In these days of longer lead times and limited availability the RFQ process for automation is being compressed. Customers want to place orders and locking in resource and materials for their solution as soon as possible.
In this week’s Fuzzy Friday, I will walk you through what the automation vendors need to do to respond to a tender and why every week counts!
All vendors will have a strict process that they have to follow when responding to an automation tender. The level of strictness is usually linked to the risk of the project. If the RFQ is only a budget request and is not commercially binding, then the risk to the vendor is low and the process is typically much shorter. If the RFQ requests a FIXED PRICE submission, this is where the process gets significantly extended.
But let’s start at the beginning. A customer and or their consultant is going to release a tender. The first step is to issue a Non-Disclosure Agreement. An NDA is a contract which purpose is to ensure that information is protected. There are two types that are commonly seen, and these are referred to as a one-way or two-way. A one-way NDA when issued by the customer, protects their information only, as most projects are confidential and the customer will be issuing the vendors potentially sensitive data, they want to ensure this information is kept in confidence. A two-way NDA protects both parties. Most vendors will push for a two-way NDA to be in place before they work on the project. This is fair, considering the effort they put into responding to the tender, all their data analysis and design is their intellectual property, and they will not want this shared with other vendors.
Once the NDA has been counter signed, the tender pack will be issued to the vendor. This will contain the tender documents and the data pack. The vendor will begin reviewing to see if the project suits their product range and if it makes sense for them to bid. Some vendors will have an internal Bid / No Bid or Go / No Go meeting with the sales and design teams to decide if the project suits their portfolio and if they have the resources to respond in the required timeframe.
Assuming the vendor is in, they will begin to review and analyse the data that has been provided. This is normally analysed by their data specialist or team, whose job it is to define a design level for the solution. While the data is being crunched, the design team will likely go on a tour of the customers current facility, giving them a good understanding of the current operation, what works, what can be improved upon and any unique requirements that need to be incorporated into the new solution.
Once the design level has been determined and confirmed with the customer or their appointed consultant, the design team begins concepting the solution, based on the requirements and the products available to them.
This will take several iterations to reach a solution design that meets the design level, all the requirements and has an optimised operational flow. About this time the solution would need to go through an internal solution review. This might be with the local team or internationally, depending on the vendor. The output of this meeting normally requires some changes being made to the design to optimise the hardware, controls and software offer.
If possible, the vendor may take the opportunity to review this solution / layout with the customer and or their consulting team to ensure it is meeting expectations and covers all the requirements. Once they are comfortable with the solution, the pricing stage begins.
If this is a budget submission, it should be relatively simple process of costing the solution with a budget costing tool. Controls and software might be included in this tool or are budgeted separately by these parts of the business. Known costs for third party equipment are usually used. A high-level project plan is prepared and after a quick review the proposal is issued to the customer.
If it is a fixed price submission, the solution is likely required to go through a number of technical reviews, either locally or internationally. With the material flows on the system confirmed, control systems reviewed including integration of third-party equipment, software functionality reviewed and finally the price and timeline. Typically for a fixed price submission, the software and controls teams will do a detailed costings themselves for incorporation into the overall project costs. For a fixed price submission, third party equipment usually needs a valid quotation with a lead time that is acceptable to the project timeline.
Once the solution has the price and timeline given the OK, it normally needs sign off before the proposal is issued to the customer. It can take weeks to have this review process and get final sign off, which is why the vendors need a significantly longer tender response period to be able to provide a fixed price offer.
When the proposals are in, the vendors will get an opportunity to present their solution to the customer and their consultants. This is their opportunity to sell the benefits of their equipment and design. All vendor representatives will present differently, with some focusing on the system design, walking the customer through how the operation will work, others will take a high-level approach, focusing on who they are in the market and what their solution offers.
With the preferred vendor having been selected. Contract negotiation takes place. Most vendors prefer a AS4910 based contract for the supply and installation of automation equipment. These have become the industry norm. Each vendor will have modified the base contract to suit their business needs. As contract reviews can take some time. Most consultants will request these early in the tender process to ensure that there are no deal breakers when it comes to vendor selection.
With the contracts signed the project kicks off and the fun really begins!
It is a long process that the automation vendors go through and all steps above are done with no cost to the customer. Here at Fuzzy LogX we understand what is involved and appreciate the effort the vendors go to. We only ask vendors for a fixed price if the customer is ready to place an order. So, for all your, help, thank you automation vendors!
If you need assistance going to market for automation, contact Fuzzy LogX for a chat!
David Morahan is Intralogistics consultant at Fuzzy LogX, with over 15 years’ experience in warehouse design and automation.