Hunting smarter to avoid extinction.
Jason C. Brewer
Consolidation in the automotive supply base is inevitable, like natural selection in the wild. Increasing global platforms, commonization of modules, global sourcing, vehicle manufacturer consolidation and shrinking Big 3 market share are drivers reducing the total number of opportunities, leaving far too many predators for the available “prey.” Without abundant, easy to capture opportunities, the weaker companies will be closed or consumed by their competitors. The survivors will be those companies that evolve into organizations more effective at capturing and executing new business.
The auto suppliers that will survive — and even thrive — zero in on the opportunities that best fit their strategy and capabilities where they have the highest probability of capturing business that is profitable. Like a laser scope, the organization focuses on customers and products where their differentiation and value proposition matches the needs of the customers and programs. Once in focus, the company captures the award by bringing the customers the answer to their needs, rather than asking for an opportunity to quote.
This survival skill is in contrast to the prevalent shotgun approach: Showing up at a customer and asking for the latest request for quote (RFQ), referred to here as “sales by being there.” This approach is based on the premise that if sales people are at the customer, they will learn about opportunities to quote on new business, and the company might get lucky and hit the price target. This approach is analogous to the predator that hangs out in a field where prey often congregates, and it occasionally gets lucky catching one by being in the right place at the right time.
The “sales by being there” approach offers no value to the customer other than a quoted price, and the only means of differentiation are service qualities such as quote turnaround and sales person personality. While the approach has evolved from vendors simply stopping by with a box of doughnuts or taking a few people out to lunch, the basic premise still persists. The “sales by being there” approach is laden with waste that most automotive suppliers can no longer afford. Hit rates on quotes commonly range from 2 to 15 percent.
That translates into 85 to 98 percent of the estimators’ and sales reps’ time — and possibly time of other scarce technical resources such as product and manufacturing engineers, that generated no value for the company. There is more waste in this approach less obvious than wasted estimator time. Lacking a deep understanding of the customer needs beyond just specifications, the company may send the sales rep back to the customer with additional questions after the purchase order is received and the company has wasted time developing an inappropriate process. Or worse, issues are not understood until the production part approval process, which may result in significant costs to the company to recover.
The “laser-guided sales” approach follows a different process. Long before the sales call, the supplier deeply understands and documents its core competencies and its long-range strategy. With this clear understanding, the supplier then identifies customers, or systems, or problems that best align with the supplier’s strengths. The targeting process is further refined through field research, which may include: customer sourcing strategies and practices, customer-identified problems, programs presently in development and present suppliers, as well as contact names and numbers of key decision-makers. Doing the homework up-front to uncover the customers’ needs, or to extrapolate the customers’ needs based on gathered intelligence, is the critical differentiator of the “laser-guided sales” approach. Market knowledge enables the supplier to zero in on what matters to the customer and develop a value proposition the customer wants.
Now the supplier can begin to establish a capture plan. The capture plan prioritizes the target customers and products or programs.
Using project management principles, the capture plan identifies all of the necessary tasks, from developing the specific value proposition to closing on the purchase order and conducting a lessons learned exercise. One of the most critical steps of the planning process is determining when during the program to present the value proposition. Innovation delivered too early may allow the customer to bring the development in-house and award the idea to a competitor. Innovation delivered too late may not allow the customer sufficient time to incorporate the idea.
Developing the specific value proposition that will be presented to the customer is the next important step to capturing the business. Value propositions may take the form of a technical solution to a problem, a product enhancement or a multi-national manufacturing network to support a global platform. The value proposition may even include design validation data, as in the case of design alternatives. Delivering a value proposition delights the customer and differentiates the supplier from those simply asking for RFQs.
The process then continues through further product development, if applicable, quoting, purchase order and launch. The customer will still likely request quotes from competitors. However, a well structured value proposition and capture plan will limit the number of truly viable competitors from which the customer may collect quotes. For example, unique manufacturing process knowledge the competitors do not possess may result in higher prices; or late in the program requests may force competitors to “no quote” or include an expedite premium.
The “laser-guided sales” approach outlined above does require research and planning that is not part of the “sales by being there” approach. Research and planning requires scarce human resources. But if estimating, sales and engineering are not wasting 85 to 98 percent of their time on quotes that will never win, they have more time to spend on the high-potential opportunities. The “laser-guided sales” approach may also require a slightly different array of skills, such as more technically adept sales people who can recognize design or process problems and suggest solutions.
More efficient and effective methods to capture awards are not a luxury of sophisticated suppliers. They are the next evolution in the survival of the fittest. Jason C. Brewer is a manager in the Automotive Supplier Consulting Services Practice of Plante & Moran in Southfield, Michigan.