Six ways to transform buyer-supplier relationships
A year into the pandemic that shook the world and exposed the fragilities that exist in the global apparel supply chain, Hannah Abdulla takes a look at the impact on the buyer-supplier relationship.
Of all the business risks clothing brands and suppliers would have been watching pre-2020, it's a safe bet a global pandemic wasn't one. Covid-19, its rapid spread across the world, and its subsequent impact on consumer spending, quite literally threw the industry into turmoil.
As of December 2020, UK retailers alone had cancelled orders worth GBP730m with Bangladeshi suppliers according to The Times, their US counterparts around US$500m.
The pandemic reinforced two things: the fragility of global supply chains, and the power imbalance between buyers and suppliers.
As the global apparel industry works on building back better, several questions remain: Have those things changed or will they change? How and why do they need to?
"One of the first things to address is that the buyer-supplier relationship can become very transactional," asserts Flora Davidson, head of product and co-founder of product development and production management platform SupplyCompass. "It's a very complicated process back and forth, often with a lot of it managed on email, with multiple attachments. Not only is this inefficient, but it also doesn't allow for brands to build and maintain a relationship with that supplier."
Additionally, the lack of structure and informal nature of the order process leads to a lack of accountability and commitment, for example, in honouring what's been asked for.
Burnt once, suppliers are exercising more caution now. Andrew Olah, founder of non-profit Transformers Foundation, says he sees suppliers asking for money upfront or more security: "Anyone that has pre-paid for their orders will take them obviously. Sellers need security. Or they just continue to absorb the whole risk."
Fashion players also need to join hands with suppliers and invest in strategic partnerships and innovation.
I like the word partner because partners share in profits and the margins are not shared in vendor/factory relationships
- Andrew Olah
"I like the word partner because partners share in profits and the margins are not shared in vendor/factory relationships," says Olah. "In fact, the relationships are transactional although there are plenty of wonderful long term relationships. I think the length of relationships tell the full story of how each party regards the other.”
Davidson believes relationships based on trust are the ones that will thrive in a post-Covid world. "In essence, by involving suppliers in decision-making, you don't just consider them as suppliers or vendors who simply produce and deliver goods. They are an extension of your business and there can be extremely strong, strategic opportunities if the partnership is well-formed and nurtured."
How to build back better
Flexible supply chains: Smaller batches, increased transparency and utilising efficient processes that are supported by analytics and digital tools are going to become the norm; demand-driven will become more prevalent. Demand-forecasting leads to leaner manufacturing, and ultimately reduced waste and production costs. But it depends on a strong and transparent relationship with the manufacturer as it involves flexibility in previously agreed terms such as a reduction of minimum order quantities of certain materials.
Sustainability: Social and environmental sustainability are fast becoming mainstream. Companies are increasingly being scrutinised on the safety of the workers in their supply chains and what they are doing to slow climate change. Close supplier partnerships will be key to harnessing and scaling up the innovation necessary to achieve this.
Rebalancing supply chains: Bringing entire supply chains to the EU, UK or US is not realistic. Not only are wages higher, but worker skills in major apparel sourcing hubs cannot be matched. And factories in Asia also benefit from vertical integration. But the shutdown of China early on in the pandemic revealed the need for more diverse supply chains. Having all your eggs in one basket is riskier than carrying them across two. But it is equally important that brands strengthen and retain relationships with existing suppliers.
Going digital: Innovation is here to stay and has been scaled up across the value chain. Design now includes AI planning and 3D design; merchandising and planning uses virtual sampling. Digital innovation is a crucial theme in surviving in a post-Covid world.
Standardising processes: Verbal agreements will become a thing of the past. There will be no room for assumptions. An important point in getting a better relationship is respecting each other's limitations and non-negotiables on either side. For suppliers, that is understanding why a retailer or a buyer needs something. For buyers, it is understanding limitations, that certain material supply chains may be delayed by months – and ultimately that there are things out of suppliers' control.
Bringing trust back into the mix: Moving to relationships with greater shared accountability and agility will be key. In practical terms, this means more regular information and data sharing – from pre-season estimates to in-season weekly performance reporting – being open and transparent with what's performing, how it may impact future forecasts, being more flexible with capacity planning, fabric commitment and order volumes in order to best respond collaboratively, redeploy resources and make the right trade-off decisions.
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