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Suppliers under financial pressure from customers: Report

05
Nov '18
Courtesy: Better Buying
Courtesy: Better Buying
Suppliers in the textile industry experience increasingly more financial pressure from their customers, says a recent report. The results also show that there are significant regional differences in purchasing practices, with North American retailers forecasting the way orders are spread more consistently than their European counterparts.

About 55.4 per cent of suppliers had been affected by high-pressure cost negotiation strategies, as per the second Better Buying Purchasing Practices Index (BBPPI), supported by C&A Foundation and Humanity United. The use of negotiation strategies is increased since the last report. Some of the negotiation strategies include not paying for samples (61.4 per cent), not paying in time (only 64.5 per cent of retailers and brands paid bulk order invoices on time) or not paying the full price as indicated in a purchase order (27.3 per cent).

Over 20 per cent of suppliers indicated that fewer than 80 per cent of the orders received from retailers or brands were priced to cover the cost of social, environmental, quality, and other compliance requirements. All in all, the report concludes that the more pressure brands or retailers place on cost negotiations, the more likely the price does not cover all the cost. This shows the need for retailers and brands to ensure their negotiation processes promote fair and sustainable partnerships.

Two of the categories measured by the index are Planning and Forecasting, and Sourcing and Order Placement, which captures data related to the supplier’s ability to properly allocate human resources, develop accurate costs, and deliver goods on time. These tasks depend heavily on the accuracy of retailers and brands to forecast the way orders are spread throughout the year. Interestingly, the index shows a significant difference between European and North American practices. The report states that North American retailers forecast more consistently and accurately than European retailers, which enhances the ability of suppliers to plan its productions.

Considering these discrepancies, the report shows that industry-wide transformation of purchasing practices demands action, said Better Buying in a press release.

“From these actionable insights, retailers and brands can work to streamline their operations, create stronger partnerships with suppliers and monitor their efforts over time. In fact, a few brands have informed us that they have set up internal improvement projects based on the BBPPI results. Similarly, suppliers can better evaluate current and potential customers and business partners and understand how to allocate resources more efficiently. Suppliers that rate their customers help provide retailers and brands with critical information needed to drive purchasing practices improvements over time,” said Marsha Dickson, Ph.D., Better Buying co-founder.

The index includes ratings from 319 suppliers across 38 countries and measures the performance of 67 retailers and brands. This is up sharply from the last index, which saw participation from 156 suppliers across 24 countries and included 65 retailers and brands. Buyer performance is measured against seven key categories of purchasing practices: Planning and Forecasting, Design and Development, Cost and Cost Negotiation, Sourcing and Order Placement, Payment and Terms, Management of the Purchasing Process, and Win-Win Sustainable Partnership (formerly CSR Harmonisation). The BBPPI’s next ratings cycle begins in November 2018.

Better Buying is the first initiative to focus on empowering suppliers and amplifying their voices. The platform tracks and releases performance scores and analysis about purchasing practices, allowing trends to be uncovered. The index uses data submitted anonymously by suppliers through its online platform to rate the purchasing practices of buyers within the apparel, footwear, and household textiles industries globally. (KD)

Fibre2Fashion News Desk – India


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