This is an excerpt from Ed Grinde’s new book Leveraging Lean with Lean Quoting, now available on amazon.com.

In my previous article I said I will discuss a unique quoting process that will allow you to quote faster and free up quoting manpower to spend the appropriate amount of effort on the few key quotes that can drive your profits higher.  This article will highlight that process.  This new process is designed to run through 95+% of all quotes quickly and get back to the customer faster than the competition.  It also frees up the time for your value stream quoting team to spend the appropriate amount of time on the handful of large and/or special quotes that will truly drive the profits of your company.  

The basis of this new process is to develop filters around key criteria that are pass/fail in nature.  Properly developed, 95% or more of your quotes should go quickly through this process and get to the customer in a day’s time.  The quotes that fail any of the filters will go to the daily meeting for these failed quotes.  This daily meeting I call the Opportunity Review meeting.  Here the quote that failed a filter will get the appropriate level of discussion necessary to determine if you will quote the business.  And if you choose not to, how to capture the data for future consideration.  

Figure 1 shows the high level process.

In order to get through the “Yes” lane, there are 4 key filters that have to be passed.  

Filter #1 = The first is the capability filter.  This is a detailed listing/matrix that has what you are able to do on the plant floor.  It will be segmented into green (easy things or things that you do well with common material content), yellow (processes and/or material that you don’t do a lot or have some difficulty with), and red (processes/material that you can’t do or don’t work with.)  Below is an example of a capability filter. 

Filter #2 – Capacity.  Can your value stream handle the volume a given quote would bring to the value stream.  If you are working with a lean boxcsore then you can look to the capacity section of the boxscore to see if you have enough capacity to take on the work. Another way to look at the opportunity is the size being quoted.  This can be in either units or dollars.  Units are a better volume determinant for small parts, but for large products it is better to use dollars.  What you would do is create a filter that states if the opportunity you are quoting is over a given number of units or a given $$ size, then it fails the filter and goes to the daily opportunity review meeting.  

Filter #3 – Material content.  This filter is determined by the material cost as a percent of the target price.  (Target price being what the customer is willing to pay for the product.  Remember, the cost to manufacture the product has no bearing on the price the customer is willing to pay.  More on this in my soon to be released book “Leveraging Lean with Lean Quoting”)  In order to have this filter you need to segment your products into distinct grouping by volume, complexity (high/medium/low) and by product class.  Keep all of these criteria as high a level as possible.  Below is an example of a material content filter.  

You get these percentages through analysis of your sales data and see where you are successful.  From there you make the determination as to what level of material content is deemed acceptable for the smaller orders.  A subset of this is how to handle this filter if you have a target price or if you don’t have a target price.  If you have a target price then you just divide the material cost into the target price and if the material content percentage is lower than the above matrix, it passes.  If it is higher than the material content listed it fails and you either no-quote or you quote at a higher price that passes the filter.  If you don’t have a target price, you can simply divide the material cost by the reciprocal of the maximum acceptable material content based on the matrix above (material cost/(1-max matl content %) and that becomes your minimum target price.  You can always submit a higher price, but this is the lowest price.

Filter #4 – Does this job support your strategic direction?  There is no template for this.  To be able to make this decision you need a close working relationship with your marketing team or whatever function drives this direction.  You don’t want to be taking on jobs that don’t support your strategic direction.  You need to understand what your area of strategic attention is, what is being cash-cowed, and what areas are you avoiding.  Depending on which area the opportunity falls in will determine how you proceed with the quote.  

If the quote makes it through all the filters successfully, then the business is quoted, and you go to the next quote.  This part of the process will drive additional sales merely by being able to successfully complete more quotes and those quotes will get back to the customer faster.  How many quotes for new business have you lost because you either couldn’t complete them in time or they were so close to the deadline that the customer had already made up their mind as to who was getting the business.

If the opportunity fails any of the filters, the quote goes to the daily opportunity review meeting.  This is where the real growth will come from.  Because you have saved the quote team so much time from the above listed process, they will have time to participate in this new daily meeting.  And this meeting will focus its attention on the large or strategic opportunities that will drive exceptional growth.  In my next and last article I will discuss this daily meeting.