Progress in Purchasing Practices Foiled by ‘Distrust and Disrespect’
To say that apparel and footwear suppliers have been through the wringer these past few years would be a gross understatement. War and disease have driven up the prices of raw materials, transportation and fuel—everything they need to keep their production lines healthy and humming. Consumers, grappling with higher costs of their own, have reined in discretionary spending, leaving brands and retailers with lower sales and bloated inventories that ultimately translate into fewer new orders.
If the relationship between buyers and the factories they contract is portrayed as adversarial at times, it’s because many in the industry view the state of purchasing practices as patently unfair, with fashion firms frequently calling the shots, sometimes callously as the spate of Covid-19 cancellations appeared to affirm. A new index, however, presents a more “mixed and nuanced” view of key indicators of companies’ commercial practices.
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“We always like to highlight the improvements,” said Marsha Dickson, president and co-founder of Better Buying Institute, a platform that allows suppliers to anonymously rate the purchasing practices of their brand and retailer customers. The organization’s subscribers, which can leverage this data to hone their processes, include Adidas, Amazon, Gap Inc., Patagonia and Ralph Lauren.
Better Buying’s 2023 Index report, published Thursday, collated more than 1,240 data points for 33 buyers, 26 of them subscribers. Of these, 24 had participated in previous ratings cycles, meaning they were able to track their year-over-year progress.
While the overall softgoods score—66 points out of a possible 100—hasn’t budged over the past three consecutive cycles, specific purchasing practices saw rises and dips. One win: The majority of Better Buying subscribers showed gains in cost and cost negotiation (+3 points) and payment and terms (+2 points), two elements that directly impact suppliers’ financial sustainability.
In 2023, 44.3 percent of suppliers surveyed said that 100 percent of their buyers’ orders covered all the costs required to produce the order, compared with 41.9 percent in 2022. Nearly 48 percent of suppliers said that their buyers used high-pressure tactics during the costing negotiation process, a 3.5 percent decline from 51.4 percent in 2022. More than 74 percent of respondents said that 100 percent of their buyers paid bulk production invoices without delay, a 5.3 percent jump from 68.9 percent in 2022.
These are positive developments, particularly “in the context of coming out of Covid when costing and pricing and payment was such a big issue,” Dickson said. “This suggests that companies realize, you know, ‘Hey, we know what we’ve done and this is something we can actually get our hands around and try to try to improve on.”
Even so, there are caveats within those categories. Some suppliers, for instance, told Better Buying that negotiations to convince buyers to cover increasing wages proved difficult. Payments are also seeing a trend toward longer terms, something that can impede cash flows and cause financial stress. The number of suppliers who agreed to payment terms of more than 91 days—orders of magnitude longer than the pre-pandemic norm of 30-60 days—increased from 14 percent in 2022 to 22 percent in 2023.
Of the practices that struggled, planning and forecasting took the biggest hit, tumbling by 3 points from the previous year despite improving by a single point between 2021 and 2022. More than 38 percent of suppliers, in fact, picked this area, which reflects the level of certainty buyers have about consumer purchase demands and preferences, as most in need of a boost. While the rocky climate makes the decline unsurprising to Dickson, who sees it as a sign of an industry “really groping” over what and how much it can sell, there were a couple of bright spots, such as the 6.8 percent decrease to 28.7 percent in the number of suppliers reporting a gap of less than 10 percent between the capacity reserved and the actual purchase order quantity. The proportion of suppliers reporting regular forecast updates by buyers also rallied by 2.5 percent from 78.4 percent in 2022 to 80.9 percent in 2023.
Win-win sustainable partnership, which describes the alignment between buyers and suppliers on social compliance goals, along with buyers’ contributions to reducing audit fatigue, was another category that showed a marked decline with an average decrease of 2 points from 2022 and 5 points from 2021. This segment proved especially polarizing. While one subscriber was able to achieve an improvement of 19 points, another’s score plummeted by 23.
Dickson has more fine print about the report. Because Better Buying, at its inception, was able to glean data from a diversity of buyers and suppliers, its findings held a mirror to the industry at large. Several years and a number of repeat subscribers in, however, its studies “increasingly reflects the reality of our subscribers” and less of those outside its base, she said. These are the companies that generally seek to improve themselves—to wit: many subscribers are also members of the Fair Labor Association—yet the variability in their scores shows that even the so-called “better” firms have room for improvement.
She also cautions using averages to obviate the experiences of individual suppliers who could be seeing better practices—or worse. That goes for buyers, too. “We had one company improve in cost and cost negotiations by 18 out of 100 points; that’s a huge improvement,” Dickson said. “We had another decline by 10 points. Even those subscribers that are working hard have things to do, you know?”
One thing that’s clear to Dickson, however, is the importance of data in improving purchasing practices. Before Better Buying started tracking this information in 2015, nobody was “doing anything with data” so everyone was “kind of at a level footing.” That isn’t the case today.
“We have a number of companies that are making improvements that are using data,” she said. “They’re bringing that into their companies, sometimes more successfully than others in terms of integration across the company, but they’re using the data and tracking performance.” Better Buying takes a risk-based approach, Dickson said, noting that its methods are “very much” in sync with brewing due diligence legislation from the European Union.
The report is chock-a-block with recommendations. Buyers should cover the full cost of compliant production, for example. Investing in advanced forecasting tools and supply chain management systems, to name another, can go a long way to enhancing accuracy and paring down uncertainties. Long-term formal commitments, an area that Better Buying looked into for the first time, are another important overture—more than 72 percent of suppliers reported formal commitments of less than a year, which don’t provide the same level of reliable support that factories need to upgrade operations, working conditions and wages.
“There’s still plenty of work to be done,” Dickson said. “I still see a distrust in the relationship between buyers and suppliers, a disrespect and just that need to really see that we’re in this together. I think there’s an attitude shift that still needs to happen. That’s going to be the underlying thing that’s going to make everything move along more quickly.”
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