What is RFQ – request for proposal?
When an industrial B2B procurement team has identified needs, specs and potential suppliers, it’s time to ask for proposals from the suppliers. The team prepares a formal document known as a RFP: request for proposal – aka RFQ request for quotation- and sends it to their preferred suppliers. A standard RFP outlines requirements and invites potential suppliers to make a presentation or submit a quote. RFP is the first stage going through to final purchase order.
If the product or service has a definite specification and manufacturer, the procurement team may ask directly for price quotations. Sometimes, the required product may be complicated or needs a custom design. In that case, technical team members may ask for suggestions in the request for proposal on how a supplier would meet the need.
Definition of request for proposal
A proposal is in the form of a formal price quotation submitted by the vendor to the buyer company. It needs to include the product specifications, unit and total price, delivery and payment terms, price validity period, taxes and duties applicable, shipping/freight cost, and any other relevant paid or free services provided. Required information is mainly mentioned in the request for proposal document.
A request for proposal, or RFP, is a procurement instrument that may assist you in ensuring that an industrial company obtains the most competitively priced goods and services necessary to function. The RFP process may be as straightforward or as complicated as required to ensure that prospective sellers (manufacturers, distributors or dealers) understand precisely what the customer is looking for.
All required information should be clearly stated in the offer form because industrial procurement teams do not waste time with inadequate price quotations. Not to miss the opportunity, be sure your proposal projects a professional image and contains all the required information.
Evaluation and selection
The procurement team evaluates all vendors’ proposals regarding comparisons of product features, services, deliveries, and additional costs. They analyze criteria such as price, performance, and value/cost to understand who is offering the best price and the best quality. In this phase, product quality and price advantages are not only determinants. A request for proposal does not only consist of product and price.
The procurement team also wants to be sure about corporate reputation, financial stability, technical reliability, and if they will be around for future requirements. They assess each vendor by scoring each feature or factor on a rating system basis. The vendor who gets the highest total score gains the order.
Negotiation and order
Before the procurement team informs the chosen vendor and places an official order, they make one last move. Purchasing experts in the team negotiate price, discount, payment terms, delivery dates and clarify other contractual issues. Negotiation before the purchase order is a tradition that everybody knows and conforms to.
After negotiation, the buyer company informs the chosen vendor about the final decision and places an official purchase order to complete the evaluation phase. The official order may be a one-time purchase or a long-term supply contract. Procurement type depends on the product’s or buyer company’s nature.
Importance of the request for proposal
The principal objective of a request for proposal is to explain the technical details of a company’s requirements to chosen suppliers. The RFP is a written document that both you and the customer use to build a shared understanding of the requirements, which serve as the procurement’s baseline. It becomes the contract’s statement of work and serves as a critical historical document if the industrial procurement process has difficulties.
As an industrial sales professional, you have something important to do at the request for proposal stage. You should influence the procurement team’s decision. Guide them towards your company by providing technical information, customer recommendations, case studies, and independent reports that review your company and products.