The Role and Responsibility of Buyers

Wednesday, March 19, 2008 10:37
Posted in category From the Factory Floor

Last summer, then Lead pain Barbie and Toxic Tommy the Tank were all the rage, and popular media was focused on the role of governments in trade, I was hammering away at fact that the ultimate responsibility for assuring quality rests solely with companies. sure, government agencies, standards, and advocacy groups play a role, but this summer highlighted that what was really missing from the equation was good old fashioned common sense quality control and assurance leadership.

Now.. I want to take this a bit further, and highlight the fact that through all of this, there is probably no more important person in this equation that the buyer. typically the person that identifies potential suppliers, the person responsible for developing the RFQ, responsible for developing the assessment framework for the program, and the person whose opinion/ expertise will provide the greatest amount of weight when CEOs/ Directors make final decisions, the buyer role carries a huge amount of responsibility.. and it is here that I am afraid that we are a bit lost… and it is here that I think the greatest room for change can occur.

Perhaps I am being naive, or perhaps I am being nostalgic a bit, but the act of buying and the role of the buyers in many industries have changed from works with trusted local partners , to amassing large networks of suppliers overseas and pitting them against each other. It is a system that one can see in various markets: electronic components, toys, textiles, stamping, raw materials, chemicals, furniture, Plastics, Wood Flooring, MDF, and so on…

and when I see that firms like Disney are still.. STILL … having labor problems that are really elementary in China, I get pretty burned because they are having problems for no good reason other than trying to “save” money… but more than Disney, or McDonald’s who is again.. AGAIN.. in trouble for failing to pay their staff properly, we are starting to see that the failures that occur at the supplier level could have been prevented if the buyer had invested more fully into the system that they are seeking to exploit.

One of the most interesting cases that I can point you towards is the just released Nike study of their own suppliers where readers are given what I think is the best window into the problems.. and some of the solutions.

The report shows there are problems at Nike contract facilities, including management not understanding or implementing moves to meet Nike’s minimum standards.

Other problems include falsifying documents such as payroll records, a practice that can hide excessive overtime and inaccurate payment of wages — and help keep prices low.

In many cases, there were problems with workers using false identification as they compete for limited jobs.

A self-assessment program found 167 cases of workers who were under the minimum age to work but are now 18 or older. There were only two current cases of workers in Nike contract facilities under age 18, according the report. There were more than 1,000 other cases of people who were of age but had incorrect information on their identification.

Unforuntaltely, in the world of textile, take denim for example, you will have a buyer send out a RFP with samples to 30 potential suppliers. there is little or no ownership in the process, and essentially a reverse auction process begins where bidders will win if the have the best lead times… and more importantly the best pricing. It is a process that many in the industry is known to create/ promote poor working conditions at poor pay.

Where buyers are important in this picture is that they hold all the cards. Prior to closing a deal, it is their inspection of a factory that provides the basis for future RFQs, and were they to begin considering the social aspects of the process, perhaps factories would be forced into cleaning up. When problems do arise, it is also the buyer (not the social auditor) who would have the most power in addressing the problems constructively.

What do you think? am I being naive? Should buyers play a larger social role? should social auditors be require to have the final say on a bid? Or are current practices acceptable?

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One Response to “The Role and Responsibility of Buyers”

  1. Yokie Kuma says:

    March 23rd, 2008 at 10:09 pm

    It is the buyers (and the companies they represent) driving the issue of quality fade and unapproved substitution of materials as well as poor adherence to labor laws.

    1) The VAT tax rebate has gone away = +14% on factories’ costs
    2) Minimum wage increased between 10%-20% per year for the past year or so
    3) Material costs are up 25%-50%
    4) Shipping is up 10%-20%

    Factories ask for price increases. Buyers have accepted ~5%-10%. Who/what is covering the difference between price increases vs manufacturing increases?

    Substitution of material helps cover this
    Poor adherence to overtime requirements helps cover this
    Quality fade …. use of lower end second tier suppliers

    A good buyer KNOWS this. If the buyer does not ….. then they are in the wrong profession. A good buyer, based on management’s opinion, is one who does not accept price increases (even though they know the squeeze is going on). What does the factory do? And mind you, this is a factory that has no sense of western business ethics ….

    With a legal maximum of 36 hours overtime per month, a factory would need 3 full shifts of people to run around the clock …. 3 full shifts ….. Wow …… they could do it with 2 shifts (and stretch the laws a bit) …… but then the customer might reject them on social policies. But the buyer would reject them if they hire the 3rd shift and raise prices ….. hmmmmm……. what to do?

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