Before a purchase, quotes are requested from three suppliers. One responds by email, one by phone, and one by message, and all three offer different conditions.
During the comparison phase, there is no consistent table available. It is unclear what each bid is for and which conditions apply.
In this article, we explained how to set up the request for quote process, the content of the request, collecting responses, and making comparisons.
Table of Contents
What is an RFQ?
An RFQ is a request for quotation sent to multiple suppliers with the same content.
Its purpose is to collect comparable quotes. Answers given to different questions cannot be compared.
Therefore, preparing the request in a standard structure is the most critical step of the process.
An RFQ also generates a record; who was asked what and who answered what is documented.
The process is carried out in the procurement module and linked to the purchase order.
Why is a structured process necessary?
Disorganized proposal collection leads to three distinct problems.
First is the inability to compare proposals. Proposals containing different conditions cannot be placed side by side.
Second is the inability to document the decision. Why that supplier was chosen cannot be explained later.
Third is the loss of historical knowledge. What price was given a year ago is forgotten.
A structured process solves all three problems at once and increases bargaining power.
Request content
A good request for proposal contains enough information for the supplier to quote without hesitation.
The product definition must be clear; a vague definition leads to quoting different products.
Quantity and delivery location must be specified; both directly affect the price.
The requested delivery date and payment terms must also be written; otherwise, each supplier submits their own terms.
The proposal validity period should also be requested; an indefinite proposal makes comparison meaningless over time.
Supplier selection
How many suppliers to ask for proposals should be determined based on the size of the purchase.
Three proposals are a reasonable balance for most purchases. More than that unnecessarily prolongs the process.
Adding at least one new candidate alongside existing suppliers ensures seeing the market price.
Constantly asking the same suppliers causes the loss of price advantage over time.
Supplier performance history should also be considered in selection; supplier evaluation see the article.
Dispatch and timeframe
Sending requests simultaneously is necessary for a fair comparison.
The response time must also be clearly stated. An indefinite timeframe prolongs proposal collection.
The timeframe must be realistic; a very short timeframe pushes the supplier to be cautious and quote high prices.
Sending a reminder before the deadline significantly increases the response rate.
Suppliers who do not respond should also be recorded; this information is used in subsequent selections.
Response collection
Gathering incoming proposals in a single place is a prerequisite for comparison.
Responses coming from different channels must be logged into the relevant request record.
The proposal document itself must also be stored; when terms are questioned, the source is referenced.
Completion should be requested for proposals containing missing information; incomplete proposals cannot be included in the comparison.
Prices received verbally must also be put in writing; remembered prices do not constitute a basis.
Preparation for comparison
Once proposals are collected, they need to be reduced to the same conditions.
Maturity differences, shipping, and minimum quantity conditions become misleading to compare without correction.
Proposals in different currencies must also be converted to a single unit.
The table that emerges after these corrections are made shows the true cost.
We covered the comparison method in the proposal comparison and selection article.
Conversion to order
Generating the order directly from the proposal record after selection prevents data duplication.
Thus, no discrepancy arises between the order conditions and the proposal conditions.
The link between the order and the proposal must be preserved; this link is used during invoice control.
Unselected proposals should also be archived; they are used as a reference in subsequent periods.
We explained the ordering process in the purchase order process article.
When should an RFQ be conducted?
Collecting proposals for every purchase unnecessarily slows down the process and wastes time.
Making it mandatory for purchases above a certain amount is a common practice.
Proposals should also be collected if there is a new product or a new supplier.
For regularly purchased items, periodic price updates are sufficient.
Defining this threshold as a written rule prevents arbitrary practices.
Points to consider
Sending requests for proposals with different content makes comparison impossible from the start.
Sharing competitor offers with suppliers causes a loss of trust and causes harm in the long run.
Making decisions based solely on price is another common mistake.
Prolonging the process too much can delay production or sales; time management is important.
Not archiving proposal history is an overlooked loss that weakens bargaining power.
The value of proposal history
The collected proposals form an accumulation that influences not only the decision of that day but all subsequent negotiations.
When prices received for the same item in past periods are placed side by side, trends become visible.
This trend makes it possible to evaluate whether incoming price increase requests comply with market movements.
Over time, it also becomes clear which supplier is competitive in which item; this information narrows down the proposal list.
Response habits can also be tracked; suppliers that consistently reply late or not at all are removed from the list.
This accumulation creates a knowledge source that remains within the organization even if the procurement team changes.
Frequently asked questions
How many suppliers is it sufficient to get proposals from?
Three proposals are reasonable for most purchases; the number can be increased for critical and high-value purchases.
Can proposals be sent via the system?
A request record is created and communication channels can be set up; we determine the scope together during setup.
How long should the proposal history be kept?
It is recommended to keep it for at least a few periods; historical data is needed to see price trends.
What should be done if supplier codes are different?
Code mapping is defined; multi-code management you can check out the article.
The request for quotation process shifts purchasing away from being relationship-based and turns it into a comparable decision.
Standardize the request content; answers given to different questions can never be compared.
Add a new candidate alongside your existing suppliers; this is the most practical way to see the market price.
Keep your quotation history; knowing the price trend is your strongest trump card in the next negotiation.
Make it a written rule above which amount quotations will be collected; arbitrary practice renders the process dysfunctional.
By consulting with the EQLEM team you can set up your quotation collection process.