A request for quote, or RFQ, is a document issued by a company or individual that wishes to request a price for a particular product or service. This document can be public with an aim of soliciting bids from several companies or it may be private and submitted to one or a few companies directly. However, if it is not structured properly or if it lacks critical detail, it can quite easily generate no bids or worse yet, generate bids that are not accurate and end up wasting time.
2. Jay Peirce How to Structure an Effective Request for Quote
(305) 215-3414 March 2011
jay@sertusllc.com
What is a Request for Quote?
A request for quote, or RFQ, is a document issued try and figure this out before soliciting prices.
by a company or individual that wishes to request a Contact a trusted source for help, especially if you
price for a particular product or service. This are unclear about what sort of product criteria
document can be public with an aim of soliciting (material, finish, functionality, packaging etc.) will
bids from several companies or it may be private address a specific consumer need.
and submitted to one or a few companies directly.
However, if it is not structured properly or if it Communicate Needs and Wants
lacks critical detail, it can quite easily generate no
bids or worse yet, generate bids that are not Once you have identified the specific needs, it is
accurate and end up wasting time. important to communicate these as clearly as possible.
It is better to provide more information than not
Communicating your company’s needs is often enough. Some things can be noted as a set of
specifications, either technical or functional. And some
difficult. What follows are some important tips on
services can be quantified. However, other things are
structuring an effective RFQ, managing an very difficult to quantify and that makes them
efficient quoting process and getting the best value especially difficult to describe. When words are not
for the goods and/or services sought. It is by no effective, use pictures or images. Often a picture is
means exhaustive, but is designed to give you really worth a thousand words when requesting bids!
some suggestions and information to help you with
running this process. If it is too difficult to specify what you want or require
performed or delivered, then try to describe the
outcome. What ultimately matters is whether the
Do Your Homework suppliers you have identified can provide you a price
Before you put pen to paper, spend some time based on what you have written or offered. Not to
worry if you don’t get everything right the first time – it
understanding what it is you really need. This may
may take several exchanges and some research.
entail understanding first the product positioning
statement – who is the customer, what is the Make sure, if requesting a quote for a product, to
problem your product/service addresses, what are communicate not only the product specifications, but
the key benefits of this product, and what makes it also delivery terms (e.g. CIF, DDP, FOB, etc.), lead
different from the competition. times, product liability insurance requirements, local
standards and certifications, customs requirements,
Differentiate between needs and wants – like-to- packout (inner boxes - quantities per inner and
haves and must-haves. Needs should be dimensions; master carton specifications – double
communicated with words like “will,” “shall,” corrugated; PDQ boxes; pallets), special markings or
“must” – these are the “requirements.” Wants are branding, and any other relevant piece of information to
make the quote as accurate as possible.
described with words like “may,” “can,” or
“optional.”
Scale Impacts Price
You should also be realistic, and this requires an
The greater the quantity you will order, whether it
understanding of what is possible. It is okay if you
be in product or services, the better the price you
are not entirely clear on everything that is needed.
can expect. It is very important to give clear
Most people aren’t. But to ensure you are not
guidelines to your suppliers of the quantities you
overpaying for features, materials, and other spec
intend to order and that these guidelines cover not
that are not entirely necessary, you really need to
3. Jay Peirce How to Structure an Effective Request for Quote
(305) 215-3414 March 2011
jay@sertusllc.com
only your initial order but provide an estimate of quality concerns that you have faced? Or are there
order quantities over an extended period of time. any other limits that could impact what the supplier
needs to do to meet your needs? Are there things
you definitely want included, or things that you
Price Impacts Spec definitely want excluded? All of these questions
are important considerations when soliciting
Equally important is to provide your supplier with
quotes. And remember, inconsistent information
a target price. When an accurate target price is
or miscommunication of priorities will result in
offered, suppliers can quickly determine whether
your vendor having difficulty supplying what you
there are problems with the noted specifications
actually need and will likely result in higher costs
and possibly identify more appropriate solutions to
as pricing is padded to reflect the uncertainty.
meet the buyer’s needs. There have been many
instances where buyers have misunderstood
“required” product spec and solicited bids on items
For more information, please contact
that are quoted well above where the buyer feels
info@sertusllc.com or visit www.asiatradepro.com
the target price should be, only to find out that a
lower spec could satisfy the same consumer need
or that the spec was simply not what it was thought
to be!
Yet many buyers are reluctant to share a target
price with suppliers for fear of compromising the
benefits of a competitive quoting process. To
these buyers, it is important to convey the
distinction between “relationships” and
“transactions.” If the only relevant criterion in
selection is price, then hold the target close to the
chest and solicit competitive bids to select the
preferred supplier. But if relationship is important
– where products or services will be purchased on
an ongoing basis – then there are probably other
criteria that are as important, if not more so, than
cost. Starting a relationship with open, sincere
communication, where needs are clearly specified
and price considerations and targets are stated up
front not only builds trust, but is also the most
efficient way to obtain accurate bids on products or
services that will meet real needs and solve real
problems.
Articulate Priorities
It has been said that a buyer can have low cost,
speed, or high quality – pick two. Make sure to
communicate what your priority is to your vendors.
Many times, it is more important to ask your
vendors to help you reach a specific goal or
objective than to merely get a quote for a product
or service. Do you have a limited budget? Do you
need to hit a delivery deadline? Are there specific