opportunities and developing a response by synthesizing operational, purchasing and engineering data along with market and customer intelligence.

Unfortunately, for almost all automotive suppliers, the RFQ process remains the most fractured of any core operation. Many companies continue to perform this business process in a manual fashion with limited integration. They are exposed to the risk of failed evaluations from inconsistencies in an otherwise repeatable process that can threaten the ongoing operations of the business. They also lose an opportunity to learn from the process and make improvements. Ultimately, they lose out on the ability to synthesize a goldmine of information and human insight that can and should be used to guide the future operations of the business and optimize profits. Consequently, this causes business planning inefficiencies and inaccuracies that reduce opportunities to balance short-, mid- and long-term profit improvements. Several suppliers have estimated that the 5-year profit improvement opportunity is about 0.25% to 0.5% of revenue or about $2.5 million over five years for each $100 million in annual revenue. Our best practices say that this may be conservative for the team that works to get quoting, costing and forecasting fully integrated with all key stakeholders. For global operations with more complex bill of materials, there can be two to five times the opportunity for profit improvements.

RFQ management is indeed a repeatable process that deserves all the attention of your production lines. Lean manufacturing techniques applied to the management of the commercial RFQ process yield all the benefits, and more, that you would hope to see from plant floor re-engineering. But that is just the first step.

Long-term sales planning is another activity ripe for improvement. The goal is to automate the gathering and synthesis of data from existing business processes that are core to the operation. Once the RFQ process is automated across the enterprise, one can begin to feed the most powerful forecasting and planning systems. Your best minds can significantly elevate their value to the organization by shifting their responsibilities from a non-core activity, the laborious manual gathering of data, to higher value analysis and decision making about the RFQ information. Your team members will start to identify strategic and tactical business improvements nearly every day.

Some companies have begun a process of coordinating the body of information concerning current and future opportunities. The view of the future is fed, not as a separate burdensome step, but by the actual core business processes of the company. Certainly, one source is the same system that feeds the current financial regulatory reports. The other source is commercial evaluation of advanced planning and engineering. The business process that puts these two sources together is the costing/quoting process and, only when consolidated information from the RFQ process is merged with the long-term forecast, will you open up profit improvement opportunity doors currently unseen. It will enable you to constantly re-invent the company to grasp potential for accelerated growth and strategically optimized profits.

Only when you get on the same page can you leverage the wealth of information from your RFQ process by merging it with a solid long-term forecast like CSM AutoBase. This empowers you, your leaders and team members to take control of your future profits while reducing risk and uncertainty.

CSM and Saphran Solutions are teaming up our best practices and subject matter experts to share lessons learned at executive and staff education workshops. We will share case studies and our unique experience supporting integrated RFQ and Forecasting to improve profits. We will waive the class fee charge for pre-registration at www.csmauto.com/workshopregistration.

For further information on this topic, please contact Ken Bassey who has 15 years experience implementing leading integrated RFQ and forecasting approaches and is a CSM Worldwide solution partner, kbassey@saphran.com.