The latest latest Better Buying survey reveals apparel brands are hammering suppliers on price harder than ever. Prices received for orders do not cover the cost of social, environmental, quality, and other compliance requirements. Retailers and brands don’t realize increased financial pressure on suppliers raises the risk of business failure, supply disruption, and environmental and human catastrophe. They don’t realize it is impossible to make tangible improvements to things like living wages and working conditions if they 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.
One way forwards is retailers and brands stop focusing on reducing costs while ignoring the implications on suppliers. The use of questionable negotiation strategies has also increased. Some of the negotiation strategies include: not paying for samples, not paying on time or not paying the full price as indicated in a purchase order. Fewer than 80 per cent of orders received from retailers or brands are priced to cover the cost of social, environmental, quality, and other compliance requirements.
North American retailers forecast more consistently and accurately than European retailers, which enhances the ability of suppliers to plan their production. What’s needed is for retailers and brands to work on streamlining their operations, create stronger partnerships with suppliers and monitor their efforts over time.