RFI, RFQ, RFP: How to Differentiate
- Request for Information helps an organization collect information about the vendor’s how their products and services can help the company grow
- Request for Quotation is issued when the company is looking at sourcing goods or services that are standard, and wants the lowest price for its requirements
- Request for Proposal allows the organization to evaluate the vendors on factors beyond pricing and find the best vendor to work on a project
July 12, 2022 | Procurement Strategy
Every business wants to save on costs to maximise profitability through standard procurement and sourcing activities.
One of the tools organizations use to find the right supplier or vendor is by issuing a Request for Information (RFI), a Request for Quotation (RFQ), and a Request for Proposal (RFP).
While RFPs, RFQs, and RFIs help streamline supply chain activities, it is important to understand the difference between the three so that the business can adopt the right route as per its requirement.
What is an RFI?
RFI, short for Request for Information, is a medium through which an organization can collect information about the prospective suppliers, their solutions, and how their products and services can help a company grow. As the name suggests, it is a request for information from the suppliers during the procurement and sourcing planning stage.
What is an RFQ?
An RFQ or Request for Quotation is a document that explains the details of the goods or services that the organization plans to procure. In response to the RFQ, the prospective suppliers are expected to quote their prices. Typically, an RFQ is issued when the company is looking at sourcing goods or services that are standard, and wants the lowest price for its requirements.
What is an RFP?
An RFP or Request for Proposal is a document that asks for a comprehensive proposal from the prospective suppliers that includes documents like a company profile, a proposal for delivering goods or services asked for, a client list, and financial details. An RFP is issued when the organization plans to evaluate the vendors on factors beyond pricing and find the best vendor to work on a project.
Difference between RFI, RFQ, and RFP
The three documents are used in an organisation's procurement and sourcing functions.
However, these are very different from each other, and which one would be suitable depends on the end requirement of the business.
Here are the key differences between RFP, RFQ, and RFI:
RFI |
RFP |
RFQ |
|
|---|---|---|---|
|
Purpose |
To collect the information about prospective suppliers when you are not sure about the solution that you are looking for |
To evaluate the vendors on factors that range beyond price |
To evaluate the vendors based on the price quoted for goods or services |
|
Ask |
RFI asks the prospective vendors to submit details about the business to stay informed about the possible solutions in the market |
RFP asks the prospective vendors to submit a comprehensive proposal in response, including an elaborate technical and financial proposal |
RFQ asks the prospective vendor to quote the price for the goods or services being sourced by the business |
|
Style |
The style for an RFI is casual and is more about asking for help from the prospective suppliers in the market |
The style of an RFP is formal and direct |
The style of an RFQ is structured and prescriptive |
|
Advantage |
An RFI is fast and easy to execute. It helps a business figure out the possible solution to business challenges |
An RFP offers a fair comparison between vendors, and a business can judge the best possible vendor based on its capabilities |
An RFQ provides a chance to reduce the overall costs incurred on sourcing a particular product or service |
How are RFI, RFP, and RFQ related?
All three – RFI, RFP, and RFQ – are related to the sourcing and procurement functions of the business. All three activities are helpful in overall supply chain management and which one would be used for business depends on the end goal of the activity.
For instance, if you are looking at reducing the cost of a product or service, you can opt for an RFQ. If you are looking at getting better service or improving the quality of the product, you can go for an RFP. At the same time, if you are not sure what solution can help you get better at doing business, you can opt for an RFI.
The three documents are different in what they achieve for the business, but in the end, all three are focused on increasing the competitiveness of the business in the marketplace. Your contract management remains the same in all three documents, especially when selecting a vendor based on an RFP or RFQ.
To sum up
You can start with ascertaining the information you have at hand and then look at the end objective to figure out which document would best fit a particular situation.
For instance, you can use supply chain management software for seamless sourcing and procurement by creating and executing RFPs and RFQs that are well-suited to the business requirements. The supply chain management software can also help you with contract management and manage the contract's end-to-end supply chain.
