For any individual, who has either studied or has worked in a procurement firm for any finite length of time, would certainly vouch for the fact that this industry plagued by a serious lack of clarity, when it comes to business terminologies. It has been witnessed that two terms, might be used interchangeably, even though there exists a subtle, yet significant difference between the two. The terms in question are RFQ (Request for Quote) and RFO (Request for Offer).
What is the issue?
The whole gamut of suppliers and procurers, are seen mixing up the two terms up, which has led to unsought miscommunication between the two parties.
So, what’s the difference between the two? The answer’s pretty straightforward though.
When to Use an RFQ
An RFQ is something that you issue when you have finalised upon a vendor, solely on the price that he is offering. You can use it when:
- You are well aware of what you want.
- When you are eyeing just a commodity – a product that is usually bought in bulk.
- There isn’t any service associated, just the goods!
- You just seek the best price and nothing else!
So send out that RFQ—lowest bidder wins!
When to Use an RFO
An RFO can be issued from your end when price is not the sole criterion in zeroing on the perfect vendor. It is generally issued when your organization has more complex needs such as:
- In addition to goods, you may be seeking services.
- You might be looking for a way to solve a problem – and you are very much open to ideas you are finding it difficult to think of on your own.
- You might not be seeking services at the moment, however you will, in the not so distant future.
- You can’t make a decision based solely on price.