Sales Capture Rates Analysis....Are you getting your fair share?
August 1, 2014
When analyzing Sales Capture Rates, we must try to understand the manufacturing processes involved for the given products.
For instance, fasteners will likely be very different than say avionics. So I will try to generalize our comments to mechanical machined components.
Typically, the capture rates assimilate a curve as the one tacitly shown on the hypothetical graph below. This graph is designed to show several points as we will see shortly.
Quotations for the shown quantities at prices below the prices shown "should" result in a win. Anything above this curve "should" typically result in a lost order.
Our goal is to understand where this curve lies in the spectrum of things. More importantly, we must endeavor to understand where we are losing and winning orders in this spectrum.
For instance, are we losing orders in the low quantities? If so, then we might not be manufacturing the right quantities (i.e. we probably should be making larger quantities in order for our cost to drop, and subsequently our price).
Are we losing the low quantities orders because everyone else is planning on making large quantities, but quote the low quantities as if they were high quantities? This is key to knowing how to quote. Are these components that will get lots of exposure (quoted often) so they require special consideration or are these rarely seen thus not worth making in large batches or stocking them?
What about the medium quantities, are you getting them exclusively up to a certain quantity, but there after you lose the orders? Perhaps you should consider making them in higher capacity machines which typically will drop the cost dramatically and thus provide plenty of margin to win the order.
Are you perhaps winning orders in certain alloys but not in others? Are the lost items typically machined on the same equipment as the items won? If so, perhaps there is a different machine that needs to be looked into.
What about stocking components? Do you have a rational for manufacturing excess inventory without an order?
And then the obvious, we are assuming that these are all non-sole source products, meaning that there is open competition to them.
These are all questions that must be analyzed in order to understand the competitive landscape.
How you plan your estimates, "ahead of time", is key to how you will quote the items. Do you have bid / no-bid meetings which include how you will quote the given RFQ. Or do you have a threshold over which requires a meeting to take place to approve the estimates and prices to be quoted, with appropriate signatures to follow so that no one in the chain of command takes it upon themselves to bypass the system.
What about negotiating the prices? What is your process to work out the differences? Notice I didn't say "meet their price expectations". Is there a go to person to negotiate the differences and is this typically your process to "split the difference". Hopefully not.
Negotiations are not part of the current scope of this article, except to say, it is best left to the experienced. For you can be sure that your counterpart already is...
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