It is a common grievance among many apparel manufacturers in South Asia that buyers do not pay sufficient price to cover the rising overhead cost and a decent profit margin. Also, It is noted that many companies struggle to fill the capacity every season. In this article, I will be sharing with you few tips and guidelines which would help you on next buyers meeting and in the price negotiation.
1. Structure for short & sweet presentation
Many managers use PowerPoint presentations to make an introduction about the company, products, and its team members. It is important to ensure presentation don’t drag on for more than 10-15 minutes. Anything beyond that would not add value rather impact negatively. No buyer wants to sit and listen to a long presentation.
For a 10-15 minutes presentation, an ideal number of slides are 8-10.
- 2 slides to introduce your company,
- 3 more slides to show your products and current buyers,
- 1 slide to explain the nominations, compliance, approvals and certifications that company has obtained.
- 2 more slides to explain the facilities and benefits company providing to its employees as well as charity work, company does for the community.
- Use the follow-up discussion to explain any other information you may think important yet didn’t cover in the presentation.
2. Learn the company’s core competencies and limitations
Most often manufacturing company is represented by merchandising or marketing department. It is noted that many merchandising/ marketing managers do not have a technical or production background. In many occasions, their objective is to somehow fill the capacity. It is not wise to accept any order just because it could fill your capacity.
For an example, if the factory is specialized in woven products, it is not wise to accept a large order of polo shirts with a woven collar. The factory may have to either buy or hire certain machines. Machine operators have to go through a learning curve which would surely have an impact on the efficiency. Further, when sewing knit products there are other technical issues such as timely needle change, investment on machine parts and training the mechanics will add up to the cost. Therefore, knowledge on product capabilities and machine inventory is a must to avoid selecting orders that are not particularly suited for the current setup.
3. Learn to read the buyers concerns
It is very important to listen to the buyers and determine their priorities and motivations. Don’t rush to talk rather be patient and listen. Most buyers have pre-determined objectives when initiating a discussion. Some of the key objectives are,
- Trying to achieve the rock bottom price
- Ensure manufacturer is a reputable company with a good track record on compliance
- Good quality and technical background
- Possibility of value added services
- Lead time.
Obviously, there could be many more objectives but above are the primary concerns. If the buyer is concerned about the FOB price, It is important to present her with few solutions. You could discuss the possibility of finding fabric suppliers who would work with you to achieve the same hand feel with a lower price. If the buyer is more concerned about the hand feel of the fabric, it is possible to achieve it by re-engineering the fabric with less yarn count. This inevitably reduces the cost. It is important to ask the right questions from the buyer in order to convince her that you’re an expert on the subject matter. For an example, If you are making round neck T-shirts for Primark which retail for US$3, the end customer do NOT expect it to last more than 4 wash cycles. It absolutely makes no sense to use a fabric that would last 10 wash cycles. What is important is the hand feel, passing the fabric tests and achieving the target price. You need to ask the buyer about the number of wash cycles she expects it to last. Share the information with the mill and they will help to re- engineer the fabric to meet your technical requirements and the price points.
Some of the buyers are concerned about the compliance and quality. Take this opportunity to explain the lean management initiatives taken by the company. Explain the quality management systems in place and don’t forget to tell a story about how the 5S campaign helped to find some long lost items which were considered lost at one point.
Perhaps your company does not practice lean management. If this is the case, explain the other initiative in place to improve the safety and the compliance within the company.
Another tricky point to navigate in negotiation is the lead time. Most of the manufacturers have to rely on imported fabric or trims to commence an order. Maybe you don’t have the capacity available to meet the asking delivery dates. Instead of falsely agreeing to deadlines or flatly saying NO, work with them on possible solutions. If the buyers' nominated fabric supplier is in another country, see the possibility of counter developing the fabric quality with a better price. Most often, if the price is better and the quality is met, the buyer is sure to go with your option. When this is not practiced, explain the other value added service your company can provide. It is always wise to do a quick calculation and see the price difference on air freight & sea freight and if within margins, offer to send the first shipment by air on factory cost. It is highly likely buyer would go with your suggestion.
4. Be transparent to build the trust. Use open costing format
Another strategy is to offer to sit down and work the cost in an open cost sheet where all costs are explained and nothing hidden from the buyer. Initially, some of the company owners and senior managers may decide against the move but it is one of the easiest methods to earn the buyers trust and to build a lasting relationship. Most buyers feel factories are taking advantage of their lack of exposure to production. By conducting open garment costing you can highlight the numerous hidden costs such as transport, courier and other development costs which were not discussed or highlighted in other forms of costing.
5. Discuss the CMT price and how you arrived at it
It is important to explain to the buyers how the company calculated CMT price. Practically speaking this is the real price point in the costing where a manufacturer has a direct input. All other prices are based on the prices given by an external supplier or a service provider. Discuss the method used by the company to calculate SMV. Buyers always impressed when you explain how the technology and information systems such as GSD or SEWEASY used to calculate SMV accurately. Get the assistance of a work-study engineer to do a demonstration and discuss how it helps to find bulk friendly sewing methods to reduce the SMV which in turn helps to bring down the cost.
Bottom-line is though there are many ways to re-look at the cost. Eventually, you may find that the initial price is the best but by now, the buyer knows that you tried your best. That will surely help in the negotiation process.
I have discussed above five tips to help the manufacturers on conducting buyer meetings.
Post a comment and let me know whether you found these tips helpful.
About the Author: Charm Rammandala is the founder & CEO of IStrategy USA. He counts over two decades in fashion supply chain in diverse roles as Lean Manager and Model himself. He is an expert in rolling out programs in Lean apparel manufacturing and Sustainable labour costing. His former positions included being the first Lean Technologist at George Sourcing Services UK Ltd.
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