Sourcing is a long process from managing internal needs to getting in a new supplier. Request for quotation (RFQ) is one of the sub-process in sourcing that require tactic and communication skill. I try to summarize from my uncountable number of front line sourcing experience and write down some of the “best practices” when asking for quotation. I believe this could be a friendly reminder for my experienced buyer fellows and maybe a useful guideline for newbie buyers.
Introduce yourself and you project
Although it seem obvious, you may surprise to know that most buyers start with “how much is this?” as their first sentence when contacting new supplier. It is not only rude, but also an ineffective one. That sound like a scammer or direct marketer who is group sending to anyone.
Try to start by saying “Hi my name is Ben and I am looking for XXX with FDA standard…”. You need to give suppler a clear and strong introduction that give them a message on what you need and it is a real business, real opportunity. How to “market” your project could make a clear different.
Set baseline of quotation for exchange rate
Many times we see sellers complain buyers come back with their offer from 2 years ago and ask to keep the same price. What even worst is that buyer get frustrated when they are told price is no long valid and a new and more expensive quotation is updated. Although it is clearly related to material inflation, exchange rate or any other changing factors, buyers tend to believe they are tricked by supplier and usually end up unhappily.
As best practice, always have your supplier quote with a valid date, ideally with it baseline of exchange rate and key material market price listed. Eg. USD:CNY 1:6.4, brass price at $XXXX/ton. Although you might not need going into complicate costing calculation, the baseline help a lot on future negotiation.
Don’t dump unorganized information to supplier. They will just run.
I used to make such a mistake. I was trying my best to give as much information to my suppliers so that they can give a fair response. I ended up with 2 kind of responses. First, there were suppliers who come back with a whole list of clarification. Second, they ran away and not want to communicate further. While one could claim that those ran away were not professional and not likely a good supplier, you may also risk yourself a good chance to lose opportunity with capable supplier who just misunderstood you. Sourcing is a process that provide opportunity for both side to understand each other, and over-simplifying conclusion might end you with expensive supplier who only good at communicate but nothing.
Always make the communication short, easy to read and ideally in their language. I ran an experiment myself before. A Chinese RFQ is much more readable and higher responsive than an English one.
Compare apple to apple. EXW is always a good starting point
After reading your RFQ, most suppliers will come back and ask for at least two things: Should I quote you FOB? FOB which port? And, what is your packaging requirement? Unprepared buyer will normally ask them to quote their closest port. Bear in mind that some logistic cost sensitive product (bulky, relative lower value) could cost quite differently at this point. If you are in the first round of your RFQ, asking them quote in EXW could be a good starting point for comparison.
Same for packaging. If you ask them to quote a 4+2 color box printing, that cost could be various and printing is obviously not the supplier core competitiveness. Taking out logistic and packaging provider cost give you a relatively fair comparison for the real product cost.
Ask for their standard product which they know the best
Even if you are OEM-ing, it might still make sense to start with asking price of supplier’s standard product. By doing this, experienced buyer could evaluate how much the slightly-different OEM version should cost. This way is especially useful if you are not going to show a new, yet-to-trust supplier your new product idea. Also it is the fastest way to get an idea how competitive a factory could be.
If they end up disappoint you by showing a clear different of the two cost, you can then ask them what and why is the different between the OEM version and their standard point. This is a great starting question on further price negotiation.
“Golden sample” isn’t enough
Golden sample could loosely define as a sample that quotation should be 100% base on it. For certain industry, golden sample is a fast and relative reliable way to get accurate quotation. However, a sample can only reflect it outlook, dimension, weight, and probably some material. You cannot tell the quality and test standard, product liability and anything related to it productivity from just a golden sample. For a precise quotation, buyer might need to provide their full specific, with tolerance requirement, quality standard (eg. AQL) expectation in their RFQ. Too many time I see argument and even dispute after production started and delivered. “The sample is good” isn’t always good enough.
Don’t just disappear after asking.
When you go to fresh market, you ask about “how much is it?”, and you get an answer. Buy it or not, most of us will at least say thank you as a response. However, when it comes to B2B, surprisingly, buyer tends to be much less responsive. In a poll result from 200 front line Chinese suppliers, I asked about what is the most disturbing behavior a buyer could have commanded. A clear “winner” is “the lack of responsiveness after enquiry”. Most sellers find it uncomfortable when buyer act aggressively at the beginning and suddenly disappear.
What is the impact? Honestly, not much. I am pretty sure your supplier will still choose to response to you next time. It is a matter of personal manner that should have taught in kindergarten. Who am I to judge this? I just try to tell a fact - Supplier need to be respected, and they care about this. For those believe that you need to build relationship with suppliers, I think that mean something. Simply answering thank you or some comments with their quote will be welcomed.
Conclusion
RFQ is a two way communication process that require experience from both side of the trade. In manufacturese.com you can find industrial insider that can quickly pickup your project and support your sourcing project. If you are interested to spoke with them, just let us know. We will make the link.
Comments