Can a partnership optimize the sourcing of merchandise and non-merchandise products with suppliers of branded goods in the fashion trade? by María García

We look at the challenge at SinnLeffers. Procurement management is the systematic approach used for buying all the goods and services needed for a company to stay sustainable.

In fashion and textile business, the demand changes rapidly due to fashion trends and a volatile market situation. This demand is unpredictable and could vary and change completely in a short time, creating high difficulties for supply chain.

It is important not simply to measure the success based on non-merchandise or own brands, but to utilize companies‘ expertise for targeted negotiations with third-party brands.

Suppliers of branded goods play a special role in sourcing for the multi-brand fashion trade. The two criteria of quality and purchase price that are so important in other sectors are not the only key factors here.

In addition to product performance, another important decision-making criterion in the trade is the brand‘s value or advertising power. For branded goods in particular, there is only one supplier – the manufacturer of the relevant brand. Accordingly, there is a close relationship between trading companies and suppliers in the fashion industry. Strategic brand partnerships are created and involve a certain degree of dependence for both partners.

In sourcing terms, this means one thing above all else – tendering and negotiations in the traditional sense are not possible with strong suppliers of branded goods. Due to the lack of alternatives, negotiations with suppliers of branded goods normally focus on other terms and conditions such as advertising allowances, periods for payment, etc.

In view of this difficult situation, the aim of the project was to increase the profit contribution for each brand and still create a win-win situation for both partners.

In order to achieve this objective, suppliers would in the future no longer be responsible simply for delivering their goods. They would also be required to assume partial responsibility for sales rates and SinnLeffers‘  gross profit margins. The only way of achieving this was through close cooperation between SinnLeffers and suppliers of branded goods.

The project started in the conventional way with an analysis of existing suppliers to deliver transparency about all terms and conditions for all types of items. In-house KPIs were also generated to measure the sales success of the relevant brand. These include turnover per square meter, initial and final gross profit, and inventory turnover. The KPIs were used to determine the profit contribution and the relevant margin for each supplier – both crucial figures.

The second stage was to establish a suitable negotiating strategy and tactics in line with our positioning and orientation. They considered important to take a partnership-based approach, providing clear commitments to their suppliers in return. Thanks to this new negotiating setup, SinnLeffers was able to optimize terms and conditions.

Intensive cooperation resulted in two-way knowledge transfer. Negotiations became more professional, and the optimized methods and negotiating processes created a solid basis for the period after the project. This is vitally important in view of the difficulties facing from markets and competitors.

The project‘s success went beyond improving the profit contribution of suppliers of branded goods. They structured a systematic approach, combined with excellent teamwork, which brought lasting results that enabled the company to make significant progress.

María García Bufill