Better Buying™ Index Report, Fall 2018 Purchasing Practices Performance in Apparel, Footwear, and Household Textile Supply Chains

TM Better Buying™ Index Report, Fall 2018 Purchasing Practices Performance in Apparel, Footwear, and Household Textile Supply Chains ABOUT BETTER BUYING Better BuyingTM is a global initiative that provides retailers, brands, and suppliers a cloud-based platform to obtain data-driven insights into purchasing activities. Better Buying’s transparency fosters sustainable partnerships and mutually beneficial financial results and other outcomes. Anonymous supplier ratings of buyer purchasing practices obtained by the independent third-party initiative are aggregated, scored, and made available to the participating retailers, brands, and suppliers with the goal of accelerating change and industry-wide improvements across supply chains. Co-founded by Marsha Dickson, Ph.D. and Doug Cahn, Better BuyingTM 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: www.betterbuying.org. Report written by Dr. Marsha A. Dickson, co-founder of Better BuyingTM, with support from Dipti Bhatt, research associate, Doug Cahn, co-founder, and Tony Lowe, East Asia ambassador. Suggested citation: Dickson, Marsha A. (2018). Better BuyingTM Purchasing Practices Index Report Fall 2018: Purchasing Practices Performance in Apparel, Footwear, and Household Textile Supply Chains. Available at www.betterbuying.org. Copyright 2018, Better BuyingTM. All rights reserved. ACKNOWLEDGEMENTS Better BuyingTM appreciates the support of its primary funder, C&A Foundation, and secondary funder, Humanity United. The opinions expressed are those of Better BuyingTM and do not necessarily reflect the views of its funders. Better BuyingTM Index Report, Fall 2018 Contents 1. Introduction 2 2. Scores and Ratings 4 3. Key Findings 6 CONTENTS 4. Conclusions and Recommendations 18 Appendix: Methodology 20 Better BuyingTM Index Report, Fall 2018 1 1. Introduction Better BuyingTM is a global initiative that provides retailers, brands, and suppliers a cloud-based platform to obtain data-driven insights into purchasing activities. Better Buying’s transparency fosters sustainable partnerships and mutually beneficial financial results and other outcomes.1 2 Better BuyingTM Index Report, Fall 2018 Introduction Spring 2018 marked the launch The buying companies that engaged The BBPPI is the first in a suite of of the Better BuyingTM Purchasing with Better BuyingTM during this Better BuyingTM indices that provides Practices Index (BBPPI). The BBPPI ratings cycle are acknowledged in performance data and statistics uses data submitted anonymously the report and are being provided measuring the performance of INTRODUCTION by suppliers based on their business with individualized company buyer companies on a range of experiences with specific customers reports. The reports include a business practices that impact their to measure the performance of summary of their performance financial, environmental, and social retailers and brands within the against the industry benchmark and sustainability performance, as well apparel, footwear, and household recommendations for improvements as the performance of their business textiles industries against seven in better supporting their suppliers partners. Better BuyingTM is currently categories of purchasing practices. and the stability of their supply focused on relationships between Regularly updated ratings are chains. From these actionable retailers and brands and their first- aggregated, scored, and made insights, retailers and brands can tier suppliers, but it is expected that available to the retailers and brands work to streamline their operations, over time this will expand deeper being rated and the suppliers that create stronger partnerships with into supply chains and across rated them, providing up-to-date suppliers, and monitor their efforts multiple sectors, such as toys, information about purchasing over time. Similarly, suppliers can electronics, and food and beverage. practices and how they are better evaluate current and potential changing over time. customers and business partners, and understand how to allocate This report summarizes the results resources more efficiently. Suppliers and key findings from the Q2 that rate their customers help 2018 ratings cycle of BBPPI data provide retailers and brands with collection carried out between critical information needed to drive May-August 2018. The report reveals purchasing practices over time. differences in results compared with the previous ratings cycle and explores the reasons behind these differences. It also shares findings from a new set of questions and identifies further opportunities for buyers to improve their performance. The data collection methodology and participation information can be found in the Appendix of this report. 1 Better BuyingTM provides the opportunity for suppliers - as opposed to factories - to rate their customers because information pertaining to purchasing practices is most often held in the corporate supplier office that has direct contact with the buying company, and not at the factory level. A supplier, therefore, is defined as a parent company that owns one or more facilities or places orders in independently owned and operated factories on behalf of their clients (buyers from brands, retailers, agents and design houses). It is understood that a factory may also be a supplier if it has direct contact with the buyer’s product creation teams and no other corporate office intervenes in the factory-buyer relationship. Buyers are referred to as retailers and brands throughout this report due to the heavy prevalence of ratings of those types of businesses. Better BuyingTM Index Report, Fall 2018 Introduction 3 2. Scores and Ratings 4 Better BuyingTM Index Report, Fall 2018 Scores and Ratings Table 1 outlines the scores of the The categories of Management It is more likely that changes in 363 submitted ratings from the Q2 of the Purchasing Process and scores can be attributed to two 2018 ratings cycle. Color coding has Sourcing and Order Placement factors: SCORES AND RATINGS been used to differentiate between improved by a full star and half a best scores of 4 to 5 stars (green), star respectively compared to the 1. The type of buyer and number mid-range scores of 2 to 3.5 stars previous ratings cycle. Planning of times they were rated. The (blue), and poor scores of 1.5 stars or and Forecasting and Design and majority of ratings this cycle were less (purple). It is important to note Development remain unchanged. attributed to 20 buyer companies that the industry benchmark does In contrast, Payment and Terms and the benchmark reflect this. It not represent a standard of good dropped by two and a half stars is expected that with an increase performance, it simply indicates while Cost and Cost Negotiation and in the number of participating average industry performance during Win-Win Sustainable Partnership buyers, the findings will reflect this ratings cycle. (formerly titled CSR Harmonization) purchasing practices across the both dropped one star. And the broader apparel, footwear, and In Q2 of 2018, the average Better overall Better BuyingTM score household textiles industries, BuyingTM score for all retailers and dropped by half a star. rather than just a discrete set of brands was 2 stars out of 5, but companies. the scores assigned to individual Although scores have changed companies varied widely, ranging it is unlikely that, in the short six 2. Adjustments to questions and from a low of 0 stars to a high of months since the last ratings cycle, scoring in this ratings cycle have 5 stars (see Table 1). The best performance in purchasing practices revealed further supplier pain performing category was in have changed as buyers are only just paints. Management of the Purchasing beginning to develop and implement Process (4.5 stars), while the worst strategies for improvement (refer to performing category was in Sourcing case studies). and Order Placement (0.5 stars). BETTER BUYING SCORE INDUSTRY BENCHMARK, INDUSTRY BENCHMARK, FIRST RATINGS CYCLE (N=218) Q2 2018 (N=363) Overall Planning and Forecasting Design and Development Cost and Cost Negotiation Sourcing and Order Placement Payment and Terms Management of the Purchasing Process Win-Win Sustainable Partnership (formerly CSR Harmonization) Table 1. Overall Better BuyingTM and purchasing practices category scores (0 to 5 stars) Better BuyingTM Index Report, Fall 2018 Scores and Ratings 5 3. Key Findings 6 Better BuyingTM Index Report, Fall 2018 Key Findings In this section, we analyze the information captured by the BBPPI. RETAILER/BRAND CASE STUDY This ratings cycle covers four After receiving a detailed analytical The workshops began with a thematic areas: TM report from Better Buying review of the relevant findings from FINDINGS KEY comparing the brand’s purchasing the report. Each participant was 1. Financial pressures experienced practices category scores with the then asked to identify ideas for by suppliers overall Better BuyingTM score, the improvement, as well as barriers to 2. Opportunities for increased company went to work. To begin, change with a view to focusing on operational efficiency the ethical trading staff distributed everyday purchasing practices that 3. Regional differences in the findings to director level can impact the lives of workers. forecasting and ordering executives and began planning Nine areas of focus were addressed 4. Pursuing a win-win sustainable

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