Configure Price Quote (CPQ) software has revolutionized the quoting process, offering businesses the ability to quickly and accurately configure quotes for new customers and projects. For job shop manufacturers, this software plays a crucial role in locking in large-volume customers, many of whom are Original Equipment Manufacturers (OEMs). With OEMs being central to long-term growth and success, the ability to generate accurate, competitive, and timely quotes can significantly enhance a job shop's odds of winning high-value contracts.
The Importance of Accurate Quoting
In job shop manufacturing, quoting is a critical factor that directly impacts profitability. Most quotes in the industry are clustered around an optimal rate—a price point where job shops can remain competitive while ensuring profitability. When every job is accepted, quoting at or near this optimal rate typically results in a profitable venture for the shop. This job quoting process follows a normal distribution, forming a bell curve where the majority of quotes cluster around the optimal price point.
For job shop manufacturers, maintaining accurate and efficient quoting processes is essential for profitability. With a CPQ system, businesses can gather real-time data from their shop floors, allowing them to refine future quotes based on actual production insights. Armed with this data and a lightning-fast quoting system, businesses can:
- Anticipate and quote for future rises in material prices.
- Factor in the latest labor rates to ensure accuracy.
- Shorten expiration times on quotes to create urgency.
- Keep all quotes organized in a digital interface accessible to authorized personnel.
For instance, Eva Curto from Ace Anodizing explains, "All our quotes are in one place, accessible by any users given permission... We don't have to waste time wading through a sea of manila in our filing cabinets. We don't have to worry about human error and losing or misplacing improperly filed quotes."
How Plant Management Tools Drive Profitability
Job shop owners who integrate plant management software tools see a dramatic shift in their profitability. By harnessing real-time information from their shop floors, they can turn data into actionable insights, improving their job costing. This not only enhances profitability but also increases efficiency and precision.
Consider the case of a mid-west job shop owner who, over the course of a year, saw their net profit margin jump from 5% to 35%. They achieved this by:
- Using plant data to adjust time estimates for tasks like masking and packaging, improving the accuracy of future quotes.
- Reanalyzing jobs with negative margins and adjusting future quotes to ensure they hit target margins.
- Adjusting minimum job pricing based on job cost data from smaller orders.
- Working with customers to find optimal part quantities, which allowed them to maintain customer piece cost while hitting their target margins.
This approach—tracking and optimizing the quoting process based on real data—transformed their business, allowing them to make strategic adjustments that directly impacted their bottom line.
The Two Pillars of Ideal Quoting: Speed and Accuracy
Accurate and fast quoting is the foundation of success in job shop manufacturing. When quoting is too slow, customers may turn to competitors, reducing win rates and dragging out the sales cycle. On the other hand, quoting inaccurately—either too high or too low—can have disastrous consequences. Quotes that are too low will stress production teams and reduce profitability, while quotes that are too high will drive customers away and hurt long-term revenue potential.
Speed: How to Accelerate the Quoting Process
Speed is a key differentiator in the quoting process. To achieve rapid quote turnaround times, job shops must establish a streamlined process with clear ownership and defined metrics to track success. Some metrics to track include:
- Quote turnaround time
- Win-rate
- Sales cycle duration
As quote turnaround times decrease, win rates typically improve. When paired with an efficient CPQ system, job shops can consistently meet customer demands quickly, reducing the risk of losing potential contracts to competitors. Over time, faster quoting processes drive increased customer satisfaction, contributing to long-term growth.
Accuracy: The Foundation of Long-Term Profitability
In high-mix job shop environments, pricing accuracy is essential. When quoting is inconsistent, it reflects a lack of clarity on what truly drives profitability. For example, if multiple salespeople at the same shop quote different prices for the same part, this signals a disjointed quoting process.
CPQ software simplifies this by providing a standardized formula for calculating job costs. While the formula doesn't need to be perfect, consistency is key. Over time, businesses can track job costs and make data-driven adjustments to their quoting formulas to hit target margins more effectively. The goal is to create a quoting process where any team member can generate the same quote for the same job, ensuring consistency across the board.
Automation: The Future of Job Shop Quoting
The future of job shop quoting lies in automation. With shop management tools becoming as indispensable as computers or internet access, job shops that embrace these technologies will thrive. Quoting automation ensures that businesses are not only faster but also more precise in their pricing.
Common Questions in Job Shop Quoting:
- What is the average time to quote for job shop manufacturers? – The average time varies, but with CPQ software, quotes can often be generated within minutes, improving both speed and efficiency.
- How does quoting automation help job shops ensure profitability and close more deals? – By leveraging data, job shops can ensure that quotes are accurate, aligned with current costs, and competitive in the market, improving their win rates.
- How do job shops know their quotes are aligned with other shops? – Using industry data, job shops can benchmark their pricing against competitors to ensure their quotes are in line with market trends.
- How do job shops ensure their prices are profitable? – By continuously tracking job costs and adjusting quoting formulas based on actual production data, job shops can hit target margins consistently.
Why Steelhead Technologies Stands Out as the Best Job Shop CPQ Software
Steelhead Technologies provides easy-to-configure quoting specifically designed for metal finishing job shops. Using preset parameters—such as surface area, racking setup, time to mask and process, and material costs—Steelhead allows shops to quickly and accurately generate quotes. For businesses with automated lines, Steelhead also offers Red Line Job Costing capabilities, ensuring that every aspect of the job is factored into the quote.
With accurate job costing and detailed data tracking, Steelhead helps job shops optimize their profitability. Critical data points such as:
- Production performance
- Cost of goods sold (COGS)
- Direct and variable labor costs
- Labor efficiency
- Revenue per line or process
- Profit margins by customer or part group
- Shipping performance
- Vendor performance
All of these can be monitored and optimized to help job shops make more informed business decisions, improve efficiency, and maintain long-term profitability.
Conclusion: The Power of CPQ for Job Shops
CPQ software is no longer a luxury for job shop manufacturers—it’s a necessity. Accurate, efficient, and fast quoting processes are essential for success in today’s competitive manufacturing environment. By leveraging CPQ solutions like Steelhead Technologies, job shops can improve their quoting processes, win more contracts, and unlock higher levels of profitability. As the industry continues to evolve, those who embrace these technologies will lead the way, while those who resist may find themselves left behind.