Purchasing Practices Must Change

Covid-19 Has Clearly Made the Need for an Overhaul of Purchasing Standards.

Many fashion supply chain professionals have been considering what changes should be made in how buyers contract with factories and suppliers. The virus has exposed the weakness that current practices have, particularly for the factories and their workforces.

Below are some of my ideas on fair and equitable ways that should be implemented based on my experience as well as the truths uncovered during our current crisis.

1. Force Majeure - This is the biggest problem that Covid-19 exposed. Acts of God, so to speak. According to Wikipedia; "Under international law, it refers to an irresistible force or unforeseen event beyond the control of a state making it materially impossible to fulfill an international obligation, and is related to the concept of a state of emergency" Of course, F.M. is specific to the place which applies to the contract which is always whatever State or Country the buyers are headquartered in. Attorneys can argue about the legalese of whether it was 'materially impossible' to fulfill a buyer's obligations because of C-19. My suggestion to every producing country that exports is make F.M. illegal on all buying contracts within your countries. Problem solved.
2. Nominated Suppliers - This has a been a huge problem for factories in many ways. Larger buyers nominate where to buy trim, fabric, findings or any number of items from suppliers they trust and have control over. It sounds like a great idea to have consistency and reliability within a supply chain. However, in practice, it creates tremendous burden on the factories. First, very often a nominated mill will force all factories to pay before shipping the fabric or soon thereafter, say ROG 5 days. On the other hand, every factory I know that is not vertical has mills that they work with and can get appropriate credit from. Traditional fabric credit is 60 days. The risk and cost of this reality must end. If a supplier is nominated, they must give appropriate credit facilities to the also nominated factory supplying the RMG. The buyers can easily make this happen. Secondly, when a nominated supplier runs late on a shipment to the RMG factory, there should be an automatic extension given to the RMG supplier, by contract. When I was selling to Target, the nominated label supplier was late on almost every order we ever gave them and never had the amount of stock they were supposed to carry. It created more overtime for our factory than all other causes combined. This is a huge challenge for RMG factories. The benefits of a nominated supplier are enjoyed by the buyer, so the risks should be born by them as well.
3. Buyer Pre-Production Obligations - Buyers are notorious for not meeting their own pre-production obligations. However, they are rarely, if ever willing to extend the shipping date when this happens. A typical example might be fit sample turn-around. The buyers vendor manual says they must reply within 4 business days but they take 8 days because of whatever reason. Having dealt with this more times than I can count, the buyer is not going to give you an extension for this. The amount of headaches this extension would cause the buyer is too much for them to deal with. It almost never happens. 4 days is forever when it comes to production planning and it surely costs the supplier margin and happens on most every order in some way, shape or form. Again, if the buyer is late on any obligation there should be an automatic extension given as per contract. If the factory can ship on time, it should be up to them to make the costly decision to do so.
4. Cancellations - Any cancellations that are not caused directly by the factory come with an automatic release for the factory ( at the very least into the local market, if one exists) to sell the stock as is. No trim or logo changes required. Otherwise, don't cancel what you ordered.

These 4 issues alone would level the playing field in very equitable ways. The RMG factories and particularly their employees, deserve to be treated as the important partners they are. I feel that we can start here and then continue to collaborate in other ways in order to strengthen the fashion supply chain industry as a whole. As always, thoughtful comments of all kinds are welcome.