In today’s competitive market, items are designed, priced, and quoted to ensure they have the right mix of features for each person who buys them. Websites may give how much their solution will cost, but serious buyers will always ask for a quote to get a more accurate figure.
Now you wonder what RFQ is and if it is beneficial for you? Working with hundreds of scenarios and clients as seasoned sourcing experts and with a decade of procurement knowledge, we are confident in our ability to assist you in discovering the best source for any specific product.
This article will assist you in writing an excellent RFQ and completing the full procedure and evaluation criteria with minimal effort.
What is a Request For Quote?
Request for quotation (RFQ) is a process in which a company asks suppliers and vendors to bid on specific products or services they want to buy or sell. It is usually a question about the price of what you know you want.
Yet, a request for a quote usually includes more than the price of things. It may also include specific information about the project and its needs. As a result, when someone asks for a quote, they need to know all about the product or project.
To get a better quote than other companies, you need to give as much relevant information as possible. Another reason to make price quotes clear is that they could be used for legal reasons.
When Should You Use Request for Quote（RFQ）?
If you’re thinking about using a Request for Quote (RFQ) to buy goods or services, you need to know when this process is proper for you. When you should use an RFQ process:
- You need to purchase goods or services that are complex or technical.
- You need to buy goods or services from a new supplier.
- The quantity of goods or services you need is significant.
- You have time to conduct a more detailed evaluation of suppliers.
When you send out an RFQ, suppliers will tell you about their prices and how well they can meet your needs. As a result of this method, you can compare suppliers and choose the best one for your business. Better to have a pre-made template to send all of them. Look which one replies fast. It means he prefers to do business earlier. Yet wait for 24 hours to send a follow-up message.
4 Types of RFQs
There are four types of RFQs, and the bid preparation period in the RFQ process is critical.
1. Open Bid:
An open bid is an RFQ where all parties may see the replies to a quotation. Supplies may make changes to their filed bids. Making prices public may encourage more competition between suppliers. In those scenarios, you get many bids from lowest to HIGHEST. Ask about their quality while selecting low-price bids.
The RFQ might be made available to all potential bidders. Better to advertise the bid on your website as many suppliers will discover it. Yet you also announce your bids on Marketplaces too.
2. Sealed Bid:
The RFQ is open to all qualified bidders using a sealed bid. The buyer sees responses after all bids are filed. Sealed bids are more reliable than open bids. It may not be as good for the sellers since they may not be as driven.
3. Invited Bid:
Qualified bids must be kept private to guarantee a fair outcome. The best practice is to end the bidding on the due date and open all offers. Analyse the bids in the meantime and prepare your sample requests. Organise their contact information to send follow up messages.
4. Reverse Auction:
In a reverse auction, sellers are requested to submit their lowest bids. When no suppliers match the specified price aim, a reverse auction can be used as the second stage in the RFQ selection process.
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5 Steps RFQ Process
Step1：RFQ document preparation phase
Begin your RFQ by gathering the necessary documents. To ensure you’ve covered all the bases, get feedback from internal stakeholders about what they need. This should include things like:
Definition of the needed items, including exact specifications
- Specifications for delivery
- Quantities
- Terms of payment
- The proposed evaluation technique
- Timeline for decision making and the review procedure
- Conditions of the binding contract
- Predefined criteria for Submission
- Smallest qualifying criteria
- Create a supplier list
The RFQ might be made available to all potential bidders.
Step2：Send RFQ
The RFQ must provide clear instructions and a submission deadline. Allow ample time for a bidder to respond. The buyer’s terms and conditions should be attached to the RFQ templates. Every potential provider must be able to ask questions and get explanations.
Step3： Receive answers and analyze the outcomes
Qualified bids must be kept private to guarantee a fair outcome. The best practice is to end the bidding on the due date and open all offers.
Step4：Choose the most profitable supplier in payment terms.
Choose the bidder who offers the lowest price for the specified products or services while meeting all selection criteria. A clarifying procedure and small discussions may be required to get the desired outcome. The transaction is not complete until the contract is signed.
Step5： Inform unsuccessful suppliers after the procurement process
Inform the remaining bids that the contract has been awarded. Thank them for their time; you may need them again in the future.
Suggested reading: Best 7 Ways to Use Alibaba RFQ
Request For Quote vs. Request For Proposal
Many people who work in the business-to-business field send and get requests for proposals and quotes when they talk to people who want to buy your products and services.
The primary distinction is the goal between the RFQ and RFP process. An RFQ is submitted when you know what product or service you want and need the pricing. A request for proposal is offered when the situation is more complex, and you want to consider many variables other than pricing before selecting.
Proposals include what strategy/features he is offering. How they would help you in your business affairs. Request for proposals is often used first and then request to Quote for final pricing.
The Benefits of a Request for Quotation (RFQ)
There are several benefits to using an RFQ in the procurement process:
1. An RFQ can help ensure that you receive competitive bids from interested suppliers. You filter out which suppliers are interested in business. Like a first step in the filtration process.
2. An RFQ can help you check suppliers based on their ability to meet your specific requirements.
3. An RFQ can help you identify any potential problems with a supplier before entering into a contract.
4. An RFQ can help protect your company from price gouging by forcing suppliers to compete on price.
5. An RFQ can be used as a negotiating tool to get the best possible terms from a supplier. Negotiate on pricing or quantity/quality and even on any extra service. It’s always better to look for something extra.
How to write RFQ documents?
When writing an RFQ document, it’s essential to be clear and concise when describing the product or service that needs to be done.
1. The RFQ should address:
- Objectives
- Payment terms
- Required quantities
- Estimated hours of labor
- Project length
- Contractual terms and conditions
- Quotation submission requirements
- Deadlines
- Evaluation criteria
- Awarding and closing process
2. Send out the RFQ to different suppliers.
In the next phase, you’ll outline a list of reputable other vendors you’ve worked with before. Send the RFQ document to all interested parties after collecting all contact information. In advance, create a FAQ to avoid repetitive queries. Incorporate administrative tools and procedures to assist the bidding and review process.
3. Get and check feedback.
Inspect and review all submissions. It may sound simple, but it may be a time-consuming and crucial step in the whole rfq process. See what pricing and quality they are offering in which quantity. See whether they have any MOQ or any terms for payments. Filter them and only close a few of them in your final decision. Notify all vendors after receipt and evaluation.
4. Choosing the best vendor
After analyzing all submissions, each vendor must fulfill the assessment requirements or deliver the lowest bid. Sign the final contract after selecting the winning vendor and thanking all participants.
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Examples for RFQ
International Renewable Energy Agency Request for Quotation (IRENA) is a group of countries that work together to help countries transition to renewable energy. IRENA also has a lot of important documents, policies, and educational materials. In May 2021, IRENA put out a Request for Proposals (RFP) for consulting service providers to help with specific tasks, like consulting with stakeholders and making a handbook with practical advice. The paper has a lot of information about the project, including exact dates, assignment terms and conditions, and evaluation criteria.
How should I send an RFQ?
There are a few different ways to send an RFQ. You can do it through email, fax, or mail. You can also use an online form or RFQ template.
When drafting your RFQ, include all the pertinent information the selected vendor needs to give you an accurate quote. This consists of a detailed description of your needs, specifications or quantities, and your deadline. Sending out an RFQ can seem like a lot of work, but getting the best price for your business is worth it.
FAQs about RFQ
What does RFQ mean in the supply chain?
RFQ is an essential part of the supply chain business. Companies send out Requests for Quotation (RFQs) to get bids from many different companies for products or services. RFPs are separate from RFQs in that they ask for more information about suppliers’ products and services and other factors that could affect the company’s purchasing decision or the best vendor. The whole RFP and RFQ process impacts the supply chain and helps standardize vendor-buyer communication.
How to complete an RFQ template or RFQ pricing template?
A typical RFQ pricing template includes the following:
• Header with address and contact details.
• RFQ request, submission, and due dates.
• A formal request for products and services, quantities, and budgets.
• Quote footer containing approved signatures and contact details.
What exactly is an RFQ on Alibaba?
Companies can use the website Alibaba to get price estimates from sellers for the goods they need. Businesses can use the RFQ page on the Alibaba website to look at, interact with, and ask for prices on a wide range of goods, from office supplies to car parts, from all over the world.
What is RFQ procurement?
In procurement, a request for quotation (RFQ), also known as an invitation for bid (IFB), allows a company to get prices from vendors for the goods or services it needs.
Conclusion
It is one of the best ways for buyers to learn more about suppliers’ products and services and get more information about their prices and payment terms. It is a must for small businesses to know how to run the RFQ process right. This relationship could be good for years, so it’s critical to find the right supplier for your business. To both of them, this friendship must be kept up.
LeelineSourcing has a range of different services. Our skilled sourcing agents will help you when you buy something from suppliers. We will take care of the complicated process and offer customized quality inspection services based on your needs. If you need related services, please contact us.
