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Strategic Moves

  Purchasing entails a great deal more than finding the right product from the right supplier. It's a game of balancing price, delivery, quality and more. In an information age, when time and knowledge are among the most valuable commodities to profitable operation, exploring new strategies and tactics for making efficient purchases can pay significant dividends.That, in essence, is the whole reason for the annual Textile Industries Buyers Guide issue. It is the goal of the editors of TI to provide a comprehensive reference of resources to make purchasing easier.But purchasing entails a great deal more than finding the right product from the right supplier. Price, quality, delivery, availability, lead times and more have a significant impact on the ultimate total cost of a product. As more than one textile manufacturer has learned in the past few years, cost and price, while related, are not synonymous. Despite the seeming paradox, the issues facing purchasers today are at once both more complex and more simple than ever before. In terms of complexity, there are more ways to evaluate and implement purchases than at any time in history. In days gone by, a purchasing agent, department head or other qualified specifier would call a trusted salesperson at a well-known vendor or three, get prices and availability, select the lowest-priced of comparable products, and the process would be finished. Today, however, just finding the right medium through which to make the purchase can be a major undertaking. Purchasing agents are still bombarded by telephone and in-person sales calls, but the emergence of the Internet and e-commerce as major elements of the supply channel has added a new and sometimes confusing dimension to the process. The time-honored product catalogs that used to occupy drawer after drawer of filing cabinet space are almost a thing of the past. In their place is a collection of compact discs that can be kept on a desktop and easily accessed by computers. Direct mail, automated telephone sales systems and other avenues provide the purchaser with yet even more choices. High Technology Offers Speed And ConvenienceIt is the very complexity of the process, however, that makes it simple at least, once the buyer is initiated into the world of high technology and can learn to function with only the barest minimum of human interaction. Today, one can order everything from paper clips to multi-million dollar machinery with a few clicks of the mouse. Additionally, in many cases, all the financial transactions can be handled electronically, reducing costs in both personnel and handling. 
In the past several years, a number of websites dedicated to textile purchasing have sprung from the ether with a fair number of them folding shortly thereafter. The Thomas Register, perhaps the ultimate industrial buyers guide, can now be had in its entirety on compact disc, eliminating the need for a dedicated bookshelf somewhere in the purchasing department. Product specs can be e-mailed almost instantly, eliminating the sometimes-frustrating wait for information on time-critical purchases.Internet sites such as Fiberbuys.com, eSASA.com and others that offer e-commerce solutions have made a lot of headlines in recent months for the ease, convenience and savings these companies offer their members. According to a recent survey of purchasing agents by Purchasing Magazine, 84 percent of buyers say they use Internet technology as part of their computer sourcing process. Those not currently using the medium report plans to do so within the next three years.But like many areas in which leading-edge technology is applied, some potential beneficiaries are hesitant to use a medium they do not fully understand. According to the Purchasing survey, some respondents still have concerns, many of which center around the stability of e-commerce sites. A number of sites have failed after a relatively short period of time.But the real watchword in purchasing these days as it seems to be in just about every other field of information technology is value-added. In selecting from among many different products, there is often less difference in performance and price than in the intangibles that ultimately determine customer satisfaction. While the process of ordering can be done without nearly as much face-to-face contact as in previous years, that personal touch becomes critical in assuring satisfaction after the sale and repeat business for the vendor. What you get after the sale is at least as important as what you get during it. Purchasing ConsortiumsIn the past decade, consumer buying consortiums have emerged in everything from groceries to do-it-yourself products for the home. The thinking behind these buying clubs is that the sales volume generated by multiple consumers will result in significant price breaks. Today, more and more companies even large ones that generate significant savings on their own are joining buying groups in the effort to squeeze even more savings from the supply channel.The quickest way to harvest cost savings is to reduce prices paid for materials, said J.C. Rice, president of United Sourcing Alliance, a purchasing group for the textile industry. Even very large companies like General Mills, Abbott Laboratories, and 3M, which have huge individual purchasing power, join purchasing groups to aggregate volumes and further reduce costs of raw material, supplies and services.United Sourcing counts among its members such marquee names as Burlington, Guilford, CollinsandAikman, National Spinning and Greenwood Mills.All sourcing efforts by the Sourcing Team are customer-driven, Rice said. Members semi-annually develop a list of high-interest commodities. These interests direct [United Sourcings] priorities for negotiations for the coming period. 
United Sourcings staff, headquartered in Charlotte, N.C., manages the process. When priorities are established, the staff collects consumption data by commodity from member companies. Based on these volumes, negotiations are initiated with quality suppliers for lowest costs without sacrificing service or quality. Contracts are developed, and implementation with member companies is overseen. Contracts to date have yielded savings from 7 to 19 percent, according to Rice. Value-adding services yielding additional cost reductions are often negotiated along with price improvements, he said.Current commodity agreements include: office products and paper, business forms, process chemicals for dyeing and finishing, polyfilm, electrical supplies, corrugated, lift trucks, janitorial supplies and general mill supplies.Benefits, according to Rice, include increased sales, reduced selling costs, long-term stable customer relationships, and increased profits. Large volumes typically give suppliers more influence with the manufacturers they represent. A key to suppliers enthusiasm for contracts with United Sourcing is the assurance that they will receive expected volumes in exchange for lower prices and enhanced service. United Sourcing is working to develop a strategy for purchasing non-strategic products and services through the Internet. The e-commerce strategy will automate clients processes, maximize ability to analyze information, and develop a unique e-market/e-procurement system.Phase One involves procedures that will allow individual clients to make leveraged buys from aggregated purchasing data. Phase Two will provide a web-based purchasing interface for clients, allowing seamless connection to suppliers and elimination of redundancies in information systems.Cooperatively, companies can determine the best vendors that will meet requirements for speed and total cost reductions, Rice said. Investment cost for e-commerce capabilities will be much lower for a group than individually.Supply management through group purchasing combined with e-commerce will provide clients with lowest total material costs, he said.  Managing The Supply ChainWhether purchasing in the traditional fashion, through the Internet or as part of a larger buyers group, there is no doubt that managing the supply chain is becoming an increasingly critical issue for many companies. Textile companies in the United States are doing less and less commodity work and more made-to-order products. As well, the customers of the textile companies are demanding just-in-time shipments and customer service that taxes the capabilities of even the most modern and well-organized business. For example, Valdese Weavers, Valdese, N.C., underwent a long and often painful implementation of an Enterprise Resource Planning program in order to qualify for high-end business that requires careful and strategic managing of resources (See Valdese Weaves ERP Success Story, TI, May 2001).In a highly competitive marketplace, many companies are learning the same lessons as Valdese. As both buying and selling become more efficient, new markets are opened and profit potential increases.Every day, more companies are reducing inventories and streamlining planning and distribution channels in order to increase profit and efficiency. Product and manufacturing cycles are getting shorter and shorter. Following the trends of recent times, processes that used to take weeks will take only days. What just a few years ago was an acceptable time from order to delivery is now woefully unacceptable. So, management of the supply chain, including the best and most efficient method of purchasing, can have a huge impact on how well a company positions itself in a highly competitive marketplace.

July 2001