Remember the time you needed a new phone. You went to Amazon. Browsed through hundreds of devices. But you couldn’t decide which one was better. So you read reviews, compared prices, and asked your friends to help you choose.
You did everything you could to make sure you were making the right decision. It’s identical to what businesses do when purchasing something as well. But the process is a bit traditional.
With businesses, the vendors or companies submit RFPs or RFQs so you can compare their products and services to make an informed decision.
In this article, you’ll know what RFP and RFQ are and why they are important along with their benefits.
So let’s jump in!
RFP (Request for Proposal) is the request when you want to reach out to a group of vendors or want to pitch a bid between vendors for a particular use.
Being a vendor manager, you are looking for the organization's requirements, and during the process, you are also looking for vendors who can render the services or equipment.
The RFP will go out to all of the companies listed by Agency A during the RFI process. It could also be picked up by companies that collect, categorize, and house RFPs so that businesses can quickly search for the services they provide.
Perhaps the most relevant piece of knowledge at this stage of the RFP process is the proposal. The RFP process is where the answering organization will discuss its plan and how it will be applied.
RFQ (Request for Quote), sometimes called IFB (Invitation for Bidding), is a document that specifies prices for a particular service or product.
In this, you reach out to different providers for the same service, to check who is giving a better price.
For example: If Agency A were to issue an RFQ for their kiosk, they would have told the recipients exactly what they wanted. How it should look, how it should work, what it should reveal, etc.
While raising an RFQ, the company or the vendor manager also requests small details such as payment conditions and contract durations. These are essential information, especially for government agencies that need to deal with financial constraints.
Every process has its way into the organizational system. There are both sides of the coin that can be discussed. But for now, let’s look at the importance of a Request for Proposal
The main purpose of a Request for Proposal (RFP) is to exchange requirements for a project or service to the vendors, who the manager/organization thinks can provide solutions.
This document is used as the project’s baseline as there will be clarity and joint understanding of the requirements.
With the help of RFP, the organization gets a chance to compare the different quotes offered by the vendors.
In the case of ERPs offered by the Value-Added Resellers (VARs), with the help of the RFP, the company can get clarity about the key services, and experience of the VARs, and check if they are the right fit for the current company's requirement.
All profits or benefits experienced by the organization need not be tangible. Another key factor of maintaining RFP is, with the help of this documentation, the company can keep a track of all the intangible advantages it incurred through the current vendor transaction.
These benefits could be in the form of reduced cost, better productivity, improved customer service, and so on.
While we have briefly discussed the importance of RFP, here are a few significant points about RFQ as well:
Sending an RFQ to a limited number of pre-qualified vendors speeds up the selection process as there would be little to no need to check the bid or the vendors.
The RFQ puts your company firmly in charge of the operation. You're going to decide what to buy, how much, and when. You are also limiting other purchasing options by being so specific.
RFQ is created when the organization/vendor manager is completely aware of the vendor’s services and without wasting much time or money soliciting offers from other vendors, they can get straight to the business.
- It’s the request when you want to reach out to a group of vendors or want to pitch a bid between vendors for a particular use of the product, not just the price, using it.
- RFP contains specifics other than the price like delivery date, quantity, etc.
- You are looking for vendors who can provide the service or equipment.
- It’s a document that specifies prices for a particular service or product.
- RFQ only talks about the price.
- You reach out to different providers for the same service, to check who is giving a better price.
Both RFP and RFQ are great processes for soliciting companies and vendors. The RFP method is excellent for reducing the time taken to attract suppliers to your company. RFP’s flexibility can help you get several credentials and make them unique to your business needs.
Also, RFQ is the reduction in time as there won't be a sales records requirement. The number of citations decreases with the number of providers, allowing you to thoroughly analyze all of the bidders, and encouraging the choice to prepare.
So based on the clarity of your requirement, it is up to you to choose that suits you the best. For more information, book a demo with us.