A Request for Quotation (RFQ) is a formal document that a business sends to one or more suppliers asking them to provide pricing for a specific quantity of goods or services. RFQs are used in procurement when the buyer knows exactly what they need and wants to compare prices from multiple vendors.
Understanding the Request for Quotation (RFQ)
A Request for Quotation is the most structured form of competitive bidding in procurement. Unlike a Request for Proposal (RFP) , which invites suppliers to propose a solution, an RFQ asks suppliers to quote a price for a defined item or service. The buyer controls the specification; suppliers compete on price and terms.
RFQs are common in CPG procurement for standardized inputs: packaging materials, raw ingredients with established specs, contract manufacturing runs, and logistics services. When a brand knows exactly what it needs, the RFQ is the most efficient way to collect comparable pricing from approved vendors.
Core Components of an RFQ
An RFQ typically includes several key elements. Item specifications cover exact descriptions of the goods or services being requested, including quantity, unit of measure, quality standards, and any relevant compliance requirements. Delivery requirements define the required delivery dates, locations, and any special handling or shipping instructions. Pricing format instructions tell suppliers how to submit pricing, including unit price, volume discounts, and applicable fees. Evaluation criteria inform suppliers what factors the buyer will use to assess responses, which in a standard RFQ is primarily price. The response deadline specifies when suppliers must submit their quotes. Terms and conditions cover payment terms, warranties, and applicable commercial terms.
RFQs in Practice
The RFQ process follows a standard sequence. The procurement team drafts the document with exact specifications and sends it to a list of qualified suppliers, often drawn from an Approved Vendor List (AVL) . Suppliers review the request and submit quotes by the deadline. The buyer compares responses and selects a supplier based on price, delivery terms, and other criteria.
Once a supplier is selected, the quote may be converted into a purchase order. In some cases, RFQ responses form the basis of a longer-term pricing agreement or blanket purchase order.
RFQs are most effective when specifications are clearly defined. Ambiguous requirements lead to non-comparable quotes, which defeats the purpose of competitive bidding.
Related Concepts
- Request for Proposal (RFP) is used when the buyer needs suppliers to propose a solution rather than quote a fixed price. Purchase Requisition is the internal request that often initiates the RFQ process.
- Approved Vendor List (AVL) is the pre-approved list of suppliers eligible to receive RFQs. Blanket Purchase Order is a longer-term agreement that may result from a successful RFQ.
