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Is transparency possible in RMG?

  • Published at 01:30 am September 12th, 2019
What are they spinning?

Factory owners must take responsibility on this issue

We need more and better research on the relationship between apparel brands and their supplier factories globally. These issues are too important to be kept in the dark, and more transparency on this issue would be a positive development, certainly for consumers who might be interested to know more about how the clothing they wear every day is sourced.

It was welcome, then, to see new research from Better Buying, which gathered information from more than 700 apparel suppliers globally. This was the third update by Better Buying, which collects information anonymously from apparel brands and their suppliers, with an aim to improve purchasing practices in supply chains globally. It asks suppliers to rate their apparel brand customers on issues such as planning and forecasting, cost and negotiation, and sourcing and order placement.

The most recent findings, which were focused on Q4 of 2018, have a notable Bangladesh focus. Better Buying found that there is continued downward pressure on prices faced by factory owners. The latest Better Buying index found suppliers in the lowest cost locations being pressured for lower prices, with 38% of Bangladesh suppliers reporting their buyers have held them to last year’s prices, despite inflation and rising wages. 

This index certainly has credibility, for it includes 802 verified ratings from 715 suppliers across 52 countries, and also measures the performance of 71 retailers and brands. 

A couple of issues stand out. 

One of these is that price pressure on suppliers is a problem everywhere, not just in Bangladesh. In Q4 of 2018, the average Better Buying score for all retailers and brands was just 2 stars out of 5, but scores assigned to individual companies varied widely, ranging from a low of 0 stars to a high of 4.5 stars.

In Bangladesh, where suppliers appear to be under most strain, 31% of factory owners said they were left with unused capacity and 45% were left with excess materials on orders.

Of these factories, 6% reported that retailers and brands paid for excess materials, while 83.3% were asked to hold materials for use in future orders. 6% reported retailers and brands took no responsibility for excess materials.

None of these findings come as a huge surprise but they do offer some healthy support to the wealth of anecdotal evidence that already exists in these areas.

Are brands to blame here and should we be pointing the finger? This is not so straightforward for several reasons. 

One is that we don’t know which brands are operating these business practices, so it would be unfair to tar them all with the same brush. Better Buying operates a policy of anonymity, which is a shame in some ways but this does ensure that we get healthy numbers and data on these vital issues.

The other factor is that factory owners themselves have to take some responsibility here. An alarming figure is that 32% of factory owners were left with unused capacity. I’ve written before about excess capacity issues in Bangladesh, and these figures support such an argument. 

Another figure from the Better Buying report is that 36.4% of factories had to accept last-minute, low price orders to fill capacity. Again, this is a concerning figure, and brands cannot be blamed for this. Surely, this is about operational management and strategic planning. If a factory owner has to accept last minute orders in such a haphazard way, perhaps it is time for a rethink about how he or she is running their operation. An excess of unused capacity should be the exception, not the rule, in any industry. 

All of this said, there is a broader issue at play here, which we cannot ignore. If prices are, indeed, being squeezed for suppliers, where does that leave sustainable sourcing? Where does it leave a factory which wants to invest in green production techniques but is too busy fire-fighting and attempting to make ends meet to do so?

What the research of Better Buying shows, if anything, is that perhaps it is time for more collaborative thinking between buying and sourcing teams. Sourcing teams will always drive a hard bargain on price -- we all know that. But what if their key performance indicators (KPIs) were more closely aligned with broader sustainable sourcing goals of the brand? What if we could slowly shift the needle so that it wasn’t always just about price?

At the luxury end of the market, we are seeing some evidence of buying team KPIs being aligned with sustainability goals, but the broader, mass market continues to see these teams operate independently.

This is a shame, because if brand sustainability personnel want greener production -- and I have no reason to believe otherwise -- then the people that hold the purse-strings in their organizations will have to pay for it. The latest much-needed insights show the whole industry still has a long way to go on this issue.

Mostafiz Uddin is the Managing Director of Denim Expert Limited. He is also the Founder and CEO of Bangladesh Denim Expo and Bangladesh Apparel Exchange (BAE). He can be reached at [email protected]