DEFINITION
A Request for Quotation (RFQ) is a standard business process used to invite suppliers to participate in the bidding process for specific products or services. It is a document that is created in order to obtain detailed pricing information.
OVERVIEW
An RFQ is typically the final document created to solicit cost information from a supplier for particular products or services. The RFQ should be completed after some level of due diligence has been met. Experts recommend that it be produced following the completion of a Request for Proposal (RFP).
For example, RFQs are typically used following the buying company’s determination that all work-related issues and questions have been answered to its satisfaction. It knows the precise requirements of the requested services and products, and whether the provider meets financial, professional and capacity-related concerns.
RFQs generally are employed as stand-alone requests when the product being purchased is a commodity, a standard product with little to no services attached, or when the buyer already has familiarity with the supplier(s) and only desires new pricing information. Typically, the buyer has already gathered other relevant information and is only interested in the price. In addition, RFQs are also frequently provided as an add-on to an RFP.
RFQs can be as short as a single page. The quality of the activity, and the accuracy and credibility of the quote, is dependent on the sophistication and success of the earlier proposal activities.
BEST PRACTICES FOR A REQUEST FOR QUOTATION
Numerous RFQ best practices have been identified by surveys, studies and practical experience of outsourcing parties. Here are some to consider.
- Be specific. Stipulate all pricing and product specifications. For example, buyers are encouraged to ask the supplier to define all details related to the price such as quantity, volume discounts, etc.
- Define service expectations. Be certain to detail what you expect from the supplier regarding services and support of the product for which you are getting quoted.
- Request delivery expectations. If this important detail is not already stipulated in the RFP, buyers will need to schedule delivery of products and services.
- Be cost conscious. Remember that there is a cost to the supplier to prepare responses. Requesting information that does not add value to your business only adds cost and sours the relationship.
- Give the supplier appropriate time to respond. Suppliers need ample time to develop and work through solution ideas. Two weeks is the minimum recommended time expected for a supplier to respond to an RFQ. It can be longer depending on the complexity of the engagement and the amount of information requested.
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