Vendor Payment Arrangements Reveal Battle Between Businesses

When it comes to supplier payment terms, there is often a tug-of-war at play. On one side, corporate buyers are looking to lengthen their vendor payment timeframes as long as possible to be able to hold onto capital longer. On the other end are the suppliers, often smaller businesses with less leverage to convince their customer to pay more quickly.

This week’s B2B Data Digest looks at this battle between businesses, including a new initiative among Asian apparel manufacturers to fight for more favorable terms, a struggle within Apple Stores’ vendor community and an expansion of a faster supplier payment initiative within South Africa.

Four apparel manufacturing associations have joined the STAR Network (the Sustainable Textile of the Asian Region) as more industry participants band together to promote better purchasing and payment practices across the sector. Reports in Fibre2Fashion said that the new association members are joining the network from Turkey, Indonesia and Morocco, in addition to the current nine members, which are from Bangladesh, China, Cambodia, Myanmar, Vietnam and Pakistan. According to the publication, suppliers within the STAR Network account for about two-thirds of the global market share of factory exporters within the apparel and shoe product category, which has been hit particularly hard by canceled orders and longer B2B payment terms. The coalition is looking to collaborate and combine its members’ market leverage to establish better payment and delivery terms with corporate buyers.

Separate reports in Fashion United said the STAR Network is collaborating with GIZ FABRIC, the International Apparel Federation (IAF) and the Better Buying Institute to establish a joint set of minimum payment expectations. “Suppliers from around the world are coming together to offer solutions for strengthening global supply chains,” said Dr. Marsha Dickson, president and co-founder of the Better Buying Institute. “Suppliers often have the best ideas for how to overcome challenges and the impacts of brand and retailer purchasing practices on workers and the environment. It’s critical that their voices be heard.”

30-day payment terms will be the norm for Macsteel, reports in Engineering News revealed. The steel conglomerate, based in South Africa, is accelerating B2B payment terms to its small suppliers in an effort to strengthen the nation’s overall economy. The initiative is part of a broader #PayIn30 campaign occurring in the nation, spearheaded by Business for South Africa, which is championing more favorable supplier payment practices among large organizations. “Even large corporates continue to face sustainability hurdles daily, never mind the plight that SMEs [small and medium-sized enterprises] confront, particularly when it comes to liquidity,” the steel company said in a statement.

60-day payment terms are now in place for suppliers of Apple stores in the U.K., The Telegraph reported recently, and vendors are displeased by the payment term extension. Previous payment terms had been at 45 days, but Apple is reportedly extending its payment agreement for vendors of products like iPhone and iPad cases. The changes also include a new requirement for vendors to take back unsold merchandise. The two changes will negatively impact supplier cash flow, some companies told reports. In a statement, a spokesperson for Apple said, “Apple regularly assesses the assortment of the third-party products we sell and the structure of our models to provide vendors with the ability to reliably and confidently grow their business.”

$1 million is owed by one Pennsylvania city to street reconstruction contractors, an outstanding invoice that has led the city’s mayor to secure bridge financing to pay the bill. Local reports in the Sun-Gazette said the $1 million overdue invoice is part of a broader $5.5 million street reconstruction project. The job associated with the outstanding invoice was completed in October, reports said. The city’s mayor has reportedly reallocated government funds to settle the invoice.

“There has to be somebody else that can answer it besides me, because a lot of checks are going out to this project already,” the mayor told the publication, adding that “any longer delay and the contractor may or may not be as gracious. I realize it’s a lot of money, but I didn’t realize until yesterday that something was going on.” The mayor noted that the city treasurer and controller first brought attention to the late invoice.