Clothing retailers continue squeeze on low-cost suppliers

09 | 2019

NEWARK – In a new report released today, the Better Buying initiative finds that despite long-standing relationships between apparel retailers and manufacturers across South-East Asia and Bangladesh, suppliers continue to be squeezed by cost negotiations that, in some cases, fail to reflect regional wage rises.

The report, which focuses on eleven key sourcing locations and a further six broader regions, collates anonymous data supplied by factory bosses around the world to paint a representative picture of what business aspects – including order forecasting, costs, and management of purchasing process – have the greatest impacts on these businesses and their workers.

It finds that, for different reasons, Hong Kong, Southeast Asia, Turkey, the United Kingdom and the USA experience the ‘worst’ apparel buying practices, though the report’s author insists all nations should work to improve, saying that “supply chains of the future need to be designed to meet volatile market demands… these [supply chains] will also need to contribute positively to the environment and people making our products.”

The C&A Foundation-funded Better Buying initiative has released its third annual Index report, which it says sets out to “improve purchasing practices globally,” by spotlighting cases of malpractice around the world – going as far as to break down the most pressing issues facing key geographies.

To do so, the Better Buying Purchasing Practices Index (BBPPI) launched last spring, broke down the data submitted by hundreds of suppliers to yield a score comparable to all others. More specifically, this telling information attributes to seven categories: 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.

Overall, it’s identified that planning and forecasting, and sourcing and order placement crippled the operations of suppliers the most; with these categories receiving a one and a half, and half a star ratings out of five.

When broken down by geographies, the report highlights that Bangladesh and China join the likes of Taiwan and Latin America in being deemed locations experiencing the best purchasing practise. What is influential in the outcome of this finding is that countries such as Bangladesh – due to the longevity its suppliers have demonstrated in the industry – remain a popular destination for brands and retailers who enable these factories to forecast future business.

In contrast, it’s found that 38 per cent of respondents from Bangladesh are paid the same prices as they were last year, despite inflation and rising wages. What’s more, Bangladesh – along with Southeast Asian nations such as Cambodia, the Philippines, Malaysia and Singapore – is said to experience the greatest pressure from brands in cutting costs. This, because the region as a whole is used to compromising price in order to secure adequate order volumes.

Judged the geographies to demonstrate the poorest purchasing practices, Hong Kong and Turkey are surprisingly joined by the United States and the United Kingdom. For context, a net buyer impact score was calculated for all places assessed in the Index report, with a sum worked out by subtracting the number of suppliers that highlight bad practices from those that alluded to good practices.

Whilst Hong Kong and Turkey totalled scores of -11 and -15 respectively, the UK registered a score of -9, and the US tied with Southeast Asia with a score of -16.

To better understand how these scores came to be, the report’s author focused in on six geographies with varying results to understand the biggest challenges experienced by each and how this, in turn, translated into these findings.

The places subject to further analysis included Bangladesh, Latin America, Hong Kong, Turkey, the United States and Southeast Asia. For reference, Bangladesh registered a net buyer impact score of +13 and Latin America was similarly positive, at +14.

Starting with these two, the only positive geographies of this six, it’s clear that Bangladesh, as aforementioned, is seen to benefit from the custom of brands after years of working together. What’s more, the country is deemed to benefit from incentives of compliant production and the management demonstrated in the purchasing process; this, despite cost cutting exercises by brands.

In Latin America, suppliers report positive relations with brands and retailers who note better practices in planning and forecasting than most, whilst reserved capacity is also said to help native suppliers which want to ensure order visibility.

These findings are juxtaposed to those coming out of Hong Kong, suppliers from which allude to a lack of planning and forecasting from brands and retailers – a practice that has compromised job security and adequate pay in the nation for some time. Furthermore, workers in the country note how they receive few incentives for compliant production, comparable to Bangladesh for example.

In Turkey, which recently made the headlines off the back of a report from the Business & Human Rights Resource Centre due to findings of its Syrian workforce being offered only precarious employment and low pages, things aren’t much better. The report notes that “Suppliers are surely feeling the interrelated strains of their customers’ late and poor forecasting, low prices, and high order variability, which may make it difficult for them to address high-profile concerns about subcontracting and precarious labour.”

Meanwhile in Southeast Asia, a region ravaged by brands and retailers, it is perhaps of no surprise that suppliers highlighted cost and cost negotiations amongst its worst cases of bad practice.

Better Buying notes in the report: “As a location where many countries are sought out for their low cost labour, the very low percentage of orders priced to cover compliant production is surprising, as is the frequent use of cost negotiation strategies placing high pressure on suppliers’ businesses. This begs the question of when is low cost, low enough?”

Finally, suppliers in the States have identified the biggest issues facing them focus around planning and forecasting and management of the purchasing process, for which it’s believed to exhibit the worst cases of bad practice.

What’s more, “retailers/brands contracting with suppliers in the United States frequently use cost negotiation strategies reported to place high pressure on suppliers’ businesses,” the report notes.

Upon the release of these findings, Better Buying has called on brands to work more cohesively with their suppliers to form strategic partnerships that draw on each partner’s core competencies to build resilient supply chains capable of demonstrating longevity without compromising the wellbeing of workers.

“It needs to change toward more balanced relationships with all suppliers,” suggested Marsha Dickson, Better Buying’s president and co-founder. “Better Buying supports retailers/brands and their suppliers in making this transition, bringing insights from both parties into strategizing for improvements. By providing expanded transparency between supply chain partners and facilitating dynamic, solutions-oriented feedback, we change processes that deliver meaningful social, environmental, and business impacts.”

 

EcoTextile



Older Post

We use cookies to ensure that we give you the best experience on our website. If you continue we'll assume that you are understand this. Learn more
Accept