- April 20, 2021
Procurement Quotations: Standardizing Your Procurement
Written By Spencer Herder
In the retail space, it’s common practice to use a request for a quotation (RFQ) or a request for a proposal (RFP) in the design and development stages of a product in order to compare the various vendor options available to you. This is key to help determine which suppliers truly want to work with you and to settle fine details regarding product specifications and pricing options. However, there is a distinction between an RFQ and an RFP and knowing what details you need on your end can help facilitate what kind of procurement quotation is required. So, what’s the difference, and what’re the steps required in the quotation process?
What Procurement Quotation is Needed?
An RFP typically comes before an RFQ in the quotation process and gives a more high-level overview of the vendor’s offerings. While still being a comprehensive document, this step helps a retailer funnel their options down in order to send an RFQ to only a handful of suppliers which seem to meet the needs of this particular project. Though an RFP isn’t the last step in the quotation process, it is crucial in setting the initial criteria for what a vendor needs to be offering in order to receive final consideration as the winning procurement quote later down the line. After collecting initial information, it’s now time to request a quotation from the selected suppliers.
A request for quote is the more detailed of the two options. After narrowing down vendors, this step in the rfq process allows for retailers to invite suppliers to include necessary pricing, sizing, quantities, and any other pertinent information required for a successful quotations request. This procurement quote is particularly useful when dealing with products that are being sold in high volumes at low prices. This is because every detail is necessary to pin down product margins, inventory needs, and shipping requirements. This is what makes a procurement quotation such a powerful document for retailers seeking maximum value in their products.
Laying Out the RFQ Process
While every RFQ is different, it can be helpful to define some sort of RFQ template to standardize your workflows and increase efficiency for future quotations requests. A well put together procurement quotation should outline a few key details in order to clarify the project needs. First, the request for quote should open with an introduction to the company, giving a background into its history and current endeavors. This is where you must make it clear what the RFQ is for to allow suppliers to produce clear procurement quotations in return. The easiest way to do this is by simply creating a template that allows all potential vendors to fill in fields of required information. This preparation step helps to standardize the RFQ process to easily compare one procurement quote to the next.
Prepare the Document
The first step in the RFQ Process is to formulate a document to send to all necessary suppliers. Make clear the needs of all internal stakeholders to ensure that every requirement is outlined. Some of these requirements may include:
- Definition of the products or services required with detailed specifications
- Delivery requirements
- Payment terms
- The proposed method of evaluation
- Decision timeline and review process
- Contract terms and conditions
- Submission requirements
Utilize Excel or another spreadsheet program to make fields to account for all of this information as well as potential pricing and volume discounts.
Refine Your Supplier List
Though a procurement quotation can be sent to any supplier, it is likely that you’ll already have a more refined list of potential vendors after going through an RFI or RFP process to help identify vendors which have been placed in the consideration set. This helps to speed up the RFQ process, as there are fewer responses to analyze, and it ensures that the responses you receive are worthwhile.
Send the RFQ to Suppliers
After creating the document and defining the list of suppliers, it’s time to request a quotation! Make sure to include answers to any questions that may arise and offer any other necessary information to ensure that every supplier is given the same amount of information to be able to create a cohesive procurement quotation. Give the vendor’s ample time to give a detailed response and provide a deadline for responses to be submitted.
To help organize the RFQ process, certain sites help to collect responses and allow for bidders and buyers to easily communicate in one location.
After the due date has passed, it’s time to analyze the received procurement quotations. Compare the responses based on your individual purchasing criteria to find the best option for your business. It may not always be the cheapest option, so make sure to consider every detail outlined in the RFQ response to ensure that price and other selection criteria are met.
Select the Winning Bid
The selection process shouldn’t take too long given that you did the upfront work of defining your business needs in a well-formatted RFQ template. After selecting the winning request for quote there may be minor details which need to be ironed out before fully solidifying the deal.
Contact the Other Suppliers
While your work of selecting the winning procurement quote is over, it’s not the end of the line for you. It’s extremely important to contact every supplier that didn’t make the cut. There will always be another project later down the line, and you don’t want to lose out on future business opportunities simply because you decided to be careless in the final steps of the RFQ process. This will help build and solidify your brand as a communicative and friendly business partner.
The quotation process is vital to the success of a retailer and helps set the foundation for creating products which fit in the marketplace, while making financial sense to produce. The upfront work of completing a proper RFQ process is crucial to the long-term sustainability of a business. If you’re looking to seriously ramp up your supply chain capabilities with end-to-end visibility from the design and development phases, through the quotation process and on to procurement, check out how CBX Cloud allows retailers to advance ahead of the competition with increased insights and custom modules to create a truly personalized PLM platform.