Five ways an order dies

Every factory protects itself against one failure

Ask a factory owner what protects the business. You will hear the same three answers: a deposit, a confirmed purchase order, and a signed size set. All three are useful. But all three guard against one failure only — a buyer who cancels an order that already exists.

Ghannam's year went wrong in five ways. One of them was that. This lesson takes the other four seriously. The type of buyer decides which one you get, and you can work that out before you quote.

One: the programme that shrinks

Hallgate never cancelled anything. Every piece shipped. Every invoice was paid on the day. The buyer's Christmas email was warm.

Then in March the next programme came back at 36,000 pieces instead of 60,000, for the same September window. Hallgate's own clothing sales were down, so the range was cut from eleven styles to eight. The reduction is 24,000 pieces — 40.0 line-days and USD 15,600 of contribution. It arrived after Ghannam had already planned the year around the old number.

Nobody sees this one coming, because nothing goes wrong. There is no dispute, no claim, no late shipment. The order behaves perfectly. There is simply less of it.

No contract term protects you here. Looking for one wastes a season. What protects you is a signal, and the signal is free. Ask for the buyer's programme volume month by month at the annual review. Read the buyer's own clothing sales — for a listed grocery group they are in the quarterly statement. Ask how many styles are in the range; the buyer will tell you, because it is not confidential. A programme is cut in the buyer's range meeting, months before the order is placed. And that meeting has a date.

Two: the order that never becomes an order

Volante's repeat did not come. Sell-through on day fourteen was 71% against the 80% threshold in the buyer's own reorder rule. The merchandiser said so honestly on 24 August.

Nothing was cancelled, because nothing had been ordered. Ghannam was holding 95.4 line-days and USD 124,320 of cloth against one sentence in an email.

Lesson 2 priced it. The cloth recovers 45%, filler work returns USD 120 a line-day, and the branch costs USD 56,928. It happens about one season in three. The protection that works is not a contract. It is the option fee from lesson 3, which turns an uncontracted risk into a priced one.

Three: the order that arrives and then asks for money back

Ludenholt took all 60,000 pieces, on time, and paid. Then in November its category director wrote to every menswear supplier asking for a 3% contribution to a markdown on autumn stock: USD 9,720.

This is not a claim. Ghannam had breached nothing, and nothing in the contract permits the request. It is a request. And it is made in November by the person who will place next spring's order in January. That is what makes it hard.

The protection is neither a refusal nor a fight. It is to price the ask into the quotation before it is made. That is exactly what lesson 2 did: two seasons in five, at 3%, is USD 3,888 expected. It sits in the cost sheet as a line instead of arriving as a shock. A factory that has priced it can say yes in ten minutes and keep the January order. A factory that has not will fight, spend the goodwill, and usually pay anyway.

Four: the order that stops moving

Panmoor's shops went quiet in September. Panmoor did not cancel. It asked Ghannam to hold 18,000 finished pieces for six weeks and ship in November.

That request costs nothing you can see on a cost sheet. This is why factories grant it in a phone call. Here is what it really cost.

Ghannam's finished-goods store took the pallets, so outside storage was rented for the peak: USD 780 a week for six weeks, USD 4,680. Then, because the store was full, a second buyer's cut had to be pushed back. In October Ghannam ran at 84% capacity against a plan of 92%. October has 22 working days on eight lines — 176 line-days. So 84% is 147.8 used against 161.9 planned: 14.1 line-days idle, worth USD 5,417.78 at the return of Ghannam's least valuable programme.

Total USD 10,097.78, for a favour granted on the telephone.

Two complaints reached January's board meeting, and they had one cause. The owner said the finished-goods store had been full for six weeks. Separately, he said October's utilisation had fallen to 84%. Nobody connected them. The first is a warehouse problem and the second is a planning problem, and they are argued in different meetings. They are the same six weeks.

The protection is a clause, and it is not punitive: goods held beyond fourteen days at the buyer's request are charged at 0.75% of invoice value a week. On 18,000 pieces at USD 5.85 that is USD 789.75 a week, and USD 4,738.50 over the six weeks. Panmoor would have signed it without comment. A wholesaler knows storage costs money, because storage is its own business.

Five: the order that stops without a conversation

Onbrook reordered every three or four weeks for eleven months, then stopped. No email, no complaint, no meeting. A marketplace seller has no season, no range review, and nothing to tell you.

Ghannam's exposure was small, and only because of two habits. Onbrook pays 50% in advance, so the last order was half covered. And Ghannam had a standing rule: never buy cloth for Onbrook before a purchase order arrives. So the USD 7,560 of cloth for the next colour had not been placed.

The protection here is a measurement, not a term. Watch a marketplace account in weeks since the last order, not in seasons. Four weeks of silence from a buyer who normally orders every three is worth a phone call. And it is invisible on any report organised by season.

The table worth pinning up

Now read the last column downwards. A deposit protects against one of the five. A confirmed purchase order protects against one. A signed size set protects against none of them. Those are the three things most factories believe are their protection.

Act as a factory planning and costing analyst. Work out what an uncommitted block of work is really worth to me, and give me a number I can negotiate with. My engineering: operators per line [NUMBER]; productive minutes per operator per day [NUMBER]; the efficiency the line actually runs at [PERCENT]; and from those, the standard minutes earned in one line-day, which is one production line running for one day. Also: the cost of running one line for a day [AMOUNT]; standard minutes per piece for this style [NUMBER]; and the set-up and colour-change allowance in line-days [NUMBER]. My costs per piece: materials [AMOUNT], of which cloth is [AMOUNT]; freight, handling and documents [AMOUNT]. The order: firm quantity on a purchase order [QTY] at [PRICE]; hinted or expected quantity with no order behind it [QTY] at [PRICE]; the date I must commit cloth [DATE]; the date the buyer says they will decide [DATE]; the delivery window [DATES]. My history with this buyer: hints given [NUMBER]; hints that became orders [NUMBER]. If the hint does not turn into an order: what I can realistically recover on the dyed cloth, as a share of what I paid [PERCENT], and what a line-day of short-notice filler work returns above its own materials and making [AMOUNT]. Now compute, showing every step: pieces per line-day; the cost to FOB, the price at the port of shipment, and the margin per piece at each price; line-days BOOKED, which is everything I must hold open, against line-days CONTRACTED, which is what somebody owes me money for on the day I commit cloth, and the ratio between them; the value of cloth committed ahead of any order; the value of the block if the hint converts, the value if it does not, and the expected value at my measured conversion rate; and the return per BOOKED line-day, never per line-day used. Then give me three negotiating numbers: the conversion rate at which this block equals my best alternative use of the same line-days, and I will name that alternative here [ALTERNATIVE AND ITS RETURN PER LINE-DAY]; the option fee per hinted piece, credited back against the repeat, that would leave me indifferent; and that same fee as a share of the quoted price. Flag any input I have not given you as a gap. Do not assume a value for it.

What to take away

1. There are five shapes, not one. Which one you get is decided by the buyer's type, before you quote.
2. No contract term stops a shrinking programme. A signal does, and the signal is free.
3. An indication with no quantity, no date and no consequence is not an order, however senior the person who wrote it.
4. Price a retrospective ask into the quotation instead of fighting it later. It is cheaper and it keeps the account.
5. A favour granted on the telephone still eats line-days and space. Put a price on it at the start, while nobody is under pressure.