Buyers increasingly pressuring suppliers for lower costs, says report
Oct 31, 2018
Suppliers are under mounting financial pressure from buyers, according to a new report released this week by Better Buying, an organization dedicated to improving purchasing practices in the apparel supply chain. Better Buying surveyed 319 suppliers from 38 countries, who provided anonymous ratings of 67 retailers and brands they’ve worked with. No less than 55 percent of suppliers have been affected by high-pressure cost negotiation strategies such as not paying for samples (61 percent), not paying in time (64.5 percent) or not paying the full price as indicated in a purchase order (27 percent).
The high pressure for low costs impacts suppliers’ ability to provide decent working conditions and improve their environmental performance. Over 20 percent of respondents said that fewer than 80 percent of the orders they received 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”, said the organization in a statement.
36 percent of brands and retailers not paying their suppliers on time
The current study marks the first time Better Buying asked suppliers whether their customers paid for samples. Turns out the majority (61.4 percent) did not. “This is especially concerning because the number of samples can run into thousands and producing those can carry costs 10 times more than the free on board”, said the organization on its report. Of those who did pay for samples, only 27 percent did so on time.
Not paying on time is, in fact, a common practice among buyers. The study indicates that over 35 percent of brands and retailers have not paid their bulk order invoices on time in Q2 2018. Those paying late averaged a 22 day delay, though some paid up to 100 days late.
Furthermore, suppliers are losing money due to forecasting mistakes on the part of the buyers. Over 25 percent of surveyors said they were left with an excess of materials, which they were frequently asked by their customers to hold for future orders. When it comes to planning and forecasting, buyers headquartered in North America were better rated than those from Europe: 92 percent of North American brands and retailers are likely to provide suppliers with insight into their upcoming buying plans, while a mere 78.4 percent of their European counterparts do the same.
Image: courtesy of the Clean Clothes Campaign