How to Reduce Losses Associated With Inaccurate Quotes

Inaccurate quotes can create revenue and margin leaks manufacturers never see coming, taking a toll on revenue and profitability. Many of these margin and revenue leaks increase when quoting isn’t integrated with CRM, ERP, and MES systems. How can manufacturers reduce losses associated with inaccurate quotes?

Mistakes on quotes that turn into orders happen more often when quote systems are isolated or in a vacuum. For example, one of the world’s leading heavy truck manufacturers had over 40 different conflicting quoting systems running simultaneously due to previous acquisitions. As a result, every order had to be reworked an average of seven times, at $165 per order. The heavy truck manufacturer was $1,155 per order because their quoting systems were disconnected from each other.

Increase Quoting Accuracy & Speed To Drive More Revenue

Manufacturers don’t need to settle for quoting systems that deliver mediocre results. Likewise, don’t settle for an isolated quoting system that will drag revenue and margins down. It’s like installing an ill-fitting carburetor on a new 570 HP engine capable of running at 6,700+ rpm. Isolated, disconnected quoting systems are like the carburetor that’s not fine-tuned to a high-performance engine. Just as a carburetor optimizes the mix of oxygen and fuel to get the best performance possible from a high-performance engine, the same holds with a quoting system tailored to and integrated with a high-performance manufacturing operation.

Closing the gaps in quoting that cost so much revenue and margin every month needs to start by making it a core part of manufacturing operations. That means getting a quoting system that integrates with the core ERP, MES, finance & accounting, and CRM system to help eliminate inaccurate quotes. In addition, every department from production scheduling, shop floor operations, supply chain, sourcing, sales, service, and pricing needs to know what’s going on in real-time with every quote a company produces.

Knowing the areas and amount of revenue and margin savings from integrating quoting with ERP helps drive the business case to improve. For example, the graphic below illustrates the benefits and savings when quoting is integrated with an ERP system and not isolated in a vacuum.

 

Every quote is a commitment to a customer that needs to be kept. It is the essence of delivering value to a prospect or customers, a promise to deliver high-quality products at a future date. Manufacturers with the most accurate, complete, and quickest quoting processes win more deals than competitors because they deliver everything a customer needs to know to buy. Gartner found that the manufacturers who provide a complete quote first win new deals most of the time.

Improving how effective quoting is in any manufacturing business needs to start with the following:

• Quoting needs to share the same database as ERP, MES, finance & accounting, and CRM. The single database approach allows the quoting team to produce estimates that consider all of the factors and actual history that go into producing accurate and timely quotations.
• Integrating with the common database that ERP, Manufacturing Execution Systems (MES), and CRM share to deliver Available-to-Promise, Capable-to-Promise, and delivery dates in real-time can take deals away from competitors. Having this level of data integration impacts the accuracy and speed that every sales cycle has the potential to achieve. It also enables greater selling effectiveness across all product lines. In addition, this approach makes winning deals faster by getting competitors out of deals quicker than using manually based methods of quoting and proposal production.
• When a quote is approved, work instructions, bills of material, and production schedules need to start immediately, making real-time ERP and quoting system integration a must-have. Too often, manufacturers rely on manually-driven workflows that cause delays, scheduling errors, and bills of material that specify parts not available. By integrating quoting, production scheduling, MES, and CRM systems, everyone involved with the customer knows what is going on with the order from the first order to fulfillment. This level of insight is invaluable in managing customer relationships and keeping expectations met and
• Accurate quoting is fundamental to manufacturing profitability. A misquoted item is an automatic deduction from profitability. Even in the 5% range, consistent misquoting will cost a $20 million manufacturer $350,000 per year in lost profitability.
• Integrating quoting with manufacturing ERP software provides greater visibility and control of costs and more accurate revenue predictions. The following are the benefits that manufacturers are seeing from integrating their quoting and ERP systems together from a manufacturing execution, costing, and revenue management standpoint:
  • Quote/estimate history as starting points and points of comparison
  • Price management, including pricing optimization and price control
  • Proven accurate Bills of Materials that can be building blocks for new quotations
  • Accurate and current raw material costs
  • Documented machine and labor costs
  • Actual production rates and costs factored into very quotes’ cost structure

Eliminate Inaccurate Quotes and Sell More Profitably

The long-term payoff of closing quoting gaps is fewer lost deals, improved margin and revenue retention, and more loyal, satisfied customers, who receive their orders on time. It is time to treat quoting as the cornerstone of customer relationships and selling. Get quoting right, and manufacturing operations have one less problem holding it back from excelling. Quoting is s revenue carburetor, and manufacturing operations is the engine. Fine-tune each for high performance to drive more profitable revenue and protect margins.