3 rules for job shops to follow to avoid unprofitable work

Job Shop Work;  Things to Avoid!

 

Job shops are caught between a rock and hard place when considering RFQ’s.  On the one hand, you can’t win if you don’t bid.  On the other hand, winning might be a fatal error and great losses might occur.

In general, the danger areas are these.  First, when bidding on work, consider whether or not you have the capacity to do the future work that might happen.

You need to create or confirm capacity before you take an order, or you can wind up losing your shirt as customers find you to be unreliable.

Another critical item is meeting ship dates.

Meeting promised ship dates translates to reliability in your customers’ eyes, and this is an excellent reason for continuing to award work to your shop, even when your prices might be a bit higher than your competitors’.

A related point is to be sure to inform your customer if a ship date becomes jeopardized for any reason.  We had to “fire” a shop in our network because they simply could not understand the importance of keeping a customer informed about ship dates.  This shop did not take them seriously enough, and we have no use for such an attitude!

Most shops we work with keep reasonably good track of who’s sending RFQ’s and what is the value of the work proposed.  Unless you do this, over time you may be quoting work for which you really don’t have a chance of getting.  Prospects that do a lot of shopping can generate a lot of RFQ’s without commensurate PO results.

It’s also true that most shops have a small number of really good customers and it’s important to be sure you maintain capacity to address their needs.  Thus, bidding on work that would jeopardize such customers could be a real mistake if you guess wrong on what your excellent customer does.  One idea would be to contact your excellent customer(s) to tell them you’re considering work that could impact the capacity you’re holding just in case.  You know which of your customers would find this sort of inquiry a good thing, and which might not, and act accordingly!

A separate profit analysis for each customer is well worth conducting.  You need to focus on customers with the greatest potential–that is, those with good hit rates, a high number of dollars quoted, and large order sizes-and a good quoting database can help you identify them.

Perhaps the greatest benefit is that a quoting database provides the basis for communication with customers. You can ask your customers how to increase your hit rates or why you are not winning the larger-dollar RFQs. This gives you the opportunity to make them more aware of the total package of services your shop offers, and how using it can make their business more successful.

 Your RFQ/Quote data to maintain might the amount quoted for each customer; the amount won; the percentage of dollars won; the number of quotes submitted; the number of quotes won; the percentage of quotes won; the average size of won orders; and the average size of RFQs from each customer.

Some of these points came from an excellent Fabricator article, “Three Rules for job shops to follow to avoid unprofitable work”: https://www.thefabricator.com/thefabricator/article/shopmanagement/3-rules-for-job-shops-to-follow-to-avoid-unprofitable-work.


The overall point here is to beware of just responding because someone sends you an RFQ.  It’s the wise shop owner who carefully examines what’s coming in and how these are answered, for this is a path to success!

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Read the original article “3 rules for job shops to follow to avoid unprofitable work” at https://www.thefabricator.com/thefabricator/article/shopmanagement/3-rules-for-job-shops-to-follow-to-avoid-unprofitable-work

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