An RFQ (request for quotation) is usually used when:
- You have a comparatively short list of suppliers that can meet your production needs;
- You have the overview of the project solutions, and just want to have the pricing details of the product and/or service;
- You want to select the supplier with the best pricing deal possible;
- You are to purchase a number of off-the-shelf products.
When you make the decision to go for an RFQ, the next thing to do is to figure out how to do the RFQ well. Luckily, the RFQ process is pretty easy and straightforward.
Breaking down the RFQ process
The request for quotation can usually be divided into 4 sections: the preparation phase, the processing phase, the awarding phase, and the closing phase.
You might have see the RFQ process is broken down to 3 steps, i.e. the preparation, management and closing phases, but the two are basically saying the same thing.
Let’s take a deep look into the process so you’ll have a better understanding about them.
Step 1: Preparation
The amount of time you invest at this phase will never be too much, because the more preparation you do, the more time you’ll save later.
At this stage, you are expected to:
1) Create the RFQ
Make sure that you’ve identified all the necessary requirements from the very beginning. It allows you to quickly review responses you receive and award a contract.
Your RFQ should include:
- Invitation and description of your organization and the project, and other information as needed;
- Terms and conditions;
- Products or parts detail, including the description and quantity;
- Delivery requirements;
- Payment terms;
- A pricing template;
- Selection criteria;
- Submission requirements.
If you’re not sure how to create the RFQ, here is an RFQ template for your reference. Feel free to modify the RFQ template so it can best suit your project needs.
2) Prepare RFQ documents
Decide who you should send the RFQ to. Generally, it saves you much time if you just send the RFQ to pre-selected suppliers that have been filtered from RFI (request for information). But if you want to discover the best possible deal for the product, you can also send the RFQ to a larger crowd, for instance, potential suppliers that you find via public channels.
3) Identify risks and risk tolerance
At the preparation stage, one of the most important things for you to do is to identify the potential risks and how much your organization is liable to bear the brunt. Make sure you’ve done a proper risk assessment and risk mitigation plan.
Step 2: Management
At this stage, you’ve decided who to send the RFQ to, and what’s left for you to do is to wait for the response and be prepare to answer questions about the RFQ.
By answering questions from potential suppliers and sharing answers about the RFQ, you’re creating a transparent and equal environment for your project from the beginning.
However, you should not provide different amount of information to different suppliers, and you should always stick to the confidentiality requirements as stated in the RFQ.
Step 3: Awarding
When the response deadline is due, it’s time for you to review the RFQs. As the second most important step in the RFQ process, you are to decide who to work with from the response you have collected.
Now it seems all the more important for you to invest enough time in the preparation stage. And the pricing template you created makes it so much easier to compare the bids.
It’s highly suggested that you use a wider group of audience, like the internal stakeholders, to make the awarding decision. Be sure that you share all the necessary information with your team, such as the number of the responses, the qualified responses, reasons why some are disqualified, the awarding criteria and weights, and much more as needed.
When you’re done with the comparison, create a contract and set up a meeting with the supplier to close the deal.
Step 4: Closing
If the general terms and conditions and other needed information for the contract are included in the RFQ, closing the deal is not complicated. But if such information are omitted in the RFQ, you might need to do some negotiation to get the best deal. And the bid price could sometimes changed. Again, we can’t stress enough the importance of investing time and energy in the preparation stage.
One more thing to do, provide feedback to the other candidates who are less qualified. It’s good business. And it’s a great opportunities to include them in your supplier database for your later projects.
That concludes what we want to share about the RFQ process. If you have any question about RFQs, feel free to contact us, or leave a comment here. We’ll respond as soon as we possibly can.