It is funny how we all keep talking about change, and the fact that most of it is Buyerdriven… The requirement to be a preferred supplier keeps growing and so do the efforts of the industry to keep pace…
Talking to a Buyer or reading about his sourcing strategy really impresses one with issues like social sustainability, environmental concerns and safety issues given importance in all the norms put forward for compliance. Buyers will work overtime to impress their customers that they are an ethical company and all the right systems are in place to project themselves as a ‘caring’ or ‘sustainable’ company.
The stress of course is on the manufacturers to comply, and though the industry has admittedly moved beyond the concept of ‘pass and fail’ in audits, to a more proactive improvement mode, the fact remains that the pressure is still on the companies to reassure the Buyer continuously that they are compliant!
Not only that, every analysis or rating done by any bank or consulting company or even the media will, besides laying importance on compliances, talk about certain other set of priorities like transparency in the system, the financials, and of course the sewing capacity and support infrastructure, as the determinants of a ‘good company’. These are just a few among the many other issues, which will tell you what all is important to the Buyer to be its, one among many others, a preferred supplier.
As the list of ‘must haves’ increase, so do the business challenges, from slow market conditions to increasing input cost…, industry is really at a cross-road with seemingly no help in sight.
But don’t get hassled and worried of such a long list of ‘what to do’ because what’s been written as ‘must haves’ is in reality a ‘feel good’ list to make you think ‘he cares’. What the Buyer really cares about and has always cared about is the Price, Price and Price…
I have written price three times not just for emphasis but also because of the three phases in the negotiation…, all concerned with the price of the product. Firstly, the Buyer gives you his price and asks you to match the price, since you can’t match it for obvious reasons, you will give your price on which he will ask you to rework on the design or some technique to match his price…, said in a more straightforward manner… the original price stays!
My conclusion has come from talking to manufacturers all across the globe and for whom the Buyer is ‘Penny wise’. For all his commitments and pressures…, the bottom line is “what do I earn from the product’.
The Buyer is ready to ignore and overlook many of your shortcomings if you are ready to match the price, even to the extent that you may outsource the entire style. The reasons for turning a blind eye to such gross violations are many; firstly, he does not have enough manpower in the manufacturing destinations to monitor each and every manufacturing unit where the program is placed to ensure that the entire style is made in the same compliant unit.
Neither is the system so transparent that he knows the detailing of the orders booked or in the day-to-day running of that particular factory, to help him take an informed decision on whether to place the program with that factory or not. And finally he is not ready to pay a penny more to compensate for ‘the matters he claims are important’ like Living Wages of the workers or even willing to extend help and compensate for the cost towards safety and other welfare schemes being asked by him.
What the Buyer does, in exceptional cases where he doesn’t want to pull out orders, for again obvious reasons like in Bangladesh after the Rana Plaza incident, is to become a consultant for ‘change’ advocating what needs to be done and making sure the world is listening, while production continues as usual. I may sound like a cynic…, but I have seen and heard enough to know that it is the industry which is making the efforts for change, while Buyers are sitting on the fringe looking for the ‘right price’.
I always hear that times have changed and so have the dynamics of the business… but I am not really sure if that’s true!
