'Supply chain bullying' hits almost one in five small firms

Will Green is news editor of Supply Management
11 December 2014

Almost one in five small businesses have been the victim of “supply chain bullying”, according to a survey.

The poll, by the Federation of Small Businesses (FSB), found 17 per cent of members had faced unfair dealing in the past two years.

The top five “most resented practices” were:

1.     Pay to stay. Also known as “supplier assessment charges” and “supplier investment payments”. The FSB said 5 per cent of respondents had been asked to make a payment or face de-listing.

2.     Long payment terms. “In effect this becomes an interest-free loan from firms in the supply chain to large companies with excessive payment terms,” said the FSB.

3.     Late payment. “Many companies are routinely exceeding agreed terms, or changing terms retrospectively to allow them to miss agreed payment dates,” said the FSB.

4.     Discounts for prompt payment. The FSB described these as “arbitrary discounts big firms give themselves for paying early or even just on time”.

5.     Retrospective discounting. “Some firms seek to apply retrospective discounts to outstanding money owed to a supplier,” said the FSB. “This involves the company effectively changing the terms of the contract signed with the supplier after a contract has been agreed.”

The FSB wants the Prompt Payment Code toughened up, which the government intends to do, as well as “fresh measures to stamp out the most heinous examples of bad practice like retrospective discounting and pay to stay”.

John Allan, chairman of the FSB, said: “When the public think of their favourite brands, they are unlikely to connect them with the sort of immoral payment practices which are becoming all too common across an increasing number of industries.

“However, it is clear that whenever these examples come to light, the public shares the same sense of moral outrage as the small firms that have to put up with them on a daily basis.”

Allan said members were “fast approaching breaking point” and were “no longer prepared to put up with these sharp practices”. “Brands that think they can continue to squeeze their supplier with impunity may get a nasty shock when what they are doing comes to the attention of their consumers.”

The survey of 2,500 FSB members comes after Premier Foods was criticised for asking suppliers for payments. The firm has since made changes to its ‘invest for growth’ programme to “simplify the details of its future programme to a more conventional type of discount negotiation potentially based on price, value or volume-based rebates, or lump sums”.

 

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