Understanding Quotations
What Does This Page Cover?
Learn about Quotations in the procurement process, Request for Quote (RFQ), and how they help users with effective quote comparison and to complete the purchase successfully.
Overview
Quotations in procurement refer to the process of requesting and receiving price quotes or proposals from potential vendors for the purchase of intended goods. This step is essential in the procurement process, as it allows organizations to gather pricing information, compare offers, and ultimately select the appropriate vendor that offers the best value for their requirements.
Quotations are an essential part of any business. They facilitate the procurement of the appropriate materials at the most competitive prices and enable businesses to verify the quality of products or services being procured. Quotations can also be used to evaluate bids.
Quotations in Procurement by Zoho Creator
Once the procurement need is identified, the procurement team or requester creates an RFQ (Request for Quote) document. The RFQ typically includes detailed specifications, quantity requirements, delivery terms, payment terms, and any other relevant information.
The RFQ is then sent to the selected vendors, inviting them to submit their quotations or proposals in response to the request. Vendors review the RFQ and provide detailed quotations, including pricing information, delivery schedules, product specifications, and any additional terms and conditions. This in turn helps the procurement team identify potential vendors who can fulfill the requirements outlined in the RFQ.
Quote Comparison
The procurement team collectively views all the quotations provided by the vendors and selects the best possible option for approval. Here is where the organization engages in formal comparisons of quotations provided by the vendors in order to secure the most prosperous terms, pricing, and conditions for both parties while building a mutually beneficial relationship.
A[Initiate Procurement Need] --> B[Create RFQ (Request for Quotation)]
B --> C[Select Vendors/Suppliers]
C --> D[Send RFQ to Vendors/Suppliers]
D --> E[Receive Vendor Quotations]
E --> F[Evaluate Quotations]
F --> G[Negotiate with Selected Vendors]
G --> H[Select Preferred Vendor]
H --> I[Finalize Purchase Order]
I --> J[Receive Goods/Services]
J --> K[Invoice and Payment]
K --> L[Record and Analyze Procurement Data]
Use Cases
Let's take as an example where an Organizartion's Procurement team receives a Procurement Request(PR) to purchase iPhones and MacBooks.
- As a first step, the team raises a Request for Quotation(RFQ) to either all vendors or
selected vendors for five of each product. In this instance, the
following are the vendors selected for a quote:
1. Stark Industries
2. Bryant Industries
- Both vendors receives RFQ and provide their quote as below and wait for the buyer's confirmation.
| Iphone | MacBook |
Bryant Industries | 7000/- | 9000/- |
Stark Industries | 8000/- | 10000/- |
- Procurement team receives and compares the quote and selects the best possible option for their requirement, which is Bryant Industries in this case.
- The selected products goes for finance approval.
- Once approved, a Purchase Order (PO) is raised for product purchase and the PR gets completed with payment.
Points to Note
- At the moment, vendors are only allowed to give one quotation per request.
- Its the requester's discretion to purchase either all or any product from the list for which the vendors are providing a quote.
- Vendors do not have an option to edit the given quotation, and only provide the unit price for the requested product.
Related Topics
Will be added when it is available.
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