Your procurement process is a critical part of keeping your business running smoothly. You need to source quality goods and services at the right price, and that’s where the Request for Quotation (RFQ) process in Dynamics 365 Finance and Operations comes into play. This powerful module helps you streamline vendor interactions, compare bids, and make informed purchasing decisions.

In this guide, you’ll learn what an RFQ is, how to set it up, the steps to create and send one, how to handle vendor replies, and tips to avoid common pitfalls. By the end, you’ll have a clear roadmap to optimize your procurement using this robust tool. Let’s start by defining what an RFQ is and why it matters.

Key Takeaways/ TL;DR

• Complete RFQ Lifecycle Management: Dynamics 365 F&O streamlines the entire request-for-quotation process—from creation to evaluation and conversion—ensuring a structured, end-to-end procurement workflow.

• Customizable Setup for Strategic Sourcing: You can tailor RFQs using bid types, scoring criteria, and solicitation categories to align with your procurement goals and vendor evaluation standards.

• Efficient Vendor Collaboration and Communication: The platform supports both manual input and portal-based submissions, allowing vendors to respond, revise bids, and engage in Q&A—all in a centralized, secure space.

• Transparent Evaluation and Record-Keeping: Automated scoring, sealed bidding support, and detailed journals ensure every RFQ decision is traceable, auditable, and compliant with internal and external standards.

What Is the RFQ Module in Dynamics 365 F&O?

The RFQ module in Dynamics 365 Finance and Operations is a toolset that allows you to solicit and find vendor bids for products or services.  It is one of the features of the Procurement and sourcing module and enables you to control the lifecycle of the RFQ from start to finish, including converting accepted quotes into purchase orders or agreements.

Microsoft’s documentation outlines the RFQ lifecycle: you create the RFQ, send it to vendors, receive vendor responses, evaluate them and then make final purchasing decisions.  This enables you to get competitive pricing and quality because you are asking vendors to make their best offer.

The module also works seamlessly with other Dynamics 365 Finance and Operations processes such as purchase requisitions, journals, and scoring. For example, you could create an RFQ linked to a requisition to fill a stock need and add in scoring criteria so that your evaluation is objective; it can also work with purchasing environments so that procurement policies are adhered to. You can create RFQs in several ways, depending on your needs:

• Manual Creation: You build an RFQ from scratch in the Procurement and sourcing workspace, specifying items, quantities, and delivery details.

• Planned Orders: Generate RFQs automatically from planned purchase orders based on demand forecasts or inventory shortages.

• Requisitions: Convert approved purchase requisitions into RFQs to source specific goods or services requested by your team.

Each scenario allows you to respond to the multitude of procurement conditions you may face, whether replenishing a warehouse or procuring a specialized piece of equipment. The integrated nature and flexibility of the RFQ module make it an excellent resource for managing the vendor relationships you have established in a dynamic manner. 

With this understanding of the RFQ module’s role, let’s move on to the setup steps you’ll need to get started.

Pre-Configuration & Setup

Before you are able to issue your initial RFQ, you must set up the system to reflect your procurement requirements. A correct setup allows for the smooth operation of your Dynamics 365 Finance and Operations RFQ process and adherence to your business objectives. Microsoft's documentation highlights several key parameters to set up in the Procurement and sourcing setup area. Here’s what you need to focus on:

• Procurement Parameters: Define default settings for purchase types, such as standard purchase orders or project-related purchases. Set deadlines for vendor responses to keep the process on track. You can also specify bid types, like open or sealed bidding, depending on whether you want vendors to see each other’s bids.

• Email Templates: Create templates for RFQ communications. These ensure consistent messaging when you send RFQs to vendors, saving time and maintaining professionalism. For instance, you might set up a template that includes delivery terms and submission instructions.

• Scoring Criteria: Establish criteria to evaluate vendor bids objectively. You can assign weights to factors like price, delivery time, or quality certifications. For example, if timely delivery is critical for your production line, you might give it a higher weight in your scoring.

• Solicitation Types: Define standardized solicitation types, such as “standard goods” or “services,” to streamline RFQ creation. This helps categorize RFQs and ensures consistency across your procurement team.

• Sealed Bidding Setup: For sensitive or high-value procurements, enable sealed bidding. This feature, supported by Microsoft’s Key Vault integration, encrypts vendor responses to prevent premature access. You’ll need to configure encryption settings and assign unsealing permissions to authorized users, ensuring a secure and fair process.

These configurations lay the groundwork for a consistent and efficient RFQ process. For instance, a manufacturing company might set up scoring criteria that prioritize cost and supplier reliability, while a retailer could focus on delivery speed. 

Taking the time to tailor these settings ensures your Dynamics 365 Finance and Operations RFQ process meets your specific needs. Now that your system is ready, let’s walk through how to create and send an RFQ.

Creating and Sending an RFQ

Creating and sending an RFQ in Dynamics 365 Finance and Operations is a straightforward process when you know the steps. The Procurement and sourcing workspace serves as your central hub for initiating RFQs, guiding you through each stage to ensure accuracy and efficiency. Microsoft’s documentation provides clear instructions, and here’s a step-by-step breakdown to help you get it right:

1. Access the Workspace: Start in the Procurement and Sourcing workspace. Navigate to the “Requests for quotations” section and select “New RFQ.” This opens a form where you’ll define the RFQ’s details.
   
   
2. Select Purchase Type: Choose the purchase type, such as a standard purchase order or a project-specific order. This determines how the RFQ integrates with other processes, like accounting or project tracking.
   
   
3. Assign Solicitation Method: Pick whether the RFQ is open (vendors see all bids) or sealed (bids remain confidential until unsealed). Sealed bidding is ideal for high-stakes procurements where fairness is paramount.
   
   
4. Enter Delivery Details: Specify the delivery date and warehouse location. For example, if you’re sourcing parts for a factory, indicate the warehouse where goods should arrive to avoid confusion.
   
   
5. Add Line Items or Categories: Include the specific items or procurement categories you need. You can add products directly from your item master or select categories like “office supplies” for broader requests.
   
   
6. Select Vendors: Choose vendors to invite. The system can suggest vendors based on past transactions or item requirements, or you can manually add them. For instance, you might include trusted suppliers for critical components.
   
   
7. Generate and send the RFQ: Create an RFQ journal to finalize the document. You can then print it or email it to vendors using pre-configured templates. The system tracks when RFQs are sent, ensuring you have a clear record.

This process ensures your RFQ is clear, professional, and tailored to your needs. For example, a construction company might create an RFQ for steel beams, specifying delivery to a specific site and inviting multiple suppliers to bid. The Dynamics 365 Finance and Operations RFQ module makes this efficient, letting you focus on evaluating responses. Let’s explore how to handle those vendor replies next.

Handling Vendor Replies

Once you’ve sent your RFQ, vendors will respond with their bids, and Dynamics 365 Finance and Operations provides tools to manage these replies effectively. Depending on your setup, you can handle responses manually or through the Vendor Collaboration portal. Here’s how it works, based on Microsoft’s guidance:

• Manual Entry: If you’re not using the Vendor Collaboration portal, you’ll input vendor responses manually via reply journals. Navigate to the RFQ in the Procurement and Sourcing workspace, open the reply journal, and enter details like price, quantity, and delivery terms. This approach works well if you have a small number of vendors or prefer direct communication, such as via email or phone.

• Vendor Collaboration Portal: If enabled, this portal allows vendors to submit bids online, revise proposals, and track communications directly within Dynamics 365. You provide vendors with access, and they log in to enter their bid details, upload supporting documents, or ask questions. This streamlines the process, especially for large RFQs with many vendors.

• Managing Inquiries: The RFQ Q&A section lets you address vendor questions efficiently. Vendors can submit queries through the portal or email, and you respond within the system, keeping all communications centralized. This ensures clarity and maintains an audit trail for transparency.

For example, imagine you’re sourcing packaging materials for a retail chain. With the portal, vendors can submit bids online, ask about packaging specifications, and revise their offers if needed. 

The Dynamics 365 Finance and Operations RFQ process keeps everything organized, so you can focus on evaluating bids rather than chasing paperwork. This sets the stage for the next step, where you’ll compare and accept those bids.

Comparing and Accepting Bids

Once vendors have submitted their bids through the Dynamics 365 Finance and Operations RFQ process, your next step is to evaluate and select the best offer. The system provides tools to make this comparison structured and transparent, ensuring you choose based on data rather than gut instinct. Microsoft’s documentation highlights the use of comparison forms and scoring mechanisms to streamline this stage. Here’s how you can navigate it effectively:

• Use Comparison Forms: Access the RFQ in the Procurement and Sourcing workspace and open the bid comparison form. This tool displays all vendor responses side by side, showing details like price, delivery time, and any additional terms. For example, if you’re sourcing office furniture, you can compare each vendor’s bid for desks, noting differences in cost or warranty periods.

• Apply Scoring Criteria: Use the scoring criteria you set during configuration to evaluate bids objectively. These might include weighted factors like price (40%), delivery speed (30%), and vendor reliability (30%). The system calculates scores automatically, helping you identify the top bid quickly. You can adjust weights if priorities shift, such as prioritizing quality for critical components.

• Accept or Reject Lines: You don’t have to accept a vendor’s entire bid. The module lets you accept specific line items (e.g., one product from Vendor A and another from Vendor B) or reject lines that don’t meet your needs. This flexibility ensures you get the best deal for each item.

• Transfer to Purchase Documents: Once you’ve chosen a bid, transfer accepted lines to a purchase order, purchase agreement, or requisition. The system creates these documents automatically, linking them to the RFQ for traceability. For instance, a construction company might convert a winning bid for steel into a purchase order for immediate delivery.

The scoring mechanism plays a pivotal role here. It removes bias by quantifying vendor performance, so you make decisions based on clear metrics. This structured approach in the Dynamics 365 Finance and Operations RFQ process saves time and ensures fairness. With bids evaluated, let’s explore how sealed bidding works for sensitive procurements.

Sealed-Bid RFQ Process (If Applicable)

For larger value or sensitive procurements, the sealed-bid capability in Dynamics 365 Finance and Operations RFQ provides an extra layer of security for collecting and evaluating bids. This process is particularly useful in instances when you are required to provide assurances of a fair and unbiased process, such as in government contracting or competitive tenders. Below is a walkthrough of the process:

• RFQ Creation: Start by creating an RFQ in the Procurement and Sourcing workspace, selecting the sealed-bid option. Specify that responses will be encrypted, using Microsoft’s Key Vault integration to secure the data.

• Vendor Submission: Vendors submit their bids through the Vendor Collaboration portal, where their responses are encrypted automatically. This ensures no one, including your team, can view bids before the designated unsealing time.

• Unsealing Process: When the bid deadline passes, authorized users unseal the responses using the system’s decryption tools. This typically involves a procurement manager accessing the RFQ journal and initiating the unsealing process, revealing all bids simultaneously.

• Bid Evaluation: Once unsealed, you evaluate bids using the comparison form and scoring criteria, just like in an open RFQ. The system maintains an audit trail of the unsealing process for transparency.

Sealed bidding adds value in scenarios where confidentiality is critical. For example, a pharmaceutical company sourcing raw materials might use it to prevent price collusion among vendors. It also builds trust with suppliers, as they know their bids are secure until evaluation begins. 

The Dynamics 365 Finance and Operations RFQ sealed-bid feature ensures compliance with strict procurement regulations while maintaining fairness. Now that you understand sealed bidding, let’s look at how the system keeps track of all RFQ activities.

RFQ Journals & Record-Keeping

Keeping detailed records is essential for transparency and compliance in procurement. The Dynamics 365 Finance and Operations RFQ process generates several types of journals to document every step, ensuring you have a clear audit trail. Microsoft’s documentation emphasizes the importance of these records for tracking and accountability. Here’s what you need to know about the journals and record-keeping features:

• Distribution Journals: These track when and how RFQs are sent to vendors. Each journal entry logs details like the send date, method (email or print), and vendor list, so you can verify that all invited suppliers received the RFQ.

• Reply Journals: These capture vendor responses, whether entered manually or through the Vendor Collaboration portal. You’ll see bid details like price, quantity, and terms, linked to the original RFQ for easy reference.

• Change Logs: Any modifications to the RFQ, such as adding a vendor or updating a deadline, are recorded in change logs. This ensures you can track edits and maintain accountability.

• Audit Trails and Bid Versioning: For sealed bids, the system logs the encryption and unsealing process, including who accessed the bids and when. It also tracks bid revisions, so you can see if a vendor updated their offer during the submission period.

• Activity Tracking: The RFQ Q&A section records all vendor inquiries and your responses, creating a centralized communication history. This is useful for resolving disputes or reviewing past decisions.

Imagine you’re auditing a procurement for a retail chain. The journals let you trace every step, from sending the RFQ for packaging materials to accepting a vendor’s bid, ensuring compliance with internal policies. 

Also Read: On-Premises Deployment of Dynamics 365 for Finance and Operations

These records make the Dynamics 365 Finance and Operations RFQ process transparent and reliable. Next, let’s cover common pitfalls and how to avoid them to ensure a smooth rollout.

Common Pitfalls & Best Practices

If you implement the Dynamics 365 Finance and Operations RFQ process, it can transform your procurement. But missteps can derail your efforts and waste lots of time and resources. Microsoft’s documentation highlights several pitfalls and best practices to guide you. Here’s a detailed look at what to watch for and how to succeed:

• Incomplete Setup: Starting without fully configured parameters can lead to inconsistent RFQs. Ensure all procurement settings, like bid types and scoring criteria, are defined before launching. For example, set up email templates to streamline vendor communications.

• Poor Data Quality: Inaccurate vendor or item data causes errors in RFQs. Before implementation, clean your data by verifying vendor details and standardizing item records. This prevents issues like sending RFQs to outdated contacts.

• Open vs. Sealed Bidding Confusion: Choosing the wrong bidding type can disrupt fairness. Decide early whether open or sealed bidding suits your scenario. Use sealed bidding for high-value contracts to ensure confidentiality, and open bidding for routine purchases to encourage competition.

• Lack of User Training: Your team might struggle with manual entry or the Vendor Collaboration portal without guidance. Train users on both processes, using real-world examples like entering a bid or responding to vendor queries. This builds confidence and reduces errors.

• Inconsistent Workflows: Without standardized templates, RFQs can vary across your team. Create uniform templates for RFQs and responses, ensuring consistency in how you solicit and evaluate bids.

By addressing these pitfalls and following best practices, you set up a reliable RFQ process that saves time and ensures quality outcomes. Let’s wrap up with final thoughts on leveraging this system.

Conclusion

The Dynamics 365 Finance and Operations RFQ process allows you to simplify procurements, get bids from multiple vendors and make informed purchase decisions. From creating RFQs to evaluating vendors' responses and making your decision, the module offers tools to simplify processes and enhance transparency. Although there may be challenges, such as how to set up, user adoption or change management, you can successfully address them through planning and user training. 

The benefits of better pricing, faster processes and better transparency make it a useful tool for your organization. To grab the full value, you may want to engage with experts in the field. WaferWire’s Dynamics 365 professionals are prepared to assist you with setup and optimization, so that your RFQ tool functions properly and creates value. Reach out today to WaferWire to start working on improving your procurements. 

FAQs

Q1. How can you ensure the Dynamics 365 Finance and Operations RFQ process aligns with your organization’s procurement policies?
To align the Dynamics 365 Finance and Operations RFQ process with your policies, configure procurement parameters to reflect your rules, such as approval workflows or bidding methods. Set up standardized solicitation types and scoring criteria to enforce consistency.

Q2. What role does the RFQ Q&A section play in managing vendor interactions?
The RFQ Q&A section in Dynamics 365 Finance and Operations RFQ centralizes vendor communications, allowing you to address inquiries efficiently. Vendors can submit questions via the Vendor Collaboration portal, and you respond within the system, maintaining a clear record.

Q3. Why is it important to configure scoring criteria before initiating an RFQ?
Configuring scoring criteria in the Dynamics 365 Finance and Operations RFQ process ensures objective bid evaluation. You define factors like price, quality, or delivery speed, assigning weights based on priorities.

Q4. How does the system handle multiple vendors submitting bids for the same RFQ?
The Dynamics 365 Finance and Operations RFQ module manages multiple vendor bids by compiling them in a comparison form for easy review. You can evaluate each bid’s details, like price or terms, side by side. The system supports accepting specific line items from different vendors, allowing you to mix and match for the best deal.

Q5. What are the advantages of converting an accepted RFQ bid into a purchase order?
Converting an accepted RFQ bid into a purchase order in Dynamics 365 Finance and Operations RFQ streamlines procurement by automating document creation. It links the bid details directly to the order, ensuring accuracy and traceability.