LONDON – Apparel brands are hammering suppliers on price harder than ever, according to new data. Many suppliers answering the latest Better Buying survey claimed prices received for orders did not cover the cost of social, environmental, quality, and other compliance requirements. The report recommends that retailers and brands must “stop focusing on reducing costs without considering the implications on suppliers.”
The survey, based on date collected from May to August this year, adds: “Increased financial pressure on suppliers raises the risk of business failure, supply disruption, and environmental and human catastrophe. It is impossible to make tangible improvements to things like living wages and working conditions if retailers and brands do not ease the financial pressure placed on suppliers.”
Better Buying is a global initiative that provides retailers, brands, and suppliers a cloud-based platform to obtain data-driven insights into purchasing activities.
The latest dataset shows that 55 per cent of suppliers had been affected by high-pressure cost negotiation strategies. The use of questionable negotiation strategies has also increased since the last report. Some of the negotiation strategies include not paying for samples (61 per cent) not paying in time (only 64 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 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.
The report also shows regional differences in purchasing practices, with 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.
Marsha Dickson, Better Buying co-founder says: “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.’’
The Better Buying Purchasing Practices Index The index includes ratings from 319 suppliers across 38 countries and measures the performance of 67 retailers and brands.