Page 11 - Ragtrader Magazine April 2020

WWW.RAGTRADER.COM.AU FRASER LIVE APRIL 2020 11 THE STRAIGHT SHOOTER
Novel times
The coronavirus is having a profound impact on supply chains.
AS INTERNATIONAL FREIGHT feels the strain of COVID-19, retailers are starting to take a closer look at sup- plier arrangements.
Mosaic Brands, owner of Katies, Noni B and Millers, is one of them.
Suppliers to one of Australia’s biggest retail apparel groups have been told to ensure delivery dates and quantities on outstanding orders are adhered to, other- wise they will be penalised.
In a letter to Mosaic’s suppliers on 20 February, the head of group production, sourcing and compliance, wrote:
“We would like to remind you that whilst we appreciate the difficulties that you may be facing, we must have our orders delivered on time. We sincerely appreciate your support to ensure that all our brands deliveries are treated as a prior- ity with your factories.
“We have instructed all the brand teams to closely monitor deliveries and where these are late, cancelled or otherwise impacted, to take action in accordance with our standard terms and conditions,” the email continued.
It included a table headed Vendor Claims Schedule, in which it lists trans- gressions and penalties. If the delivery is up to a week late, 3% is deducted from the value of the goods. For one to two weeks late it goes up to 10% and for two to four weeks 20% is whisked off.
If the goods are four or more weeks late 30%, or loss of sales (whichever is the greater) and possible unit quantity reduc- tion can be imposed. Short delivery is vet- ted on a similar scale, finishing at 35% dis- count and the right to cancel.
In fairness to Mosaic, it cannot be said that suppliers are being tricked into falling foul of penalties. They are stated in black and white. It is company policy that all suppliers (there are up to 50 of them) must sign a supplier agreement before doing business. Much of it is unexceptional, dealing with matters of quality, packing, labelling, sampling, rejection and so on.
But two sections are of particular note.
One is that Mosaic will pay within 90 days of delivery. It states:
‘FOB – MBL will pay the Supplier by T/T no later than 90 days after arrival into Sydney (FOB Sydney) unless stated otherwise on order. Invoice date to be date goods handed over to forwarder at port of origin.
‘FIS – MBL will pay the supplier by TT no later than 90 days from statement date unless stated otherwise on the Order. Invoices are to be dated to reflect when the goods arrive in Sydney Australia.’
These are already long payment terms but the company recently requested a fur- ther 30 days from its overseas suppliers and even then, how many will be paid on time? Here again, it is no secret that you need plenty of backup capital to do busi- ness with Mosaic. It does not pretend to be a prompt payer.
The other section of the supplier agree- ment relates to dispute resolution.
17.1 Dispute Resolution Procedure
If a dispute arises out of or relates to these terms and conditions a party must not commence any court or other proceedings relating to the dispute unless it has first complied with the following procedure: (a) the party claiming that a dispute has
arisen must give written notice to the other party specifying the nature of the dispute;
(b) on receipt of that notice by that other party, the parties must endeavour in good faith to resolve the dispute using informal dispute resolution tech- niques such as mediation, expert eval- uation, arbitration or similar methods agreed by them;
(c) if the parties do not agree within 10 days of receipt of the notice (or such further period as the parties agree in writing) as to:
(i) the dispute resolution method and procedures to be adopted;
(ii) he timetable for all steps in those procedures; and
(iii) the selection and compensation of the independent person required for such method,
the parties must mediate the dispute in accordance with the Mediation Rules of
the Law Society of New South Wales. The costs of any such dispute resolution procedure will be shared equally between
the parties.
1.2 Other Proceedings
Nothing in this clause prevents any party instituting proceedings to seek urgent injunctive or interlocutory relief in respect of a dispute or any matter arising under this agreement.
While 17.1 seems to freeze payments and legal action to collect, which might benefit Mosaic, the short 1.2 beneath it appears to leave an opportunity for a supplier to pursue his money, depend- ing upon the interpretation of the term ‘injunctive or interlocutory relief’. In essences these two clauses could be read as opposing one another.
One unsettling aspect of being in dis- pute or being served with a long list of penalties, is that both sides would be sleep- ing with the enemy. While a brand team might be busy creating lovely styles and placing orders with a supplier, the finance team could be hacking away at his rump.
One supplier said it would be interest- ing if the whole supplier agreement were to be submitted to the ACCC to judge it on the grounds of being fair and reason- able – but what’s that worth in real terms?
It must be remembered that nobody is obliged to supply Mosaic. There are no secrets, especially now. Being at Australia’s leading edge of budget apparel in both scale and price, empowers it to be tough. Those interested only in its profitability would applaud pushing suppliers to this limit. ■
Fraser McEwing founded Ragtrader in 1972. As must be obvious, he was a minor at the time, but had
a prodigious talent for writing editorial that informed, yet enraged people in the fashion industry –
a quality that hasn’t changed.