In this guide, we’ll discuss price quotations, requests for quotation (RFQs), as well as the main difference between an RFQ and a request for proposal (RFP). We will also go through a couple of tips on how to successfully request a price quotation from a prospective product manufacturer.
What is a price quotation?
Also known as a price quote, a price quotation simply refers to the fixed price required when producing a particular product. For product-based businesses, a price quotation is usually a document provided by the product manufacturer that details all the terms, conditions, and payment details associated when making a product. Once the business agrees with the provided quotation, both parties enter a business partnership with the potential to become long-term in nature.
How do I request a quote from a product manufacturer?
Requesting a quote from a product manufacturer involves a business process called a request for quotation or RFQ. Sometimes referred to as an invitation for bid, RFQ is a process that businesses use to urge suppliers to submit pricing quotations and payment terms based on specific requirements. An RFQ is an important aspect of the procurement process as it kickstarts the production of goods. The main goal of an RFQ is to solicit quotations from a group of shortlisted manufacturers with the purpose of comparing services, prices, and payment terms.
It’s important to note that a request for quotation shouldn’t be confused with a request for proposal (RFP). Like an RFQ, an RFP is a document that companies use to gather the necessary information about potential suppliers and/or contractors. While it may sound similar to an RFQ, RFPs are mainly used to acquire complicated information about suppliers and involve more than just price quotations.
The main difference between an RFQ and an RFP is that of scope. RFPs are used when a company needs detailed information about a potential supplier’s expertise, production efficiency, and logistical capabilities. In an RFP scenario, businesses are expected to use a more refined criteria when selecting potential suppliers in order to make sure that they will be able to meet their needs.
Is a Request for Quotation (RFQ) legally binding?
The short answer is no, it’s not. However, the details you include in an RFQ may be used in a legally binding document later on. A contract will only be established after a business selects a potential supplier.
How to write a request for a quote?
Now that you have an idea of what an RFQ is, you are ready to initiate the vendor selection process. The first step to requesting a quote from a prospective supplier is writing an effective RFQ letter. As previously mentioned, an RFQ usually comes in the form of a written document that aims to obtain critical information from vendors/suppliers. Here are some tips to help you get started:
- What type of business do you have? Providing enough information about your business helps your potential suppliers understand your company better. It also gives them an overview of the vital requirements needed to be able to adequately produce your products. As a business owner, it is important for you to provide a detailed account of your business as well as how a potential supplier can help achieve your business goals.
- What kind of products do you offer? As a rule of thumb, it’s always best to send RFQs to manufacturers that specialize in your industry. In this way, your prospective suppliers will already have the necessary tools and equipment needed to meet your production needs.
- What are your requirements? As you may have guessed, detailing your requirements is the most important part of an RFQ. This section should include clear product specifications, delivery terms, milestones, payment terms, and cost breakdown just to name a few. When writing an RFQ, keep in mind that there’s no such thing as being too detailed. This allows you to set attainable goals for yourself and set realistic expectations for your supplier. That said, it would also help to have a clear scope of work for your production needs in order to avoid setting unrealistic goals.
Tips on Requesting a Price Quotation From a Product Manufacturer
While it’s true that price quotation letters are standard practice for businesses, not a lot of people understand that an RFQ is a fairly straightforward process. When done correctly, an RFQ is a great way to tell potential vendors what you want and what you expect from them. To help guide you, we compiled a few tips on how to properly request a price quotation from a potential product manufacturer. Check them out below!
- Make a list of potential suppliers
- When making a big purchase, it’s imperative to shop around and make sure that you’re getting the best deal possible, right? The same goes when choosing a potential supplier. Try to gather at least four to five suppliers to be able to gain a better understanding of the costs involved in making your item. Through this, not only will you be able to assess the individual capabilities of each supplier but also identify the most cost-effective candidate.
- Say what you are looking for
- To avoid wasting time on back-and-forth emails about your specifications, it’s best to just say what you are looking for. Adding as much detail as you can about the services and technical capabilities you need will enable you to get the most accurate quotes.
- Present your requirements and conditions in full
- In addition to adding as much detail as you can in the RFQ process, it’s also advisable to present your specific requirements and conditions in full. Ensuring that the information you are providing is complete and organized enables you to speed up the quoting process and avoid the delay of going back and forth for clarifications.
- Make sure your tech pack’s ready
- But first… what’s a tech pack? In an RFQ process, a tech pack refers to the technical information and components required for a manufacturer to be able to produce an item. It contains important aspects such as materials needed and construction instructions in an easily-digestible format. In essence, a tech pack serves as a blueprint that enables your potential manufacturer to turn your designs into a finished product.
- Review quotations (But don’t just focus on price!)
- Once suppliers respond to your RFQ, it’s now time to evaluate their quotations. When reviewing quotations, note that one of the most common pitfalls that businesses should watch out for is solely focusing on price. In business, it’s important to make the most out of a budget. However, solely focusing on price during the procurement process may do more harm than good. Remember, lower prices may sometimes reflect goods that are of low quality, and choosing quality over price is always a more sustainable choice.
- Select your product manufacturer
- Make sure to review the quotations you have received carefully. After reviewing the prices that you have received, you’re now ready to select your product manufacturer!
Bottom Line
Requesting a price quotation is a great way to gauge the technical capabilities of a potential supplier. It allows businesses to get an overview of a potential supplier’s capabilities and determine whether or not they would be able to meet their needs.
About Kickfurther
Kickfurther is an innovative inventory financing platform that puts a unique twist on the crowdfunding phenomenon by asking backers to fund a company’s inventory needs at a consigned rate. In a nutshell, Kickfurther allows a brand’s supporters and fans to fund their inventory on consignment. Supporters would then be offered a rate and get paid when a company sells its inventory successfully. If you want to learn more about Kickfurther, visit www.kickfurther.com.
