How to use request for quotation the right way
Whether it's for your own needs or for items you sell, getting the best deal is a must if you want to keep up with your competitors and reduce your running costs. However, hunting for offers is time-consuming. Fortunately, there are some ways to make it simpler. One of them is the RFQ, or Request For Quotation.
Its name being self-explanatory, let's go straight to the working principle. The method is to create a layout with all the information a supplier could ask for and send out requests to multiple suppliers in order to choose the one that best meets your needs. You can use it just once for each item to help determine your favourite supplier, or for every single purchase if you want to make sure you're always getting the best deals.
One of the advantages of using RFQs is the competition it creates between suppliers. Because your RFQ clearly states that it's being sent out to several suppliers, each of them have to present the best prices (or services) in order to beat the others.
Another advantage is that it allows you to build a list of suppliers that have presented interesting offers, even if they're not the one you went for. In case your usual supplier can't fulfill your order, you'll already have a list of alternatives you can contact.
To make it more convenient for our users, at Odoo we've included RFQs as a standard function in our Purchase Management module, with most of the job done automatically.
Here's a look at what Odoo's automatically generated RFQ contains and if you're not using Odoo (yet?), what yours should contain, if you want to get the right answers as quickly as possible.
- In addition to your business's details (which you'll of course have started with), it's important to include contact details for people at your company that can answer commercial and/or technical questions.
In Odoo, you only have to enter the contact details once. They will automatically be added to the RFQs.
- Add your own reference number to your RFQ, so that you don't get confused if you have to use the same one later on.
Once again, this number is automatically generated in Odoo and recorded in your accounting books, opportunities, messages, etc.
- Specify the date of submission and, very importantly, a deadline for your quote to be answered by. Make sure you allow enough time for suppliers to create a good quote but not too much so that you don't miss out on other offers that have a time limit.
- Specify the terms of the of the transaction. Start with the delivery, for which I suggest you look at Incoterms® - terms set by the International Chamber of Commerce.
You can then add the payment terms you wish to be offered. This can be a number of days, but also terms such as payment on delivery, deffered payment, etc.
For number of days, one option could be to have a special term such as '30 days end of month', which means payment has to be received by the end of the next month. For instance, for an order taken on 20/02/15, payment is due on or before 31/03/2015.
Other terms inlude cash on delivery, cash before shipment, or even bill of exchange.
- State that you want to know how long the quote you're given is valid.
- Even if the delivery address is the same as your business, it's always better to specify it within the quote criteria, to make sure you avoid unexepected shipping costs if shipped to a different location than the one that the quote was based upon.
In our module, you can choose which warehouse it's sent to or use a drop-shipping method which will automatically create a follow-up, and ship-out the selected offer to your customer.
- Finally, the main purpose of the quote is, of course, the items you want to buy. Give a thorough description and be precise about each detail, especially on the ones that special or uncommon. Indicate the quantity you wish to order but also include a forecast of your needs for the whole year. This will get the supplier to think about the long term relationship and could lead to you getting a cheaper deal.
In Odoo, once a product is created, it's just one click away from any quote you build. It takes just seconds to add as many items as needed to each RFQ.
Once you've received all the quotes, all that's left to do is choose the one that fits.
Although it's not necessary, it's always nice to notify the outbid suppliers that you won't be buying from them. It's also the best way to prevent them from continually sending you reminders.
Any insights you want to share or do you still have questions? Feel free to leave a comment below.
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