Introduction
Nowadays, it's very common to shop online. Everyone shops online. There are various online shopping websites on the internet. As you're ordering a product from your phone by liking it by the picture provided by the seller and you can't touch the same, you've to ensure that you're getting the best deal. For the same, you surf the internet, check specifications, read customer reviews, and compare prices with similar products available on other marketing websites until you are satisfied with your purchase.
Companies do a similar thing when they need to purchase some product or service. Here the difference is that they have to carry out a formal process. To ensure the company that is buying the best product for a project, the company require its potential vendors to submit an RFQ (request for quote) or an RFP (request for proposal), so they can compare files, products, and services. By using an RFQ and an RFP, a company can decide which vendor they want to buy from.
It is very necessary to choose the best process to be succeeded in business and make a profit. Which is the best process between RFQ and RFP? It shall be easily understood if we list some comparisons between them. In this article below, we will discuss the differences that exist between an RFQ and an RFP, and after reading this, it'll give you an idea as to which process should be the best for your business.
RFQ vs RFP
Though both RFQ and RFP are very important in the procurement process, there are a lot of differences between them and the main difference between an RFQ and an RFP is their purpose. A company sends an RFQ when it is sure about the product/service it wants to purchase and it only needs to know the price of the product. Where, a company sends an RFP when they are not sure about the product they want to purchase and it is more complicated and requires evaluation of many other factors such as experience, reputation, working methodology, etc. besides price to make a decision.
Difference Between RFQ and RFP in Tabular Form
| Parameters of Comparison | RFQ | RFP |
| Structure | Provides company information, project goals, timeline, pricing, contact information, units, and payment terms. | Provides company information, project overview, budget, goals, timeline, proposal, evaluation criteria, and contact information. |
| Purpose | Used when the company knows exactly what they want but needs to understand pricing options i.e., budget. | Used when the company needs to explore solutions and evaluate many factors to assess the ability of the vendor to meet project requirements and deadlines to select the best vendor. |
| Questions | Ask questions about product specs and the cost to satisfy the requirements. | Asks specific in-depth questions about all of the details of a product and solution and project plan of the vendors. |
| Process | Write the RFQ, identify vendors, send RFQ to vendors, review responses, and choose the vendor. | Identify the scope of the project, search for vendors, write the RFP, send out the RFP, review responses, and choose a vendor. |
| Advantage | Helps the purchaser in getting a piece of clear information about the price of the product or service they're looking for. | Makes it easy for the purchaser to see how a potential vendor should solve his problem if they're eventually chosen and is difficult to determine with whom the purchaser eventually goes forward. |
What is an RFQ?
RFQ stands for Request for Quotation. An RFQ is the most common type of request typically used in the process of procurement. It is a simple process by which a company can request pricing options from a supplier or vendor to know the cost of a highly-specific service or product the company needs for its project.
An RFQ document shall contain a vendor's costs, payment terms, and product specs or details. To ensure that you receive an appropriate RFQ, the RFQ must include a detailed specifications sheet or product spec sheet. A good product spec sheet shall contain:
- A brief product summary
- The product specifications
- The desired materials to be used
- The desired packaging
- Diagrams and graphics
- Photographs
Drawings and photos should also be attached if you are dealing with an overseas-based manufacturer.
Sometimes RFQs are sent independently or sometimes combined with an RFP document.
The RFQ is sent to other companies with whom the sender is interested to work. Then, the other company will respond to the RFQ with the price estimate and any additional necessary information if required.
An RFQ ultimately helps a business make a more informed decision regarding which vendor they should work with to get the lowest price possible.
When an RFQ should be used?
An RFQ cannot be used in all situations. There are some specific situations to use an RFQ. An RFQ is mainly used for small purchases. A company should use an RFQ when they know exactly which product or service they want to purchase from a vendor or supplier, and they only need to know the pricing details and don't need any additional details, or when they want a head-to-head pricing comparison between competing vendors.
Use of an RFQ
Suppose you need some clothes for a cloth distribution ceremony you're hosting. You know exactly what type of cloth and the number of cloth you need, and you just to know the pricing options from potential vendors so that you can decide from which vendor you should buy. In this case, you can use an RFQ.
What is an RFP?
RFP means a request for proposal. A company may use an RFP document to ask vendors or suppliers for more details about a product or service the company is intended to buy. Along with the request for pricing from potential vendors, the RFP shall contain requirements of the entire project the company is working on, including the project duration, scope of work, and required experience. An RFP shall contain everything the company needs to know about how a vendor or support will help in solving their problem or completing their project.
Some standard sections to create a good RFP are:
- Detail about your company background.
- A brief introduction about the project.
- What you want to accomplish with this project.
- Description of the project and a detailed scope of work.
- Expected completion date for bidders to propose proper resources.
- Any constraints that may affect the project.
- Questions on bidders' proposed solution.
- Budget constraints.
- Evaluation metrics as to how you evaluate and select the vendor.
- Guidelines are required to follow while submitting their proposal.
- Contact information.
When an RFP should be used?
A company should use an RFP for larger purchases. When the company have an idea of your project's objectives but doesn't know any of the specific details, they can use an RFP. By using an RFP, the company is looking for a more comprehensive detail of the vendor's ability to offer, rather than just the price. Based on an RFP, the company can choose a vendor who can offer them the best solution instead of who has the best price.
Use of an RFP
Suppose you want to increase engagement and improve the social media presence of your company. Then, you need to hire a freelancer to handle your company's social media accounts. But you don't know where to start. In this case, you should choose a freelancer having a lot of experience in social media, has positive reviews, and can provide you with the right solutions to solve your issue. Here, you can use an RFP.
Main Differences Between RFQ and RFP (In Points)
- An RFQ is shorter than an RFP because it's used to only find out about the price of a product or service the company is intended to buy, but an RFP is lengthier because it contains used to find out more general details along with the price.
- A company mainly uses RFQ when they know exactly which product they want and just need to know only pricing options and not any other details about the product or service. In contrast, a company uses an RFP when they need to purchase sophisticated goods or tailor-made services that require specialized expertise or dedicated personnel to do the job.
- The questions in an RFQ document mainly focus on pricing requirements for specific goods, such as product specs, vendor's costs, payment terms, as well as purchase order and invoice conditions. Where, the questions in an RFP document focus on getting more detailed information on the product and solution. This is because the project for an RFP is often more complex and needs further consultancy than an RFQ. The process of using an RFQ shall look like the following:
- Write the RFQ
- Identify vendors
- Send RFQ to vendors
- Review RFQ responses
- Choose vendor
On the other hand, the process of using an RFP shall be slightly different from an RFQ and look like the following:
- Identify the scope of the project
- Search for vendors
- Write the RFP
- Send out the RFP
- Review RFP submissions
- Make your selection
- An RFQ helps the purchaser in getting a piece of clear information about the price of the product or service they're looking for. On the other side, an RFP makes it easy for the purchaser to see how a potential vendor should solve his problem if they're eventually chosen and is difficult to determine with whom the purchaser eventually goes forward.
Which is better – RFQ or RFP?
Irrespective of the fact what your business is or what industry you're in, you must've to use an RFQ or an RFP at a certain time for a project your company is working on. This is why it's so important to know the differences between an RFQ vs. RFP so that you can select the right one for your business.
The goal of both an RFQ and an RFP is to help you make a more informed decision to select the vendor you should work with for that project so that you can fulfil your business goals. Both RFQ and RFP are useful processes. But it's required to know which shall be the most useful. An RFQ should be considered better than an RFP because of some reasons. They are discussed below.
Firstly, an RFQ is made based on the specific needs of the businesses. So, there's less chance of misunderstanding between the parties involved.
Secondly, an RFQs is generally short in length and more specific than RFP. So, it shall be helpful for a business to easily and quickly complete the same.
Thirdly and finally, an RFQ gives a business a much better idea of the budget of the product/service.
So, having it is both types of requests is better because it opens up possibilities. If only an RFP is used, the company might miss out on opportunities because its competitors are also using RFQ. And if a company only use RFQ, they might have to overpay for the service/product they want to buy since they won't.
Almost all REQs and RFPs are sent electronically. It simplifies the process of collection of proposals and evaluation of quotes and speeds up the approval process when signing a contract on the dotted line is needed.
Conclusion
This article gives you a clear idea about the prominent differences between an RFQ and an RFP and also talks about the definitions of RFQ and RFP and the time you should use them. As the article states that the main difference between an RFQ and an RFP is their purpose, i.e., an RFQ is used when the company has a clear idea about the product they want to purchase and they only need the budget, and on the other hand, an RFQ is used when the company does not have a clear idea about the product they want to purchase and the decision making is too complicated and they need to consider many other consider some other factors before deciding the same.
However, it's difficult to choose between an RFQ and an RFP. It's upon your intention as to which product you are willing to buy.
Using the right type of solicitation helps you create an efficient purchasing strategy for your company and make a better business strategy.
References
- https://www.adobe.com/sign/hub/document-types/rfq-vs-rfp.html
- https://mailchimp.com/resources/rfq-vs-rfp/
- https://blog.hubspot.com/marketing/rfq
- https://oboloo.com/blog/what-is-difference-between-rfq-and-rfp-and-why-is-it-important/
- https://www.pipefy.com/blog/rfi-rfq-rfp/
- https://kissflow.com/procurement/sourcing/rfi-vs-rfp-vs-rfq/
- https://tipalti.com/en-eu/rfq-meaning/
- https://www.magestore.com/blog/rfp-vs-rfq/
