Breaking down the RFQ process for precision machining jobs
Your company needs to have a lot of parts machined. Your in-house machine shop is already overbooked and, in any event, couldn’t meet the tight tolerances required for these parts. You’ll need to outsource the work, but the work also requires a specialized supplier.
Sorting through contract machining shops can be extremely challenging, particularly when there are limited procurement resources to sort through thousands of potential suppliers. For example, if procurement googled “precision machining shops”, they will get over 2 billion results back. Obviously, no one can’t afford to explore all these companies, even clicking through the first page of results will take too much time.
Using a qualified manufacturers directory like ThomasNet.com helps narrow down the list of possibilities to less than 9,000. So then the question becomes how many filter should you apply? You can search by location, quality certifications, registrations, and even ownership/diversity details.
Now that you’ve established a list of precision machining shops to contact, you still need some important information from them. You want the RFQ process to be quick and straightforward process, so that you can accurately compare vendors and move forward to producing a quality product. Your end goal is to sell and deliver quality, and not waste time.
1. Preparing a standard RFQ template:
For a smooth RFQ, every shop must understand what is being requested of them. Therefore, companies issuing RFQs will typically include these standard sections:
- Invitation: Let suppliers know the purpose of the RFQ, and describe your company, the project, and give any other background information.
- General terms and conditions (GTC): Attaching a GTC gives suppliers an outline to follow when they are providing a quote. Make this document as clear as possible so that there is little wasted time at closing.
- Pre-qualification requirements: If you have pre-qualified the shops by using an RFI, you can ignore this step. If you haven’t, now is the time to gather that information.
- Pricing template: Don’t be frustrated by trying to compare quotes submitted in different formats. Give your bidders a model that they can use to provide their prices, and you will find it much easier to compare quotes. For example, you might want the shops to bid all production work (large quantities) on a price-per-part format. Alternatively, you might want labor and material costs listed out as separate line items, as well as non-machining prices (fabrication, painting, welding, etc.) listed as subtotals. You might also want to specify the different quantities that you want pricing to be broken down by. Often, the cost per piece will vary significantly between 1-100 pieces.
- Drawings that include annotations: A 3D model is highly recommended here, so that geometries, tolerance, and finishes are clearly specified from each view of the object.
- Quality level: Materials and dimensions that require particular attention should noted. It’s useful to share contextual, end use requirements here.
- Shipping, handling, and delivery: You want to avoid hidden costs or delays so it’s best to get this in writing from each vendor so you can compare.
- Deadline for submitting prices: This can range from 1 day - 1 week depending on the complexity of your request.
- Awarding selection criteria: Describe your priorities and the importance of each criteria you have specified above. In other words, will price carry the most weight, or will it be secondary to a faster delivery? This is your opportunity to explain in greater detail.
- Confidentiality agreement
2. Sending out and managing responses:
Once you’ve written the RFQ, it’s time to send out to your shortlist. Managing the RFQ process requires that you treat every supplier equally. If one shop asks you a question, share the answer with everyone. If you have additional information that can clarify the RFQ, make sure all of the shops get it. It should go without saying that leaking information is unethical. If you’re using sealed bids, no one should see a proposal until the deadline.
And if you don’t get your target price from any of the shops in the first round, you have the option of going to the second installment with a limited number of bidders. This time, you may want to inform the remaining bidders of your target price.
3. Awarding the work:
After all the quotes have been returned, it’s time to decide who is going to get the job. If you provided a template for the suppliers to use in providing their prices, it would be simple to compare quotes. If you have already established awarding criteria, you’ll find your winning bid quickly.
When you make your awarding decision based on predefined criteria, it provides evidence of a fair process for any internal auditors.
4. Closing the deal:
Once you’ve made your decision, set up a meeting to sign the contract. If you have previously supplied the winning shop with the general terms and conditions, closing the deal should not be too complicated. If you have not, you will have some more negotiations to go through.
It’s good business etiquette to give feedback to every shop that participated in the RFQ process and to thank them for submitting a quote.
If you decide to announce the winning company publically, don’t do it until the contracts have been signed. And no matter which way you go on an announcement, it is not ethical to publish the winning bid.
Keep in mind that closing the deal is not the end. You have just begun a relationship with an important supplier. And like all relationships, you will need to nurture this one and keep the communication pipeline wide open.
Not every machine shop has the experienced workers and the latest precision machine tools to solve your machining problems. Aprototype’s factories are ISO 9001 compliant and can offer you quality parts that we produce on three, five, and seven-axis CNC machines. And we will work with you to meet your deadlines. Include us in your next RFQ. You’ll find that accurately machined parts are not beyond your budget.