Christine Tacon, the groceries code adjudicator (GCA), has described how her landmark investigation into Tesco created a turning point in supermarket relations with suppliers.
The investigation, which ended earlier this year, resulted in Tacon ordering Tesco to make “significant changes” to how it deals with suppliers, having found the supermarket had delayed payments to boost its profits.
Tesco was also ordered to pay £1m towards the cost of the investigation and in September Tacon said she was satisfied the retailer was following recommendations.
“On the whole people are talking about how there have been significant changes in our retailers’ practices since I’ve been working on enforcing the code. The Tesco investigation made a big difference,” Tacon told SM.
This year Tacon has been deluged with invitations to speak abroad by countries that would like to set up their own version of the GCA, whose code covers first tier suppliers to the 10 biggest supermarket chains. However, the only place she visited outside the UK was Dublin.
That was because there are many suppliers that come under her jurisdiction based there, and one of her priorities is to ensure that oversees suppliers are aware they too fall under the GCA code.
Tacon said a GCA 2016 YouGov survey found 88% of direct suppliers in the UK were aware of the GCA but awareness among direct suppliers based overseas was only 33%.
Only 5% of direct suppliers based overseas had received training on the code compared to 40% in the UK.
“You might wonder why, if the overseas suppliers were unaware of me, that they were filling in the survey, and the answer is I asked the retailers to send it to their suppliers,” said Tacon.
Increasingly retailers are “getting good” at writing to their suppliers to inform them about the code, she said. The year before when she asked them to do so they were reluctant, arguing the results would not be statistically significant.
“I said, ‘Well, if you help me get more results then they will be statistically significant’,” Tacon said.
And it was in the retailers’ own interests to make suppliers aware of the code, she said.
“My aim is to give them a chance to put things right and avoid the possibility of going through a tedious and expensive investigation. So far I haven’t asked them to do anything where I’ve had pushback,” she said.
Tacon has quarterly meetings with all the 10 retailers’ code compliance officers and has been asking each of them what they have been doing to help to raise awareness among overseas suppliers. She has seen increasingly positive results.
One of them has done a presentation for the suppliers. Supplier training, another priority, is increasing, especially online.
Aside from that Tacon is focusing on what she terms a “basket of five issues” that changes depending on what suppliers are highlighting as a problem.
Payment delay has been a top five issue ever since she started in the role and became even more important during the Tesco investigation.
This encompasses “drop and drive” – a practice that most commonly occurs with chilled foods with a fast turnaround, such as meat.
Problems occur when a supplier claims to have delivered a set amount of produce, but the retailer, without having certified delivery, claims a lesser amount has been delivered, and therefore reduces payment.
The GCA’s ruling was that any deduction from an invoice without the suppliers’ agreement is a delay in payment.
“I don’t think there is theft involved here but there are definitely some inefficiencies and they occur at the supplier’s expense,” Tacon said.
Demands for lump sums is another area she is focusing on. This can involve taking payments for better positioning in stores or demanding lump sums for margin maintenance.
This occurs when a retailer might want to make a specific margin throughout the year on a given product and when it fails to do so charges the supplier a lump sum to compensate.
Another issue is where suppliers have been asked to make payments in order to stay listed with a retailer, though this is particularly complex as in some cases demands for such payments are legitimate.
A consultation on expanding GCA powers is currently taking place with the consultation period due to end on January 10. However, Tacon says legislation might be required to change the GCA role, so she is not anticipating any big changes in the short term.
Tacon has also urged suppliers to sign up to the GCA newsletter and keep aware of issues that might be vital to them. They can do so by visiting the GCA website.
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