Introducing The Better Buying Index
By Dr. Marsha Dickson 14 June, 2018
Better Buying co-founder Dr Marsha Dickson on how their new index improves buying practices in supply chains
Better Buying has launched the Better Buying Purchasing Practices Index (BBPPI) and its first benchmark report designed to support industry efforts to improve purchasing practices in supply chains globally.
The purchasing practices of 65 leading brands & retailers were rated using data submitted by suppliers
In its first report, the independent global index rated the purchasing practices of 65 leading brands and retailers of apparel, footwear, and household textiles using data submitted anonymously by suppliers through its online platform.
Over 60% of suppliers are not incentivised for being compliant to buyer codes of conduct.
Buyers, such as international brands and retailers, are increasingly concerned about the impact of their purchasing practices on suppliers’ ability to provide decent working conditions. Large and unpredictable order requests with tight timelines at the lowest possible cost are known to place significant hardships on suppliers, often resulting in substandard factory environmental and workplace performance. Poor practices can also prevent suppliers from running sustainable businesses and pose potential risks in supply chains, including business failure and supply disruption.
Therefore, improved purchasing practices not only have a positive impact on the workplace, but they also support buyers’ financial performance and help to maintain stable and responsive supply chains. Information necessary to help buying companies understand their impacts and improve their purchasing practices is lacking.
Better Buying is the first initiative to focus on empowering suppliers & amplifying their voice
Better Buying was created in 2015 to solve this problem. Better Buying is an independent, third-party initiative with a mission to transform relationships between the suppliers responsible for manufacturing products and the companies that buy them, so that all parties can achieve their financial, environmental, and social sustainability goals. Co-founded by Marsha Dickson, Ph.D. and Doug Cahn, with financial support from C&A Foundation and Humanity United, Better Buying is the first initiative to focus on empowering suppliers and amplifying their voice. The platform tracks and releases performance scores and analysis about purchasing practices, allowing trends to be uncovered. Better Buying is currently a project of the University of Delaware in the United States.
The BBPPI rates buyers against seven different categories of purchasing practices:
1. Planning and Forecasting
2. Design and Development
3. Cost and Cost Negotiation
4. Sourcing and Order Placement
5. Payment and Terms
6. Management of the Purchasing Process
7. CSR Harmonization
All ratings are aggregated, turned into scores, and subsequently made available to the buyers being rated and the suppliers that submitted the ratings. Ratings are regularly updated by suppliers and are eventually made public together with comments from buyers about examples of best practice and steps taken to improve their practices. Suppliers, buyers, and other key stakeholders get up-to-date information about purchasing practices and how they are changing—hopefully for the better—over time.
The Better Buying Index Report, available here, summarizes the results and key findings from the first cycle of BBPPI data collection carried out in Q4 2017. It includes 218 ratings from 156 suppliers across 24 countries and measures the performance of 65 buyers. It identifies best practices in purchasing and supply chain processes and highlights those purchasing practices in need of improvement. It is intended to broaden stakeholder understanding of the most challenging day-to-day business practices faced by suppliers working with buyer companies to bring products to market.
The findings gathered can be used by:
- Professionals in corporate social responsibility and labor compliance to identify how their own businesses are contributing to human rights violations.
- Industry professionals focused on business operations and profitability to manage their businesses more efficiently and profitably.
- Investors, financial institutions, insurers, and auditors who can use the findings to assess potential supply chain risks, not only reputational but material risks associated with supply disruption.
How did buyers score on the BBPPI?
While buyers are performing well in some areas, improvements are needed in others. The average overall Better Buying score for buyers was 2.5 out of 5 stars (scores were awarded using a 0 to 5-star rating system), meaning that the kinds of practices suppliers face result in significant challenges.
In most cases, suppliers were paid on time and at the price agreed upon (4.5 out of 5 stars for Payment and Terms), while the worst performing category was Sourcing and Order Placement with an average of 0, meaning that suppliers were not rewarded for compliance to their codes of conduct and legal requirements and receive highly inconsistent order volumes from month to month.
Buyers scored 2.5 out of 5 stars…
…meaning that the kinds of practices suppliers face result in significant challenges
e.g. Sourcing & Order Placement scores 0…
The report delves into the complexities of buyer-supplier relationships across each category. Some additional findings include:
- Nearly 4 out of 10 buyers didn’t ask their suppliers to reserve capacity in advance, confirming that a large amount of business comes from buyers chasing last-minute production.
- Over 43% of suppliers reported experiencing high pressure cost negotiating strategies, but buyers headquartered in Europe/UK had better costing practices than those headquartered in North America.
- Over 60% of the suppliers are not incentivised for being compliant to buyer codes of conduct.
- Buyers scored better where they had a direct relationship with the suppliers rating them compared with buyers using a third party, which is reflected in overall Better Buying scores, Cost and Cost Negotiation, and Management of the Purchasing Process categories.
- No significant correlation was found between the length of a buyer-supplier relationship and overall Better Buying scores, which implies that a long-term relationship does not improve purchasing practices.
What’s next for Better Buying?
Ratings are currently being submitted by suppliers in a second ratings cycle that closes August 3; a report will be issued from those findings in the fall.
The online rating system aims to shift the power imbalance that exists between brands & their manufacturing partners
While several important initiatives are focused on improving purchasing practices, Better Buying is uniquely contributing by providing a working tool that: provides companies with information that can focus areas of needed improvements; independently verifies company performance; highlights examples of best practices; measures change over time; and points to supply chain risks and opportunities for increased operational efficiency. Its online rating system aims to shift the power imbalance that exists between brands and their manufacturing partners, allowing suppliers to pass benefits of a more balanced relationship to the workers that produce our consumer goods.
For more information click here.
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