Why Procurement Professionals Typically Collect 3 Quotes—Not 1, Not 5
If you’ve ever worked in procurement, you’re probably familiar with the “3 quotes rule” when bidding on a purchase opportunity. But why do we default to this practice? Why not collect just one quote for simplicity—or go all in and request five or more for broader coverage?
Let’s break it down professionally, exploring the rationale, best practices, and the logic behind this widely adopted approach.
Why Not Only One Quote?
Relying on a single quote is like putting all your eggs in one basket. Here’s why:
Lack of Benchmarking: With just one quote, you lack a point of comparison to evaluate if the pricing, terms, or quality offered is reasonable. Is it competitive, or are you overpaying? You’ll never know.
Missed Alternatives: By sticking to one quote, you might overlook better suppliers or solutions that could offer superior value, higher quality, or innovative options.
Negotiation Power: A single quote leaves little room for leverage in negotiation. Suppliers are more likely to offer better terms when they know they’re competing against others.
Why Not Five (or More) Quotes?
While it might seem that casting a wider net leads to better results, collecting too many quotes can backfire:
Diminishing Returns: After evaluating three quotes, additional quotes typically provide diminishing insights. Beyond a certain point, the extra effort rarely justifies the marginal value added.
Resource Constraints: Collecting and analyzing five or more quotes consumes valuable time and resources. Procurement teams need to balance thoroughness with efficiency to stay productive.
Supplier Fatigue: Engaging too many suppliers can damage relationships by signaling a lack of focus or clear intent. Suppliers may deprioritize your request if they sense they’re one of many in an overly competitive pool.
Why 3 Quotes is the Sweet Spot
Balanced Comparison: Three quotes strike the right balance between thoroughness and efficiency. This approach provides enough data points to make an informed decision without becoming overwhelming.
Diverse Perspectives: With three suppliers, you’re likely to get a range of pricing, delivery times, and terms to compare, which helps you identify trends or outliers in the market.
Actionable Insights: Three options allow for a focused analysis of cost, quality, and value. It’s easier to compare and contrast three suppliers than to juggle the complexity of five or more proposals.
Efficient Decision-Making: Procurement isn’t just about collecting quotes—it’s about making timely decisions. Evaluating three quotes allows for a faster turnaround, ensuring you don’t delay the purchasing process unnecessarily.
Best Practices for the 3-Quote Approach
Pre-Qualify Suppliers: Before requesting quotes, ensure the suppliers meet your requirements for quality, reliability, and capability. It must be Apple-to-Apple, otherwise you are wasting time. This saves time by eliminating unfit proposals upfront.
Diversity in Quotes: Aim for a mix of suppliers—perhaps one incumbent, one mid-tier competitor, and one new or innovative player. This ensures you’re not comparing similar offers but exploring a range of possibilities.
Standardized RFP Process: Provide clear and consistent requirements in your request for proposal (RFP) to ensure quotes are comparable. Ambiguity leads to discrepancies that complicate analysis.
Focus on Total Value: Don’t just look at the price—evaluate terms, service levels, warranties, and other factors that impact the overall value of the purchase.
The Rationale Behind the 3-Quote Approach
The “3 quotes” practice in procurement is rooted in the principles of balance, efficiency, and informed decision-making. It’s a method that reflects:
Data-Driven Decisions: Enough information to make a smart choice without getting bogged down in excessive analysis.
Cost Control: By fostering competition among three suppliers, procurement teams can drive better pricing and terms.
Strategic Procurement: A streamlined process that prioritizes value, efficiency, and supplier relationships.
Conclusion Procurement is as much an art as it is a science. The “3 quotes rule” represents a best practice that balances the need for informed decision-making with the realities of time and resource constraints.
While every purchase opportunity is unique, this approach ensures that procurement teams make decisions that are competitive, strategic, and beneficial to the organization. After all, procurement isn’t just about finding the lowest price—it’s about finding the best value considering the triangle of Price, Quality and Service .
What’s your take on the “3 quotes” approach? Do you follow this rule, or do you adapt it based on the situation? Let’s discuss in the comments!