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Fashion brands urged to reassess cost models for smarter buying

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Fashion brands urged to reassess cost models for smarter buying

The roundtable findings suggests that current cost models often lack cost variable data. Credit: chainarong06/Shutterstock.

The institute’s report, titled ‘Suppliers’ Perspectives on Solutions for Better Costing’, draws from supplier interviews, focus groups, and a supplementary microsurvey to present the viewpoints of suppliers regarding current costing solutions. 

Key findings from Better Buying’s supplier perspectives report 

The 2024 Better Buying Purchasing Practices Index revealed that less than half of suppliers believe their orders are priced to ensure compliant production.  

This means that in many cases, the prices do not cover all buyer demands or allow suppliers to make a profit. Specifically, 81.9% of suppliers indicated that the prices they receive do not cover basic production costs. 

Findings from the supplier roundtable suggest that cost models lacking comprehensive cost variable information lead to underestimations of product costs.  

Additionally, when buyers use detailed cost information from suppliers, it can sometimes be manipulated to force competition between suppliers, driving prices down further.  

The practice of isolating labour costs in pricing models was also criticised by suppliers, who argue that it does not effectively contribute to higher living wages. 

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Supplier recommendations  

Effective methods for alleviating costing pressures, as identified by suppliers, include maintaining open communication, comparing similar suppliers fairly, easing price pressures, improving forecasting accuracy, and considering costs within the framework of long-term partnerships. 

While cost models and practices like open-book costing and ring-fencing labour costs have potential benefits for sustainability and worker wages, their success depends on their use in collaborative negotiations with suppliers.  

Imposing detailed cost disclosures or isolating labour costs without proper context can harm supplier businesses and their ability to invest in workers and facilities. Therefore, stakeholders and buyers are encouraged to establish clear guidelines for these practices to address wage issues in the apparel industry effectively. 

Better Buying Institute’s president and co-founder Dr Marsha Dickson said: “The solutions of buyers and stakeholder initiatives are well-intended and hold promise for better outcomes for workers. But suppliers’ input on these solutions has been limited, and with core competencies in manufacturing and the importance of fair costing to their businesses, they are critical stakeholders whose expertise and concerns should be brought to the table.”  

“This supplier roundtable report should be consulted by buyers and other stakeholders working with suppliers on costing. Cost modelling, open-book costing, and ring-fencing labour costs must be carefully managed, with guidelines and rules around their use to avoid negative consequences for suppliers.” 

The research was conducted over the period from August to October 2021, utilising both roundtable discussions and interviews, complemented by a brief survey. Interviews were conducted with 15 participants across seven sessions, both individually and in a group setting.  

The microsurvey, which ran from 15 to 27 September 2021, comprised five questions and suppliers from 23 different nations contributed to the 98 responses.  

The majority of these responses originated from China and Hong Kong, with significant input also coming from East Asia and South Asia. 

Earlier this year, the Better Buying Purchasing Practices Index showed 70% of companies improved, with sports goods outperforming fashion. 


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