How to prepare an RFQ when sourcing products in Asia

August 07, 2023
Table of Contents

I often mention that you only get what you specify when it comes to manufacturing in Asia. This also holds true when requesting quotations from suppliers - as you only get the information you ask for.

Not asking the right questions can result in nasty surprises further down the line. For example, not asking for the MOQ may ultimately detail the order. Likewise, not requiring the supplier to reconfirm your materials and other specifications can also result in severe misunderstandings and therefore quality issues.

In this guide, I explain what you need to include in your Request for Quotation (RFQ), and why.

Overview

  • Price
  • Minimum Order Quantity (MOQ)
  • Product Specifications
  • Lead times
  • Payment terms

 

Price

Asking for the product price goes without saying. However, it’s essential to tie the pricing to the product specification, order volume and delivery terms (i.e. FOB or CIF). Clearly, the price is lower if you purchase 10,000 pcs, compared to 500 pcs.

That’s also the case if you request a quote based on EXW terms as compared to DAP (Delivered at Place).

Include this information:

  • Incoterm
  • Order volume
  • Product specification file

Tip: Request quotations based on an order quantity ladder to understand their pricing structure and how increased volumes in the future can lead to price reductions.

Minimum Order Quantity (MOQ)

Some suppliers offer lower MOQs while others require larger order volumes. It’s critical to understand if a supplier is willing to sell 500 pcs, or if they require that you purchase ten times that.

This is relevant even for established buyers, as it’s in their interest to place a smaller trial order before going all-in on a new supplier.

In addition, the MOQ structure also differs.

Example

  • MOQ per order: 1000 pcs
  • MOQ per product: 500 pcs
  • MOQ per material: 250 pcs
  • MOQ per color: 250 pcs
  • MOQ per size: 125 pcs

Most suppliers don’t provide a complete MOQ breakdown unless asked for.

Product Specifications

You get what you specify is the golden rule when it comes to both OEM and ODM manufacturing in China, Vietnam and elsewhere in Asia. A price figure is meaningless unless it’s based on your product specification.

For example, a watch made of a zinc alloy can cost 5 dollars, while the exact same design made of 316L stainless steel can cost more than 20 dollars.

Further, you cannot compare prices between suppliers unless you know for certain that they actually did calculate the price based on your product and material specifications.

The problem here is that you can’t take that for granted.

It takes a bit of time for the supplier, sometimes several hours, to review the product specification, call material suppliers and put together an accurate quotation.

So, what many supplier representatives do is to glance through your product specification and provide a rough estimate. Sometimes, suppliers quote a different product altogether - without telling you.

Imagine if you go ahead and select a supplier offering a competitive price, only to find out later that it was based on a different product and material spec from the beginning.

This can be resolved by forcing the supplier to “reconfirm” some key specifications. As such, they will actually have to review your product specifications.

Example

  • Material: Specify
  • Movement: Specify
  • Diameter: XX mm
  • Plating type: Specify
  • Leather type: Genuine leather / Calf leather

Product compliance

You must also inform your supplier of your product compliance requirements. For example, if your product must be REACH compliance, then let them know that when requesting a quotation. Keep in mind that product compliance also has an impact on the unit price and material MOQ.

You don’t want to end up in a situation where you find out much later that the quoted price and MOQ requirement was based on a non-compliant product and material that you cannot legally sell in your country or market.

Tooling costs and product sample

Custom designed plastic and metal parts generally require new molds. The tooling cost can be significant, ranging from hundreds to thousands of dollars. In case your product consists of multiple custom-designed components, then ask for a complete cost breakdown of all molds:

Example

  • Case mold: $XXX
  • Hands tool: $XX
  • Strap tool: $XXX
  • Indexing tool: $XXX
  • Crown tool: $XXX
  • Packaging sample: $XXX
  • Total sample cost (including additional charges): $XXX

Likewise, you must also ask for the pre-production sample price.

Lead times

Tooling and product sample lead times are other factors that matter when selecting suppliers. This is also the case for the mass production time. Some suppliers may set a lead time of 30 days while others put it at twice that.

That said, beware of overly optimistic lead times. If a number of suppliers specify a lead time ranging between 40 to 50 days, and another one claims they can wrap up production in just 15 days - then you can assume that they just make their numbers up on the go.

Set the right expectations

It’s critical to make your supplier understand that you mean business from the very beginning. Let them know that you have strict quality assurance in place by informing them that the product will be subject to quality inspections.

If they for any reason try to find excuses for why you should not book a quality inspection, then that’s a strong signal for why you should take two steps back immediately.

This is also the case when it comes to payment terms.

A 30% deposit and a 70% post-production is the basic standard in most industries. Suppliers insisting on 100% pre-payments normally have something to hide and should, therefore, be avoided.

It’s far more difficult to renegotiate such terms at a later stage in the process. Once you have spent months developing product samples, your supplier already knows that you are in a position where you must place an order to start selling your product.

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