Request for Quotation (RFQ)
Definition:
A Request for Quotation (RFQ) is a formal document that an organization sends to potential suppliers to request specific pricing and delivery information for a well-defined product or service. Unlike an RFP, which typically involves a more complex evaluation process, an RFQ is used when the organization has a clear understanding of its requirements and is primarily seeking competitive pricing from suppliers.
Example:
Acme Manufacturing needs to purchase a large quantity of steel sheets for an upcoming production run. The procurement team develops a detailed specification for the steel, including the grade, thickness, dimensions, and quality requirements. They then send an RFQ to several pre-qualified steel suppliers, asking for their best price and delivery lead time based on the specified quantity and requirements. The responses to the RFQ allow Acme Manufacturing to compare prices and select the most competitive offer.
Why is a Request for Quotation (RFQ) important to Procurement teams?
RFQs are important for procurement teams to drive cost savings and ensure the best value for their organizations. By using RFQs to solicit competitive bids from multiple suppliers, procurement teams can leverage market competition to secure favorable pricing and terms. RFQs also help to streamline the purchasing process for well-defined goods or services, as the evaluation criteria are typically more straightforward than those for an RFP. Additionally, RFQs provide a clear and consistent format for suppliers to provide their pricing and delivery information, making it easier for procurement teams to compare offers and make informed decisions.