How data and transparency can encourage better buying
Suppliers are a good source of data on buyer purchasing practices
A new Better Buying initiative is being planned to eliminate the barriers to code of conduct compliance caused by apparel buyers' purchasing practices. Here the scheme's co-founder Dr Marsha Dickson explains why data and transparency will inform buyers about the challenges they are placing on suppliers – and enable them to track improvements over time.
The term "purchasing practices" first came up in 2003 when Oxfam was carrying out research for its 'Trading Away Our Rights' report that was published the following year. Since then many other reports from civil society and a smattering of academic research studies have illuminated the numerous ways that the day-to-day commercial activities of brands and retailers – "buyers" – create barriers to supplier compliance with codes of conduct.
While the poor wages and working conditions that persist in the apparel industry cannot be blamed solely on buyer purchasing practices, these practices can contribute to the problems because of the barriers they create.
Some progressive buyers have examined their purchasing practices with an eye toward improving. They have explored, for example, whether late design changes require the factory to use excessive overtime to meet delivery deadlines or if their sourcing personnel adequately ensure that the cost quoted by suppliers allows for worker wages and benefits to meet requirements.
A few of those forward-thinking buyers have admitted that their purchasing practices contribute to 50% to 70% of the problems they are trying to address in factories. It is unclear, however, what even the most progressive buyers are doing to effectively address this situation.
To begin to eliminate the barriers purchasing practices place on supplier compliance with codes of conduct, buyers need to fully understand the extent of their negative impacts and be held accountable for reducing those; thus, data and transparency are critical.
A new initiative, Better Buying, will be collecting the data needed to inform buyers about the challenges their purchasing practices place on suppliers and to transparently track improvements over time.
When their anonymity can be protected, suppliers are a good source of data on buyer purchasing practices. When those data are made public, the buyers' stakeholders can encourage accountability through a combination of pressures and rewards.
Addressing a buyer's purchasing practices requires a deep dive into the internal policies and practices a company uses to bring product to market and the fundamental business relationship between the buyer and its suppliers. While not all buyers have bad purchasing practices, data from suppliers can distinguish bad from better on a myriad of barriers.
Examples follow of the purchasing practices suppliers report are especially challenging to their business and the ability to improve working conditions. Some quotes are included for clarity.
- Constantly fluctuating forecasts and differences between actual orders and capacity booked
"50% fluctuation in forecast is common."
- Failure to meet critical deadlines, such as handing off technical specifications
"Some buyers do really well and hit 100% of their critical milestones, but others hit only 50% and that is a big problem and has a big impact on production time."
- Prices that do not cover compliant production
"Not one penny more, our buyers tell us; our costs go up and our margins go down."
- Heavy debt incurred from financing buyers' business for months on end
"As a manufacturer, we are increasingly being asked to finance our buyers who are some of the largest brands and retailers in the world."
- Lack of incentives for providing workers better conditions
"We have many social and environmental requirements, but we get no incentives when we improve our performance."
Some observers believe that longer term relationships are a critical component of better purchasing practices. Yet, some suppliers – even those who have maintained business with buyers for decades – scoff at the idea, indicating "there is no relationship."
By understanding the outcomes their purchasing practices have on suppliers' time for production and financial resources needed for compliant production, buyers can identify which functional areas need to be engaged and proceed with substantive internal conversations about changing practices.
But beyond having data, transparency about purchasing practices encourages buyers to follow through on the necessary actions. Transparency of data on buyer purchasing practices will inform other initiatives that are focusing on these issues. Transparency will reveal the material risks that some buyers may be placing on their shareholders. Perhaps more importantly, transparency will allow buyers to demonstrate that their efforts to reduce the negative impacts of their purchasing practices are actually working, and compare their progress with peers.
While some buyers will embrace having detailed data about how their purchasing practices impact suppliers, few are comfortable with that data being made public because of the element of accountability that will be expected. Some buyers will argue that the situation is "complicated" and very difficult to address – this is true and changes will take time. The number of functional areas that will need to be engaged and layers of the supply chain that need to be considered are large and complex. With private label business carried out directly with suppliers, these activities all play out in the buyer's own operations. More complicated models fragment various responsibilities across multiple companies, such as when an agent, licensee, or other third party vendor takes on some or all of the functional activities.
Furthermore, the global supply chains that have developed over the last decades have resulted in a lot of buyers and many suppliers running successful businesses and making money. Will they have the resolve to change what is working? But as a friend in the industry once pointed out, "it's not how much money you make, it's how you make the money."
Some buyers and other stakeholders will also argue that improving the situation of suppliers doesn't necessarily mean compliance and working conditions will improve, and that is true. For example, if buyers pay more as an incentive for workers being paid a "living wage" and compliant production, how can they be ensured that workers will actually receive the increased pay, and the extra funds won't just pay for the owner's latest Mercedes? Suppliers' concerns about workplace conditions and their capacity to address them still matter.
Yet, a recent study empirically documents the strong positive relationship between the business success of apparel suppliers and their ability to improve workplace conditions in their factories. After the argument about whether buyers' purchasing practices are preventing compliance is off the table, focus can return to whether suppliers are following through for their workers.
Better Buying, still in a beta testing period, will collect anonymous ratings about specific buyers' practices from their suppliers twice a year. Aggregated data will be shared with the rated buyers, who will be encouraged to provide feedback on the work being done internally to address areas where they are rated lower. The ratings data and buyer responses will be made public after a period of time, with focus on those buyers with the best scores and what can be learned from them. Suppliers interested in taking part in the beta test this summer should contact the organisation.
Through data and transparency, the Better Buying initiative aims to foster improvements in purchasing practices over time, and thus reduce barriers to supplier compliance that arise as a result of the primary business activities of their buyers.
About the author: Dr Marsha A Dickson is Irma Ayers Professor in the Department of Fashion & Apparel Studies at the University of Delaware and co-leader of Better Buying.
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