SOS: My Clients Want a Certified Supply Chain But…

SOS: My Clients Want a Certified Supply Chain But…

by Kim van der Weerd created 2023-01-09T12:21:27+07:00
Reflections on February’s Supplier Meet-Up

Supplier Meet-ups are private off-the record conversations open only to suppliers held once per month. Each month, one supplier shares a specific challenge they’re facing while the rest of the group shares feedback and offers support.

This month’s challenge related to the cost of material certification. Several key brands were pressuring the supplier in question to assure that 100% of their ginners were certified. This was proving difficult because the supplier works with over 50 ginners, most of them small operations for whom certification would be a big investment – both in terms of costs and management systems.

“Have you ever seen ginning mills in our area? It’s not the same as in the US or Australia. Here, it’s much smaller scale. Getting certified costs a ginner a lot. It’s also going to make our fabric more expensive.”

Covering the cost of ginner certification would require a price increase of $1 per unit – an increase that this supplier said brands would not accept.

This comment prompted knowing smiles to flicker in across the screen: an all-too-familiar challenge. One supplier responded by asking whether the upcharge could be spread out across all product lines and all customers, to minimize the upcharge for a single product line or a single client?

At this suggestion another supplier chimed in: they’d tried this but the push for “open costing” was making it harder and harder to spread the cost of sustainability related investments across products and clients.

This prompted someone to suggest taking the opposite approach: itemize the cost of certification on the cost sheet. Then, if possible, get the brand’s sustainability team directly involved in the price negotiations. Make it easy for them to advocate for you internally with their purchasing teams.

At this suggestion, another supplier jumped in: they’d tried this, and this too had backfired.  “We tried to force the brand’s sourcing team to talk to their sustainability team. Then the brand’s sustainability team ended coming to our sales team to negotiate lower prices. We fought over 10 cents for two months!”

One person volunteered that their company had created their own supplier checklist.  Beyond any technical requirements, it’s a tool they’re using to understand their suppliers’ attitudes.  They want to understand their suppliers’ capacity and motivations for adopting more sustainable practices. They’re using this to develop strategic partnerships and consolidate their supplier base… because at the end of the day, these investments are not just about equipment and money, they’re also about attitude.

However, this same supplier conceded that they had not yet managed to use this information to successfully negotiate price increases with brands. However, internally, they were making it a point to avoid replicating brand behavior with their own suppliers. Whenever possible, their head of purchasing and head of sustainability engaged with their suppliers together.

The final suggestion of the session reverted back to the idea cost sharing: could the cost of certifying these ginners be shared across mills sourcing from the same ginners? The supplier presenting their challenge responded that most of the ginners they work with primarily produce for local markets.  They are less sensitive to changes coming from the top within the fashion industry and tend to be less motivated to change.  If anything, this supplier was concerned that if sustainability requirements force them to source from a select group of certified mills the result would be a monopoly and even higher prices.

This prompted the group to zoom out and reflect on the bigger picture. One person shared: “Within brands, we have to get in at the right level. We need to engage the decision-makers – the people making the policies and procedures. These are the Board room discussions.  As an individual company, it’s very hard to have this kind of access. But this is where the idea of supplier collaboration is very interesting - together maybe we could get to those people.  You need some kind of collective voice where there isn’t a direct commercial relationship.”

These monthly supplier meet-ups are a far cry from a formal collective voice for suppliers, but we are working on taking our collaboration to the next level. For example, a group of regular participants are coming together to commission a white paper on the difficulty of financing decarbonization. If you’re a supplier interested in joining the Steering Committee leading this white paper, please email me for more information. Alternatively, join our meet-ups! They’re open to any supplier– the only requirement is a willingness to come regularly. We are a small group interested in meaningful relationships.