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Writing an Effective RFQ

Sertus LLC. © 2011

www.asiatradepro.com

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 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. Communicating your company’s needs is often difficult. What follows are some important tips on structuring an effective RFQ, managing an efficient quoting process and getting the best value for the goods and/or services sought. It is by no means exhaustive, but is designed to give you some suggestions and information to help you with running this process. Do Your Homework Before you put pen to paper, spend some time understanding what it is you really need. This may entail understanding first the product positioning statement – who is the customer, what is the problem your product/service addresses, what are the key benefits of this product, and what makes it different from the competition. Differentiate between needs and wants – like-to-haves and must-haves. Needs should be communicated with words like “will,” “shall,” “must” – these are the “requirements.” Wants are described with words like “may,” “can,” or “optional.” You should also be realistic, and this requires an understanding of what is possible. It is okay if you are not entirely clear on everything that is needed. Most people aren’t. But to ensure you are not overpaying for features, materials, and other spec that are not entirely necessary, you really need to

try and figure this out before soliciting prices. Contact a trusted source for help, especially if you are unclear about what sort of product criteria (material, finish, functionality, packaging etc.) will address a specific consumer need. Communicate Needs and Wants Once you have identified the specific needs, it is important to communicate these as clearly as possible. It is better to provide more information than not enough. Some things can be noted as a set of specifications, either technical or functional. And some services can be quantified. However, other things are very difficult to quantify and that makes them especially difficult to describe. When words are not effective, use pictures or images. Often a picture is really worth a thousand words when requesting bids! 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 suppliers you have identified can provide you a price based on what you have written or offered. Not to worry if you don’t get everything right the first time – it may take several exchanges and some research. Make sure, if requesting a quote for a product, to communicate not only the product specifications, but also delivery terms (e.g. CIF, DDP, FOB, etc.), lead times, product liability insurance requirements, local standards and certifications, customs requirements, packout (inner boxes - quantities per inner and dimensions; master carton specifications – double corrugated; PDQ boxes; pallets), special markings or branding, and any other relevant piece of information to make the quote as accurate as possible. Scale Impacts Price The greater the quantity you will order, whether it be in product or services, the better the price you can expect. It is very important to give clear guidelines to your suppliers of the quantities you intend to order and that these guidelines cover not

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 order quantities over an extended period of time. Price Impacts Spec Equally important is to provide your supplier with a target price. When an accurate target price is offered, suppliers can quickly determine whether there are problems with the noted specifications and possibly identify more appropriate solutions to meet the buyer’s needs. There have been many instances where buyers have misunderstood “required” product spec and solicited bids on items that are quoted well above where the buyer feels 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

quality concerns that you have faced? Or are there 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 definitely want excluded? All of these questions are important considerations when soliciting quotes. And remember, inconsistent information or miscommunication of priorities will result in your vendor having difficulty supplying what you actually need and will likely result in higher costs as pricing is padded to reflect the uncertainty. For more information, please contact info@sertusllc.com or visit www.asiatradepro.com