When your small business has a specific need, like sustainable packaging for large products, it might be tempting to go with a supplier you already know. To make sure you’re getting the most competitive pricing, however, you’ll want to consider other vendors. The simplest and most direct way to get the best price is to send out a request for quotation (RFQ), in which you tell suppliers exactly what you need, and ask them to submit a bid for your business.
Learn about what a request for quotation is and how to write one yourself so that you can get the best price for whatever your small business needs.
What is a request for quotation (RFQ)?
A request for quotation (RFQ) is a document that solicits detailed pricing and terms for specific products and services from a selection of potential suppliers or service providers (also called vendors). An RFQ outlines a business’s needs and provides suppliers with clear instructions on how and when to respond, ensuring a standardized process for evaluating price quotes. Once you receive responses to your RFQ, you can compare the bids and select the best fit for your business.
Use an RFQ when you’ve clearly defined your requirements for goods or services, and when competitive pricing is the primary factor in making your decision. RFQs are ideal for situations in which specifications like quantity and quality are fixed, and you are comparing vendors to get the best value.
RFQ vs. RFP vs. RFI
The difference between requests for quotations (RFQs), requests for proposals (RFPs), and requests for information (RFIs) lie in the purpose of the request and the intended responses.
RFQ
A company will typically use an RFQ when it has clear, detailed specifications about the product or service it seeks. In this case, the business is mainly seeking price quotations to identify the lowest cost possible. Once suppliers or service providers have responded to the RFQ, the company’s decision-making process for selecting a bid is straightforward: They choose the vendor that offers the best value while meeting all the requirements specified in the RFQ.
For example, let’s say you want to start using carbon-neutral organic cotton in your online clothing store’s sweatpants, and you want to make sure you get the lowest price for this material. In this case, you’d send an RFQ because the specifications of your order—the material, the quantity, and associated carbon footprint—are firm, and price quotes from vendors will determine your decision.
RFP
On the other hand, a business will send a request for proposal (RFP) when the company wants expertise, innovation, or collaboration from a vendor. Unlike an RFQ, an RFP does not always provide exact specifications, but outlines the business’s problem or need and invites potential vendors to propose solutions. The evaluation process for RFP responses typically is more complex, as it considers qualitative factors in addition to price.
For example, you might turn to the RFP process if you plan to launch your new line of carbon neutral organic cotton sweatpants with a multichannel marketing campaign. In this case, you’d send an RFP to a few marketing agencies, asking them to propose a campaign strategy and channel breakdown that fits your rough budget. You might also ask them to provide insight into their own sustainability practices, if you intend to select an agency that is mission-aligned with your initiative.
Ultimately, you select an agency that is a certified B Corp, even if their bid isn’t the lowest in price—assuming they present a strong marketing plan that aligns with your brand strategy and reflects your business goals.
RFI
An RFI (request for information) is the most preliminary information-gathering document. You might submit an RFI before moving to an RFP or RFQ if you are unsure of what products or services are on the market.
For example, you want to calculate the carbon footprint of all of your clothing products so that you can work toward becoming a carbon neutral brand. You know you need to hire an outside consultant, but you don’t know which consultants have the most relevant experience for you. You send RFIs to multiple sustainability consulting groups asking for general information about the services they provide and their experience in your sector. For example, you might ask for a list of past clients in retail and their experience conducting life cycle assessments for apparel products. This information will help you draft an RFP or RFQ down the line.
What to include on an RFQ
- Introduction and background
- Description of products or services required
- Delivery requirements
- Vendor requirements
- Budget and payment terms
- Bid submission guidelines
- Evaluation criteria
- Timeline
- Terms and conditions
The RFQ process can save time and ensure your business finds competitive pricing in the long run, but creating your first RFQ can be intimidating. To ensure your RFQ includes all the necessary details, use this outline—complete with example copy—to get started.
1. Introduction and background
First, provide a brief overview of your organization and the purpose of your RFQ. Explain your need for the products or services to give your potential suppliers context for the request.
Example
We are an online retailer specializing in eco-friendly home goods seeking a vendor to supply custom-branded shipping boxes that align with our sustainability goals. This RFQ aims to secure competitive pricing and reliable delivery for our peak sales season.
2. Description of products or services required
Next, clearly outline what you want to purchase. Include details such as product dimensions, materials, design, quality standards, quantities, and any other relevant specifications.
Example
We require corrugated shipping boxes, size 16 × 12 × 8 inches, made from 100% recycled materials. Each box should feature a two-color print of our logo on all sides. The order quantity is 10,000 units, with staggered delivery across three months.
3. Delivery requirements
Describe when, where, and how frequently you need the goods or services delivered. Include details such as deadlines and preferred shipping methods.
Example
Deliveries should be made to our warehouse in Miami Beach, Florida, in three equal shipments: Jan. 10, Feb. 10, and March 10, 2025. All boxes must be flat-packed and palletized for forklift unloading.
4. Vendor requirements
You should also list any qualifications or documentation you want vendors to provide. For example, you might request certifications, references, samples, or past experience with similar projects.
Example
Vendors must submit proof of Forest Stewardship Council certification for sustainable materials, three references from other ecommerce clients, proof of insurance, and a sample of the box design.
5. Budget and payment terms
Indicate how you want the vendor to present their pricing, and indicate any requests for discounts. For example, you could request unit pricing or bulk pricing, discounts for larger quantities, and cost breakdowns that include the costs of labor, materials, and shipping. Specify whether the vendor should provide information on taxes, shipping fees, or other miscellaneous charges.
You can also state your preferred payment terms here. For example, you might suggest payment 30 days from invoicing or upon delivery. You should also agree on a payment method, whether via check, direct deposit, wire transfer, or credit card.
Example
Please provide the price per unit, including any volume discounts. Indicate separate costs for setup fees, shipping, and taxes. We prefer a 50% deposit upon order confirmation and the remaining balance to be paid upon deliveries. Payments will be made via electronic transfer within 30 days of delivery.
6. Bid submission guidelines
Provide clear instructions on how you want to receive responses to your RFQ. Specify the RFQ format (such as PDF or spreadsheet), submission method (such as email, online portal, or hard copy), and the due date.
Example
Submit your price quotations in PDF format via email to rfq@example.com by Dec. 5, 2024, 5 p.m. ET. Include your vendor name and the RFQ reference number in the subject line.
7. Evaluation criteria
Explain how the review process will work and give evaluation criteria. While price is usually the main factor considered in RFPs, let potential vendors know if other criteria such as delivery speed, quality of goods, or supplier reputation will be evaluated.
Example
Proposals will be evaluated based on price (40%), quality and material compliance (30%), delivery capabilities (20%), and past client reviews (10%).
8. Timeline
Provide a timeline so bidders know what to expect. Note key dates such as the day you issued your RFQ, the deadline for vendors to submit questions, the submission deadline, your anticipated decision date, and when you want to begin working together. This way, your potential suppliers can be ready to deliver their goods or services if they are the successful bidder.
Example
RFQ issued: November 20, 2024
Questions deadline: November 27. 2024
Submission deadline: December 5, 2024
Vendor selection announcement: December 15, 2024.
Completion of contract deadline: December 31, 2024.
First shipment due: January 20, 2025.
9. Terms and conditions
Outline conditions like warranties, return policies, penalties for delay, and confidentiality agreements, so that your chosen vendor isn’t surprised when they receive the contract.
Example
All designs remain the intellectual property of our company. Vendors must sign a non-disclosure agreement before receiving proprietary artwork. Late deliveries will incur a penalty of 5% of the total cost of the delayed shipment per day.
Request for quotation FAQ
How do you request a quotation?
To request a quotation, businesses must provide potential suppliers with RFQ documents clearly defining the goods or services required, submission guidelines, and any relevant terms.
What is the difference between an RFP and an RFI?
A request for information (RFI) is a casual preliminary request that businesses can use to gather general information about vendors to better understand the available options. A request for proposal (RFP) is a formal invitation for suppliers to submit detailed solutions and pricing for a specific project.
What is the purpose of an RFQ?
The purpose of a request for quotation (RFQ) is for businesses to obtain pricing quotes and terms for specific products or services. Businesses typically use RFQs when the products or services required are non-negotiable and the business wants to choose the supplier with the lowest cost.
