Role of Order Negotiation in RMG Business


Orders that have been sent to factories will be negotiated for price, delivery, quota and quality etc. The order negotiation between the buyer and the manufacturer is not always an easy task. The buyers are always trying to get this garments made at very low prices whilst the manufacturers are hoping they will get at least 2 per cent more than what they got last time for a similar style.

The buyer always has a target price for the merchandise he hopes to buy. He has already finished his home work and fully aware of the market price for the particular type of garment. Therefore, he will do his best to buy the garments bellow his target price or for his target price. We should not forget the globe is full of manufacturers and suppliers. The buyer will certainly move to another manufacturer or country if he fails to buy at his price.
On the other hand, the manufacturers will promise the best quality and prompt delivery to convince the buyers to pay extra dollar or two for his merchandise. It is rather difficult to convince a buyer to pay more than his target price, but it may be possible to do so if the company has a good relationship with the buyer or if the company has a very good reputation for excellent performance. In other words a good image should do the trick.
Buying offices or their representatives should not consult companies operating at very high CMT to do very low-priced merchandise. Therefore the buying offices not only should have knowledge on company’s performance but also their average CMT prices.
Another important aspects in the order negotiation is to know the fairly accurate cost of making the garment. Most factories do this in a hurry and invariably arrive at out of focus cost. This situation will cause frustration to both parties during an order negotiation. The buyers are generally more conversant with the costing and would be able to judge almost immediately the manufacturer’s operations if the price quoted is very much different from his target price,. If the quoted price is higher it may be due to
  • Higher overheads in the factory
  • lower productivity in the factory
  • Higher mark-up
  • Raw material costed at high prices
  • Wrong consumption etc.
However the Buyer may not be that dissatisfied if the price quoted is little higher than his expected price. We might think that the price would be able to bring it down through negotiations. He might offer his help to improve productivity consumption and in the purchase of raw material at very competitive prices.
If the quoted price is significantly low, the buyer might think the factory is  not capable of manufacturing his goods for his satisfaction. Low price would reflect bad on the factory rather that securing he order. It looks rather funny, because we are in era where prices are at rock-bottom but still there is a minimum price which is offered by the buyer. Anything below means poor quality merchandise.
Therefore it is paramount importance to be at least 80 percent accurate I the costing of a garment. It must also be remembered that the buyer will not buy a particular garment at one price from two different companies. The successful company will be offered the contract to manufacture.

Posted on December 27, 2013, in Apparel Merchandising and tagged , , , , . Bookmark the permalink. Leave a comment.

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