Brands and retailers must improve their purchasing practices in meeting the post-Covid demand and protecting supply chain workers during the pandemic recovery, according to a global report.
The report titled ‘2020 Better Buying Index’ also said the recovery creates uncertainty over product availability, cost and decades of sustainability progress.
The report underscored the importance of better purchasing practices by brands and retailers to support supply chain resilience.
Twenty-two brands and retailers invited more than 2,000 global suppliers from more than 40 countries, including China, Bangladesh, India, Pakistan, Egypt, Turkey and Vietnam to participate in the annual survey, which examined the impact of company purchasing practices.
Buyers’ performance is measured against seven key categories of purchasing practices: planning and forecasting, design and development, cost and cost negotiations, sourcing and order placement, payment and terms, management of the purchasing process, and win-win sustainable partnership.
The organisation tracked and released performance scores and analysed about purchasing practices, using data submitted anonymously by suppliers on its online platform.
The report found that several brands had made meaningful improvements to their purchasing practices over the past year, especially related to planning and forecasting.
“Improved forecasting accuracy not only yields benefits in terms of production efficiency and reduced financial pressure on suppliers, but it also helps suppliers maintain a more stable workforce and decrease their reliance on temporary labour to flex their production capacity with unexpected increases or decreases in orders,” the report said.
Suppliers which have a strong sense of upcoming business can make plans to retain a full-time workforce, complete with the employment benefits for workers that such full-time opportunities provide, it noted.
This is especially important as brands weather unexpected supply chain disruptions such as the pandemic.
“Unplanned disruptions like Covid-19 tend to cause extreme reactions from buyers attempting to minimise their exposure to short-term financial risk – reactions that often do not consider the ripple effect on suppliers and workers and the other resulting risks,” said Dr Marsha Dickson, president of the Better Buying Institute.
“While the impacts of the pandemic have certainly created new challenges in the global supply chains, problematic purchasing practices are nothing new and must be addressed in order to meet rebounding consumer demand and protect decades of sustainability progress,” Marsha Dickson added.
Better Buying examined year-over-year improvements for 10 of the participating brands to identify progress and trends.
While there have been notable steps taken in each area, progress is ongoing and must be prioritised by all brands in order to continuously improve supply chain resilience.
Key findings, from the data collected in 2019, included five of the 10 companies made improvements to their planning and forecasting practices from 2018, which provided suppliers with the visibility they needed to plan production responsibly and ensure ongoing employment for workers.
Eight of the 10 companies had fewer suppliers left with unutilised capacity due to forecasting inaccuracies, and six of them had fewer suppliers left with excess materials.
Half of the companies improved their cost and cost negotiation practices by increasing the number of suppliers reporting to the effect that all orders were priced to cover the costs of compliant production.
Eight companies improved by decreasing their use of high- pressure cost negotiation strategies.
At least half of the 10 companies made notable improvements in payment and terms practices by paying suppliers on time and in full, which is critical for suppliers’ cash flow and ability to pursue all aspects of sustainability and has been highlighted to a new degree during the pandemic.
Four companies decreased their late payments by an average of 10 days, an improvement with direct links to suppliers’ ability to make wage payments to workers.
“Worker wellbeing is incredibly important to our brand, and it matters to our consumers,” Luna Lee at EILEEN FISHER Inc, an American women’s clothing brand said in a statement.