If you’re responsible for a project, and you need to select from a short list of suppliers the ideal one with the best price possible for your product, an request for quotation (RFQ) is the key for you.
An RFQ allows you to gather pricing details of the off-the-shelf product and/or services from potential suppliers, and you can choose the supplier with the optimum price under the best terms.
However, there are many areas where you can do the RFQ wrong. Here are 5 of the most common pitfalls that you should pay extra attention to, and what you can do to avoid them. Be ware, or they could lead to money loss, time waste, poor quality products/ services, and a potentially damaged supplier relationship.
5 Pitfalls in RFQ (Request for Quotation): How to Avoid
1. Lacking proper preparation
As mentioned in Successful RFQ Broken Down in 4 Steps, preparation is the first and most important part when doing the RFQ. That said, there are so many ways you can go wrong. Here are some of the most commonly seen mistakes in the preparation stage of doing an RFQ. You can use it as a checklist to make sure that your RFQ process is off to the right start.
1) Fail to represent the needs and requirements of the company
One of the key goals for doing an RFQ is to get the best price under the best terms. Failure to understand and fully represent your organization’s needs and requirements of the products and/or services could mean that you’re unqualified as a project manager. And when you start at the wrong foot, the final result won’t be pretty either.
2) Not knowing much about potential suppliers
In some cases, you might think that an RFI (Request for Information) is overkill when you know you will do an RFP (Request for Proposal) and an RFQ later. But that’s not entirely true.
An RFI allows you to collect general information about your potential suppliers, so you can make better decision based on what you get. It’s not a due diligence, but it does give you critical information about the suppliers that you are to work with. Don’t skip the RFI process, or you’ll spend more time to cover what you’ve missed in the first place.
3) Not giving critical information
To make sure that your RFQ get effective responses, it’s vital that you include some critical information in it. For example, the scope of work of the project, timetable for the project, the rough budget for each stage of the project, and more. Such information helps your potential suppliers to see if they can give you what you need, and how to satisfy your needs while achieve their business goals.
4) Being unrealistic about what the market can actually provide
Before you make the request, make sure you’ve done your homework, and that you’re not asking for the impossible. For example, you’re not asking your potential suppliers to product a product that usually takes 90 days in 3 days, just for you. Suppliers are your valuable resources to help you get things done, you being in charge, not who are overtaking all the responsibilities on your side.
2. Unrealistic timetable or budget
Always be respectful and considerate of the time and effort from the potential suppliers. It takes time to write an effective RFQ, and it sure does take time for the potential suppliers to reply it.
When you ask for an RFQ, be sure that you’ve left enough response time, so you can get more effective responses from the other party. In other words, the responses you get are more creative and customized to the questions your organization are having and wanting to solve.
3. Poor communication
The point of an RFQ is to find out the best deal for the product if it’s produced. To get the accurate cost anticipation, it’s imperative that you make it very clear to your potential suppliers that you can answer their questions regarding the project. Make sure you also share the same information with the other suppliers. Also, don’t share more information with one potential supplier than the others, because that could lead to unfair and nontransparent contest.
4. Underestimate the approval process
In Successful RFQ Broken Down in 4 Steps, we mentioned that one of the steps in the RFQ process is management, which includes managing both the potential suppliers’ side and your organization side.
For the potential suppliers, you need to make sure that they have the identical information from you so they can better see how they can help you.
For the internal side, you need to share the information you get from the suppliers to a wider audience other than just yourself, or your team. Include the shareholders in, and share your data and information. Use the team wisdom to make the better decision. Two heads are better than one.
5. Not evaluating pricing properly
Talking about evaluating pricing details, there are 2 common mistakes that you need to avoid:
- Develop a request that focuses on fees alone, and
- Rely too much on the bid grids
Even though the goal for an RFQ is to get the best deal possible for your product, the thing is, sometimes it’s hard for you to just see the best deal lying there. This requires that your RFQ include some information telling you the potential abilities and expertise of the perspective suppliers.
For example, can you see from the responses how their company treat their partners? Do they take the response seriously, or they just copy and paste the answers from some other RFQ?
To sum up, be ware of the pitfalls that might render the RFQ into useless, or you would find yourself wasting another month and extra money writing a second RFQ and waiting for the responses.
If you have any worries or questions about an request for quotation, feel free to leave a comment below, or reach out. We’ll be in touch as soon as we possibly can.