Identifying the right opportunities means finding the right RFQs issued by the right buyers. The trick is to align opportunities with your company’s financial objectives. Most contract manufacturers must maintain a shop utilization rate of at least 85 percent.
Shop orders typically come from two major categories of customers: large and small. Both are vital to the company’s success. Most companies focus on identifying large customers, as they provide the largest portion of a shop’s revenue and generate the highest profits. Large customers typically represent 20 percent of the customer base and generate 80 percent of the total revenue. These key customers provide a consistent flow of new projects and/or ongoing orders for existing products, giving contract manufacturers financial stability and predictability.
However, there are challenges associated with only focusing on large customers. For example, fluctuations in demand for a large customer’s products can result in slower-than-expected orders to your organization. When this happens, contract manufacturers can experience unanticipated downtime. During these slow periods, access to a number of smaller jobs – provided by your small customers – is critical to keep the plant busy. Without the orders of many small customers to fill unused capacity, downtime can easily erode all of the profits made from larger customers.
Another challenge associated with being dependent on a small number of large customers is the risk of losing one or more of these major accounts. It can take a year or longer to identify a new customer, win an initial order and develop that new customer into a larger key account.
Continuous prospecting for new customers is a reliable way to address these challenges. And, having a steady stream of new customers offers multiple benefits. It minimizes the impact of losing other customers, creates a pool of small customers (that could develop into large ones) and provides a source of small orders that can fill gaps in capacity when needed. In short, continuously adding new customers is a great way to ensure the ongoing health of your business.
The best time to engage new customers is when they have an identified need, such as an RFQ out for bid. However, if the buyer did not include your business on the RFQ distribution list, then you have a problem. This is one reason why being proactive and continuously prospecting are so critical. Looking for new customers when your shop has a need is too late.
Another major challenge is determining the RFQs on which to spend time quoting. The win ratio on quotes for new customer jobs is much lower than on bids to existing customers. So, you need to be thoughtful in selecting RFQs to quote. It is best to offer bids on RFQs involving parts where your shop’s expertise shines, your price is competitive and the issuer is a company with the potential to place larger orders in the future.
Winning business from new customers is difficult. Simply put, your company is an unknown entity to these buyers. And, from their perspective, doing business with a new supplier is risky. Will the new supplier deliver the parts on time, at the agreed-upon price and to the expected quality standards? To compensate for this added risk, buyers will take a chance on a new supplier if the price quoted is attractive/better than current suppliers’ bids.
How MFG.com Helps
Two MFG.com features help you identify the right RFQs on which to quote – and the right customers with whom to work. They are: “Saved Search” and “Buyer Rating.” The Saved Search capability helps you narrow the list of RFQs to just those jobs that match your capabilities and requirements.
The search criteria below will help you identify the right RFQs:
Category – the designated manufacturing process used to make the part. You should only select categories that your shop can support well.
Material – the designated materials to be used. This criterion is interesting because some shops are more competitive using one type of material compared to another, even within the same manufacturing category.
Industry – the particular industry for which the part is being manufactured (e.g., aerospace). It allows you to select industries where your shop has the greatest experience.
Quantity quoted – this feature specifies the size of the job order. It allows you to focus only on jobs of a certain size. For example, you could eliminate all small-run orders from consideration. However, keep in mind that many MFG.com jobs start as prototypes and lead to larger follow-on orders.
Complexity – this criterion specifies tolerances. It allows you to focus only on jobs that match your capabilities.
Trial and error will help you determine which search criteria yield the best results for your shop. The MFG.com platform allows you to set up more than one Saved Search at a time. You also can set a specific Saved Search to send you an email when a new marketplace opportunity meets your selected criteria.
The Buyer Rating functionality helps you quickly determine if the buyer organization is a company worth pursuing, based on a number of indicators.
When reviewing the list of open RFQs, based on the Saved Search results, the supplier can see a summary rating based on a five-star system.
By clicking on the buyer company name to the right of the RFQ, you can see how the buyer ranks on multiple criteria. These data are based on activity over the last two years.
Award ratio – the total RFQs released compared to the number awarded on MFG.com. Buyers with a low award ratio may be using MFG.com to benchmark prices.
Total award value – the total dollar value awarded to suppliers on MFG.com over the past two years.
Average award value – the average award value per RFQ awarded on MFG.com by the buyer.
Supplier rating – the rating suppliers have assigned to a buyer based on their experience on factors such as quality of requirements, responsiveness to questions and payment. Detailed supplier feedback can be found at the bottom of the page.
As stated earlier, there were over 9,000 opportunities released on MFG.com’s marketplace last year by over 2,000 different companies. The challenge to MFG.com members is to determine which opportunities and buyer organizations are worth their time and effort. The Saved Search and Buyer Rating functionality can help members optimize their time and increase their chances of winning new customers.