Definition: A request for quotation (RFQ) is a procurement method that consist in asking information about specific products or services to several suppliers. The company releases RFQ to a group of selected providers with the purpose of comparing prices and other basic sales terms.
What Does Request for Quotation (RFQ) Mean?
When a company needs to obtain particular goods or services it might decide to follow the RFQ procedure. Usually, the procurement department sends RFP to a group of suppliers and they send back, if interested, their respective quotes. The RFP includes specifications of the items or services required with the purpose of making as clear as possible what the requirement is. In this regard, the RFP should include size, quality, color, performance and any other attribute that precisely describes the need as well as the deadline to receive quotes.
The interested supplier must respond with price, availability, delivery time and any other applicable charge, discount or sales condition. The procurement department then compares the quotes received and selects the best option. Sometimes further information is requested to make the final purchasing decision but the quotes reduce the range of eligible suppliers. RFPs are more useful as the item is more standardized because evaluation can be made in comparable terms.
Example
Mobile World is a growing mobile phone distributor located in Ireland. The firm received a RFQ from a manufacturer that also sent the request to other five suppliers. The manufacturer requires 35 mobile phones with certain specifications related to capacity and speed. The answer must be received in a period of 20 days and should include price per unit and delivery time. Mobile World was very interested in this potential customer and sent its quote within the expected deadline.
When the time expired, the procurement department realized that only four suppliers sent their responses. This department evaluated and compared the quotes but decided to ask for more information to the two best supplying options. Mobile World was one of the selected firms that later provided complementary information about other features such as brand, weight, size and accessories added to the product. Finally, Mobile World was chosen as the most suitable supplier.
