Offering Custom-Made Products
A hairdresser will tell you when he has the next available opening and whether he can offer the service you want.
Similarly, many service or production companies receive inquiries as to whether they can render a service or manufacture a product according to the customer’s specifications. The customer wants to know how quickly the specific product or service can be delivered, in what quantity and at what net price.
The offering company assumes that it can deliver the product or service. Even if the product or service is already being manufactured and sold in a similar form today, it is a make-to-order manufacture.
This raises the following questions for the bidding company:
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- Are we able to produce this?
- Can we meet the desired deadline?
- What order quantities and delivery conditions are required?
- Can we expect follow-up orders if we will be successful?
- Are there competing suppliers and at which prices do they quote?
- Is the production capacity needed available in terms of personnel and machinery, or can it be built up within a reasonable period of time?
- Can the required raw materials and semi-finished goods be procured in sufficient quantities and within a reasonable period of time?
- How much net revenue and contribution margin would have to be generated to achieve the own planned profit targets?
To avoid unpleasant surprises these questions must be answered internally before an offer is submitted to the potential customer.
Since the potential customer formulates fairly precise requirements and quickly expects a reliable offer, the offering company must design its planning and control system to be able to prepare offers, process orders and manage its own earnings development. These are the subjects of the next posts.