Selecting vendors for your organization can be a daunting task.
First, you have to create a shortlist of eligible suppliers and then gradually vet these candidates to determine the best supplier possible for your needs.
In that light, it’s clear that your quality of suppliers depends to a great degree on how well you organize and follow a supplier vetting process. And within the supplier vetting process, there are key documents used to make it all work, namely:
The Request for Information (RFI),
The Request for Quotation (RFQ), and,
The Request for Proposal (RFP)
These three documents, while similar in their function, are still quite different and contribute significantly to the supplier qualification process.
Before we dive deep into each of these documents, let’s first look at their key differences and how each document plays a significant function in helping you through the vendor selection process.
Differences between RFI, RFP and RFQ
|The aim of a RFI is to request general information regarding the procurer’s problem and how it can be solved.
|A RFP solicits for information on how a supplier intends to deliver on the job should they be chosen to carry out the task at hand.
|The RFQ is designed to demand information about what a solution will cost, as per each supplier.
|An RFI is more general, simple, and relaxed, aiming to create a warm atmosphere leading on to a relationship between procurer and vendor.
|The RFP is more formal and serious, demanding actionable information from suppliers.
|A request for quotation is in-depth, explaining exactly what the procuring organization wants so it’s easy for suppliers to offer suitable quotes.
|The RFI is the first touch point for building a relationship between the procurer and potential suppliers.
|A RFP makes it easy to see how a potential vendor will solve a procurer’s problem if they’re eventually chosen and is critical to determining who the procurer eventually goes forward with.
|The RFQ creates an avenue for the procurer to get a better picture of what the solution they’re seeking will cost in real-life terms.
What is Request for Information (RFI)
This a request for general information on the problems you’re faced with, what the vendor knows about it, what could be the cause, any applicable solutions the vendor can offer, any previous experience the vendor may have with similar situations. The request for information gets the ball rolling so that suppliers can come forward to position themselves as fit to address a need an organization has.
At this point, you have an idea of your problems or pain points. You know quite well these problems are holding your organization back. Or, from a procurement perspective, you know the problems your organization has but then, you don’t necessarily know what would be the best solution(s) to this problem.
Judging by our information above, the procuring organization knows there’s a problem but doesn’t know what the best solution to their problem would be. Here’s where the request for information comes in. The intent of the request for information is to get detailed information on the problem the organization is facing, what caused it, how to fix it, and the solution that’ll do a good job fixing the situation.
what should a request for information look like? A request for information should contain components such as:
A table of content that makes the document easy to navigate,
An introduction detailing the purpose of the RFI, i.e. what problem the procuring organization has and what they expect in return,
An explanation of scope that further breaks down the problem the procuring organization is facing and what they expect to see in potential solutions,
Abbreviations and terminology that’ll be referenced in the RFI,
Template to complete to guide the supplier(s) in sending a satisfactory RFI,
How does the procuring organization intend to take the vendor selection process further? How will vendors be selected to advance through the selection process?
An RFI is a casual first touch outreach for the procuring organization that’s reaching for help and seeking to potentially build a relationship with a vendor.
The RFI gets the ball rolling so the procuring organization can take the first step in getting a supplier suited to their needs—all without addressing the issues of price at first. The RFI breaks the ground and forms the basis of further consultations and agreements.
What is Request for Quotation (RFQ)
The RFQ is a request for information detailing what the solution you’re looking forward to will cost in real terms, i.e. what inputs and costs it’ll require to get the outcomes you want.
At the point of forwarding a request for quotation, the procuring organization is fully aware of the problem they have on their hands and by reason of the responses to the request for information, have an idea of what solution is needed to solve their problems. The procuring organization typically knows how much of the supplies they’re looking to acquire that they need and now want to get an idea of how much it’d cost.
Having learnt what solutions available for problems they face, the procuring organization can put their hands down and determine exactly what solution they want to move ahead with. At this stage, the intent is to inform suppliers still in the selection process that, ‘here’s the solution we’re looking to pursue and we’d love a cost breakdown of how much you can offer it for’.
The request for quotation invites vendors to quote how much they envision it’d cost to supply the input the procuring organization is requesting, complete a project, and generally get the solution the procuring organization has chosen to move ahead with after they’ve been educated on the best next step.
A request for quotation typically includes:
a detailed list of products the procuring organization needs, including the features and functionality they expect to derive from them,
the quantity of goods required by the procuring organization,
the date on which the quoted items are expected to be delivered, and
pricing and expected payments terms.
A request for quotation is designed to inform the supplier about which exact supplies the procuring organization expects so the vendor can offer a breakdown of what it’ll cost.
A request for quotation is well structured and outlined to offer a clear picture of what exactly the procuring organization intends to acquire. This way, prospective vendors can offer reasonable cost estimates of what they’ll be able to do the work for.
The request for quotation helps the procuring organization get a picture of what the solution they’re looking for will cost, from a variety of perspectives.
What is Request for Proposal (RFP)
A request for proposal is a request for the solution that different vendors can offer so they can be compared based on their merits, demerits, the pain points they intend to solve, etc. A request for proposal invites vendors to offer information on the solutions they can offer and why they’re ideal for the customer’s needs.
The aim of issuing requests for proposals is to determine how well the different solutions offered by the different vendors under consideration can meet the procurer’s needs to help in making the best choice.
Among others, a request for proposal should:
focus on the procurer’s pain points, and demanding the supplier to detail how they’ll meet it,
provide information on how the procurer already manages their work so the supplier can offer a solution suited to what you already have in-house,
be specific and should only be used at the decision stage where the procurer is ready to finally pick a vendor.
A request for proposal is formal, focused and offers an air of increased seriousness. The procurer is looking to make a major procurement decision and the supplier is potentially about to acquire a major client.
The request for proposal helps the procuring organization narrow down suppliers based on those that can actually meet their needs and can clearly demonstrate how.
While the RFI, RFQ, and RFP are different in their specific functions, they’re all targeted at one main goal which is to assist in the vendor selection process. These three request documents help the procuring organization examine prospective suppliers to determine:
- which supplier understands their needs best,
- which supplier matches their needs with an ideal solution, i.e. which of the suppliers who offers the best solution to the problem at hand, and also,
- the most cost-effective option to proceed with.
Put all that together and it’s crystal clear that a combination of RFI, RFQ, and RFP combined simplifies the vendor selection process and helps the procuring organization build a long-term relationship with the vendor that’s perfect for their needs.