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RFI, RFP, RFQ: Which one do you need?

If you are an executive in the logistics industry, after dealing with 2020 and 2021, your biggest wish for Christmas may be a smoother 2022. But the reality is that as we continue to see new developments in December 2021 and January 2022 about new travel restrictions and possible lockdowns, smoother supply chains may not be in the cards for the new year. Today’s supply chain costs are increasing faster than ever, and company executives are turning to their supply chain teams with requests to improve capacity, lower costs, and increase customer satisfaction, which leaves many logistics executives with almost a single option; to reevaluate their suppliers with the hopes of finding the right mix somewhere. And presented with this requirement, the question that many executives now may have is, should I launch an RFI, an RFQ, or an RFP?

RFI, RFQ, RFP: Which one should you use?

person writing on white form paperThe reality is that while the terms are similar, the objectives, requirements, and expectations of all three of them can be substantially different. Companies that use an RFP where they should have used an RFI may find themselves with a solution in search of a need. Companies that launch an RFI instead of an RFQ may spend too much time reading exciting ideas that may or may not be possible or appropriate for the industry, the stage of the company, or the clients.

The core purpose of each type of RFx document is to help select the perfect vendor. To accomplish that, you will need answers to your most critical questions, and the primary question you need to be answered may be; how do you ensure you are asking the right questions? For example, it often comes down to whether you should issue a request for information (RFI), request for quotation (RFQ), or request for proposal (RFP). Each is a different tool, so which do you use?

RFI: Request for Information

An RFI educates ⁠— RFI responses explore how a vendor might solve a problem or fill a need. Short for “request for information,” the RFI is a preliminary document used by companies that don’t understand the marketplace they’re about to enter. Because the RFI is more of a fact-finding document, you’ll want to ask open-ended questions, ones that allow the vendor to talk about its full range of offerings. Typically, the RFI will state the broad business challenges you’re having, and then the vendor can tailor its response within the context of those challenges. Often, the vendor will explain its position in the marketplace (for instance, what industries it specializes in), how it licenses its product, and what other fees you can expect.

RFP: Request for Proposal

An RFP, “Request for Proposal,” is a document that asks vendors to propose solutions to a customer’s problems or business requirements. An RFP is usually what follows an RFI; in fact, a company will rarely go from an RFI to an RFQ (for reasons that will become clear below). An RFP should contain much more specificity in terms of what a company’s needs are by outlining the business goals for the project and identifying specific requirements that are necessary for the work being requested. The key to this document is to include sufficient detail to give vendors the context they need to propose a valid solution, yet it still needs to allow enough leeway for the vendors to apply creativity and best practices to fulfill those needs.

RFQ: Request for Quotation

An RFQ quantifies ⁠— RFQ responses provide the cost of meeting a specific need. Short for “request for quotation,” the RFQ is an even more detailed document that drills down to the exact specifications required by the company. In a situation where an RFQ is used for a B2B software project, the company knows enough about its current system and exactly how it wants to change or improve it in the future. In most cases, the RFQ contains a table that lists each requirement and then asks the vendor to assess its ability to meet that requirement. The vendor then will specify whether it can meet the requirement out of the box, whether it will require some configuration, whether it will require some custom code, or whether it will require leveraging a third-party vendor.

References

RFI v RFQ v RFP: Which one should it be? – https://rfp360.com/rfi-rfp-rfq/

RFI, RFQ, & RFP: What’s the Difference? – https://www.cobalt.net/rfi-rfq-rfp-whats-the-difference/

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