What is an RFQ (Request for Quotation)?
An RFQ, short for request for quotation, is a document where you ask potential suppliers to provide you with a detailed quote for a certain service, project and/or product. Sometimes, you might see Call for bids (CFB) and Invitation for bid (IFB), and they are the same thing with RFQ.
An RFQ is usually used when you know the exact number or type of products or services, or when the products and services are off-the-shelf, but you need to know the price.
Why should you do an RFQ (Request for Quotation)?
An RFQ allows you to compare the bids proposed from different suppliers easily. By comparing bidding pricing from various suppliers, you can select the ideal one that meets our terms under the best condition possible, thus reduce cost and add value to your supply chain.
For example, if your company are to buy 200 laptops with specific hardware configurations announced in the RFQ you send out the potential suppliers. With the product matrix aligned, it’s easy for you to compare the bidding prices provided by suppliers.
What’s more, you only need to send out the RFQ to few selected suppliers, thus saving you time from comparing from a long list of suppliers. But limited selection scope has its downside too. Which makes it all the more important for you to have a back-up plan for suppliers when doing the RFI (request for information).
How is RFQ different from RFP and RFI ?
In a nutshell:
- An RFI (Request for Information) is used when you’re rather new to the target industry and market, and your goal is to gather information of potential suppliers to better decide what to do next;
- An RFP (Request for Proposal) is used when you’re looking for solutions or proposals for your business. It allows suppliers to suggest creative solutions to your problems;
- An RFQ (Request for Quotation) usually asks for pricing of certain product and/or service.
The following figure might give you a better idea about the differences among the RFQ, RFP and RFI:
|Goal||Collect supplier information||Gather valid solutions for the project||Get the best price possible|
|Supplier||Suppliers will be evaluated later||Suppliers will be evaluated later||Suppliers are evaluated beforehand|
|Status of solution||Not clearly defined||Project overview is understood, with the details left to be decided||Project details clearly understood|
|Key deliverables||General information about suppliers||Statement of work of project||Pricing details of the services and/or products|
You can think of the RFI, RFP and RFQ in this way: when you have the general information about potential suppliers (RFI), you engage further to see if they can provide you with specific and creative solutions (RFP), and you ask to see the pricing details for the solutions (RFQ).
When should you do an RFQ?
At this point, it should be clear that you should use an RFQ when you know what you want to buy and need to get the best price possible.
Apart from pricing details, an RFQ usually includes payment terms, factors influencing selections, response submit deadline, and other necessary information for you to make the call.
It should be noted that the response you get from an RFQ doesn’t mean it’s an offer, and it doesn’t indicate a binding contract for the both parties. So the RFQ process doesn’t end when you receive the response back from suppliers. Be sure to follow through the rest of the process and get things in written and signed contract, until then, nothing is set in stone.
If you have any question regarding an RFQ, or how to ask for an RFQ, feel free to contact us, or leave us a comment below. We’ll response as soon as we possibly can.