Tips for Managing a Successful Request for Quote/RFQ
Melton Logistics – 04/25/2024
Annual Request for Quotes (RFQs) are an invaluable tool for shippers that allows them to take advantage of the current transportation market. A company’s request for proposal processes directly impacts the service quality of its potential shipping partners, and by extension, the reliability of its entire supply chain.
Successful RFQs require careful planning to avoid miscommunications and costly disruptions. Clearly outlining the scope of work, budget, specialty equipment (if needed), compliance details, and sustainability standards will filter out those candidates who aren’t quite cut out for the job at hand.
The question becomes, what is the best way to create and manage an RFQ? This article will explore the basics of RFQ’s and their management.
What is an RFQ?
A request for quote (RFQ) is a formal document used to solicit proposals from potential suppliers, vendors, or service providers when seeking to purchase goods or services. An RFQ details an organization’s specific expectations and evaluation criteria, which potential partners then utilize to form proposals or quotations outlining their expertise and the associated costs of completing the tasks listed in the document. A successful RFQ serves as a helpful rubric for evaluating potential partners’ offerings and their ability to adequately provide the required services.
Why Do You Need an RFQ?
A transportation RFQ is where the strategic partnership between a shipper and 3PL provider really begins, as it defines both companies’ responsibilities and expectations for success.
From a shipper’s perspective, the RFQ simplifies the process of comparing providers and determines the right combination of cost and expertise. Though rates play a significant role in finding the right logistics partner, most shippers understand the lowest rate isn’t always the most valuable offer. 3PLs with proven industry experience, tools to provide accurate freight visibility, 24-hour access to logistics personnel, and a strong track record of on-time delivery tend to bring more to the table than simply a less experienced 3PL operating strictly on the basis of rates/affordability.
For 3PL providers, an RFQ serves as a critical first impression on what might become a long-term business partner and establishes clear expectations should they be awarded the contract. If an RFQ lacks detail or is outdated, the resulting quote will prove inaccurate as the scope of service changes. Thus, an RFQ sets shipper-3PL partnerships up for success by aligning expectations on the scope of work and pricing from the start.
Steps to Creating a Successful RFQ
1. Introduce your Business: Provide a brief but informative introduction to your company, including your industry, business goals and the type of products you ship. This tells potential partners the basic motives behind your distribution needs.
2. Define the Problem: Clearly articulate the specific problems or pain points you want the 3PL provider to address. Include essential parameters like delivery regions, packaging specifications, weight, size, and key performance indicators (KPIs). Don’t forget to include the expected duration of your partnerships, as it will undoubtedly impact pricing.
3. Stay Updated: Ensure that the data in your RFQ is accurate and up to date. Insufficient shipping information (such as a change in delivery location, outdated payment terms, or special equipment requirements) will most certainly produce inaccurate quotes. Stay informed about current market trends to provide the most relevant information to potential 3PL candidates.
4. Ask Pertinent Questions: Utilize the RFQ as a means to gather information from potential candidates by exploring the following:
- Do you have experience in managing products from our industry?
- What is your available growth capacity?
- Can you provide multiple references?
- What is your typical timeline for managing projects sharing similar scopes?
- Why is your company the best choice for this project?
5. Provide Response Instructions: Standardize proposals by offering clear instructions for content and formatting. Consider providing a template for 3PL providers to complete their proposed solutions.
When is the Best Time to Submit an RFQ?
While it’s generally best to submit an RFQ as soon as a pressing issue arises, there are a few strategic advantages working in your favor if you can manage to wait for winter. First quarters are typically excellent periods for RFQ submissions, as 3PL providers are already in the process of organizing their contracts for the year and shipping rates are typically lower. Conversely, an RFQ submitted in the summer months will generally attract higher rates due to peak shipping seasons and holiday preparations leading to tighter carrier capacity.
No matter when you submit your RFQ, work to condense the entire process from submission to selection down to approximately 6-8 weeks. How can Melton Logistics utilize our over twenty years of experience across a broad range of products, modes or transportation and services, to assist your company with your transportation needs?