De Beers To Introduce Major Changes To Buyer Contracts

Manufacturing
02/03/2020 14:14

At meetings in Botswana coinciding with its second rough diamond 'sight' of 2020, De Beers detailed to clients its plans to scrap the one-size-fits-all supply model and create three different types of contract: manufacturer contracts, dealer contracts and integrated retailer contracts, a company representative explained to us. Each type of contract is said to be designed around the broad needs of the three types of business model to which they apply. The move is designed to help the diamond miner ensure that each buyer gets the stones most suited to its needs and business type. To do so will require them to look beyond “demonstrated demand”, the core of their current policy and to more effectively streamline supply and manufacturing in a way beneficial to the diamond ecosystem. The new system will enter into effect in January 2021, after the current sightholder contract expires. 

The miner's understanding of its customers and their needs has increased, we were told, enabling them to better tailor the parcels of rough diamonds to the type of polished output they produce. He said that De Beers recognises the specific types of business models of their customers and will be able to not only promote greater efficiency across the supply chain, but also generate greater transparency. For instance, we were told, when awarding a manufacturer contract, De Beers will place an emphasis on customers whose main use for the goods they buy is to manufacture them, rather than sell them onto the secondary market. A customer's manufacturing capacity and their actual manufacturing output will thus impact the selection process, as well as allocations through the contract period. De Beers, we were told, wants to have a better idea of where the diamonds go, potentially with a view to adding value down the line. "We want to reconcile rough imports and polished output. This requires an element of trust as well as supervision." 

The second type of contract, for dealers, will ensure a regular supply of goods to customers whose main use is to sell them on to secondary market manufacturers. Their emphasis for this type of contract is focused on high volume production areas because supplying at scale will enable their customers to better serve these manufacturers efficiently, but may also result in a simplified assortment of diamond supplied to them in lower qualities. The integrated retailer contracts will supply rough diamonds to retailers with integrated polished manufacturing units, based on the demand for polished diamonds in their retail businesses. We were told that the contract arrangements of this variety will be developed on a more bespoke basis, focused on value-adding services reflecting the diverse nature and needs of retail businesses. They will be awarded by invitation only, for companies selling diamond jewelry direct to retail consumers, yet with the capacity to retain ownership through the manufacturing process.