Better Buying Index Report Spring 2018

Better Buying Index Report Spring 2018

Purchasing Practices Performance in Apparel, Footwear, and Household Textile Supply Chains

ABOUT BETTER BUYING

Better Buying is an initiative that supports industry-wide transformation of buyer purchasing practices to ensure business relationships allow buyers and suppliers to achieve their financial, environmental, and social sustainability goals. Anonymous supplier ratings of buyer purchasing practices are aggregated, scored, and made available to the buyers and suppliers. Ratings are updated every six months and eventually made public along with buyer comments, and examples of best and improving practices. Detailed analytic reports, along with key recommendations, are made available to buyers who have been rated a minimum of five times. Co-founded by Marsha Dickson, Ph.D., and Doug Cahn, Better Buying was launched during an 18-month feasibility study funded by C&A Foundation in 2015 and is currently a project of the University of Delaware. For more information, visit: . Report written by Dr. Marsha A. Dickson, co-founder of Better Buying, with support from Dipti Bhatt, research associate and Doug Cahn, co-founder. Dickson, Marsha A. (2018). Better Buying Purchasing Practices Index, Spring 2018: Purchasing Practices Performance in Apparel, Footwear, and Household Textile Supply Chains. Available at . Copyright 2018, Better Buying. All rights reserved.

ACKNOWLEDGEMENTS

Better Buying appreciates the support of its primary funder, C&A Foundation, and secondary funder, Humanity United. The opinions expressed are those of Better Buying and do not necessarily reflect the views of its funders.

Better Buying Index Report Spring 2018

Contents

Executive Summary

2

1. Introduction

4

2. Methodology

6

3. Scores and Ratings

14

4. Key Findings

16

5. Conclusions and Recommendations

32

Appendix

38

CONTENTS

Better Buying Index Report Spring 2018

1

Executive Summary

In recent years, purchasing practices and their impact on suppliers' ability to provide decent working conditions have come under increasing scrutiny worldwide. In recognition of the need for buyers such as brands and retailers to improve purchasing practices, Better Buying has been created to support the transformation of buyer-supplier relationships so that all parties can achieve their financial, social, and environmental sustainability goals.

Better Buying has now launched a first-of-its-kind index ? Better Buying Purchasing Practices Index (BBPPI) ? using data submitted anonymously by suppliers through its online platform to rate the purchasing practices of buyers against seven key categories:

1. Planning and Forecasting: measures the extent to which buyers include suppliers in production plans, as well as the accuracy of planned orders compared with orders actually placed.

2. Design and Development: measures the delay or inaccuracy of technical and production details provided by buyers to suppliers. This category also covers the frequency to which suppliers receive orders for products they develop.

3. Cost and Cost Negotiation: measures if suppliers are given enough funds to meet buyer expectations, including production costs and compensation for suppliers to meet buyer codes of conduct and legal requirements.

4. Sourcing and Order Placement: measures if buyers are rewarded for compliance with their codes of conduct and month-to-month order fluctuation.

5. Payment and Terms: measures if suppliers are paid on time and at the price agreed in the original contract.

6. Management of the Purchasing Process: measures the amount of time offered to the supplier for the development and production phases in which buyers are required to complete key actions outlined in a Time and Action Calendar.

7. CSR Harmonization: measures the internal alignment of buyer companies on corporate social compliance goals and their contribution to reducing industrywide audit duplication.

This report summarizes the results and key findings from the first cycle of BBPPI data collection carried out in Q4 2017. It includes ratings from 156 suppliers across 24 countries and measures the performance of 65 buyers within the apparel, footwear, and household textiles industries globally.

Buyers have been awarded scores using a 0 to 5-star rating system.

BETTER BUYING SCORE

Overall Planning and Forecasting Design and Development Cost and Cost Negotiation Sourcing and Order Placement Payment and Terms Management of the Purchasing Process CSR Harmonization

AVERAGE OF ALL SUBMITTED RATINGS (N=218)

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EXECUTIVE SUMMARY

The scores reveal that while buyers are performing well in some areas, improvements are needed in others. The average overall score for buyers in this cycle was 2.5 stars. The best performing category was Payment and Terms with 4.5 stars, while the worst performing category was Sourcing and Order Placement which received an average of 0 stars.

In addition to presenting the overall Better Buying scores, the report delves into the complexities of buyer-supplier relationships (page 14 onwards) across each category by taking into account a number of factors such as geographic location and Buyer Type.

The BBPPI provides an internationally recognized framework for measuring purchasing practices, as well as an action agenda to promote labor standards and sustainable purchasing practices within supply chains globally.

The recommendations of this report are therefore divided into three parts: first to reveal best and worst practices and to emphasize the need for an internationally recognized index such as the BBPPI, second to highlight the importance of stakeholder engagement with the index, and third to identify opportunities for buyers to improve their ratings.

1. Current business practices are unsustainable and in order to facilitate sustainable supply chains, buyers must begin to:

? Improve the predictability and consistency of their business with suppliers.

? Offer and maintain enough time for production.

? Eliminate financial tactics that erode suppliers' abilities to cover the costs of business.

? Support and incentivize sustainable business operations.

2. Industry-wide transformation of buyer purchasing practices demands leadership:

? While the BBPPI has created an opportunity for suppliers to communicate their experiences, more buyers are needed to engage with the process by inviting their suppliers to participate in upcoming rating cycles, so they can better understand their purchasing practices and identify areas of focus for improvement.

? Department stores especially are encouraged to engage with Better Buying so that the BBPPI can reflect the experiences of a more representative group of suppliers.

? Suppliers should submit ratings rather than waiting for invitations from their buyers. By increasing the amount of ratings, Better Buying can improve accuracy, identify more trends, and provide a knowledge base from which improvements can be made.

? M ulti-stakeholder initiatives whose members have made commitments to responsible purchasing practices and improving workplace conditions can use the BBPPI to measure their performance across the seven categories of purchasing practices.

3. The BBPPI is a practical tool for improvement and will spur a `race to the top' across all categories of buyers:

? A ll apparel, footwear, and household textiles buyers can now use the BBPPI to review their own practices and begin to change their day-to-day practices, so that performance in purchasing practices improves over time.

? Buyers from under-represented types such as General Retail and Department Stores, and their peers within these types, such as footwear or active wear buyers, should engage with Better Buying to gain actionable information as a basis for making their categories stand out for best (rather than worst) practices.

Better Buying Index Report Spring 2018 Executive Summary

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