How to Write a Great RFQ
A detailed, accurate and thorough RFQ is the first step to entering a successful partnership. No one wants to be surprised in the future when suddenly a requirement previously unknown to the vendor is brought to light. Products, parts and assemblies are successful when all requirements, specifications and expectations are detailed and reviewed up front.
The below sections are critical to have in an RFQ:
1. Introduction & Product Description
All good RFQs should have an introduction about your company and the product and its intended use. These paragraphs are useful to a supplier or manufacturer so they understand what you are trying to achieve and what is expected of them. It is also helpful to provide information to your supplier about how much funding you have and what the life cycle of the company looks like. This will give your supplier the confidence to work with you and potentially provide you with better payment terms.
2. Scope of RFQ
This is where you’ll detail what your expectations of the supplier are. Do you want them to develop the full assembly and manufacturing process? Or will you dictate exactly what you want? Should they be responsible for providing a test plan or quality assurance plan? Do you want them to only provide DFM feedback? Or be more involved in improving the manufacturability of your parts? Be very specific about what you want them to do so they can accurately quote the project and make sure they have team members available to support you.
3. RFQ Due Date
Make sure its clear when you expect a response. Your supplier should be checking in with you along the way about different details in the RFQ or any questions they have. If not, its good to check in with them to ensure they are actively working on the RFQ and will submit it on time.
4. Contacts
Detail who the points of contact in your company are. Who is the lead engineer, who is the commercial contact, who is the quality contact, etc. You will also expect them to provide this back to you about who their lead team members are.
5. Timing
Lay out the milestones for you product development. When are your targeting to do your samples builds and how many parts should they make? Will you order an initial batch of parts to do testing with? When do you want to launch your product?
6. Volumes, Take Rates and Delivery Terms
Provide your supplier with an estimate of what you think your sales volumes will be year over year. You want to ensure they quote the correct manufacturing and assembly process for your estimated volumes. The process used to manufacture 1,000 parts is very different from what is done to manufacture 1,000,000 parts!
It is also important to detail what take rates you are expecting if your product has different variants. Some products have different ingredients or components depending on which region of the world they are sold in. Or perhaps what you are selling comes in different colors and you expect to sell 50% of your product in blue, 30% in red and 20% in yellow.
You can also go into specifics about what your manufacturer is allowed to do with their manufacturing regimen and delivery terms. For example, you could say they can manufacture 10,000 parts at a time and deliver 2,500 each month over the next 4 months. Or maybe you don’t want parts sitting around that long and they are only allowed to manufacture and deliver 2,500 parts each month. There are costs associated with each version you choose and those should be carefully considered.
7. Commercial Terms
Here is where you might start to struggle. Most manufacturers are very wary when working with startups because they want to make sure all their costs are covered in case you run out of money. So most of the time they will demand 100% up front payments for everything you are doing. But, if you can demonstrate that your company is well funded and your resources are well managed, they might be willing to help you out with your cash flow.
Ideally, you would pay for NRE costs as they are accrued – for example launch costs and design costs are human personnel working hours. So you should only pay for that as the hours are worked, not before. Tooling costs or assembly costs will need some payments upfront, as that is what your manufacturing will have to pay their suppliers up front. It is best to try to spread out the payments as much as possible or attach the payments to milestones. For instance, you can pay 30% up front, 30% when the tool or line is completed and 40% when the first part is produced from the tool or assembly line. Reserving some portion of money to the end is typical as that is how we maintain accountability for receiving well functioning equipment.
8. Engineering Statement of Work
This will be the largest section of the RFQ where you detail everything there is about your product and how it is expected to perform. The items should all be included
Part numbers – All components should be detailed with their own part numbers then the assembly its self should also have a part number. This is critical to ensure the correct revision of the part is tracked and built.
Environment where the product will be used – high heat? Humidity? Moisture?
Critical characteristics – detail all GD&T for critical components and critical dimensions, any important assembly tolerances required, pull out forces required, life expectancy of the product, etc.
Materials – specify any specific materials each component should be made of
Color Requirements
Haptic and Visual Requirements
Validation requirements – specify any tests that need to be run to ensure functionality
Packaging Requirements – How does the final product need to be packaged to ship to you?
Quality Requirements – what kind of end of line testing and checks will need to be in place to ensure non-conforming products are caught prior to shipping?
The most important part of a top quality RFQ is being specific and providing as many details and requirements as you can. It takes some experience to know what should be put in the RFQ and to make sure you’ve thought of everything you need. But with time and some trial and error and maybe some help from a procurement specialist you can avoid costly miscommunication and any surprises down the road.