Radio frequency identification (RFID) technology has helped Northern Foods dramatically reduce the number of invoice disputes with its largest customer, Marks & Spencer, its boss revealed. This delivered a significant cash flow benefit, said chief executive Pat O'Driscoll.

Under the closed-loop system employed by M&S, selected suppliers write data on reusable RFID tags embedded in returnable plastic trays. By reading them again before despatch, discrepancies between inner labels and outer tray end labels, miscounting and inaccurate retail prices were picked up before goods were shipped out. This improved delivery accuracy as well as speeding up despatch.

"RFID has helped us with cash management because payments are not being delayed due to discrepancies and lengthy claims procedures. When you are a cash-hungry business, this makes a real difference."

She admitted that at 4% Northern's margins were weaker than rivals'. This was partly due to inefficiency, but account management could also have been better. "We had been very accommodating with customers and said 'yes' to everything, building up complexity without thinking about the cost."

However, chilled margins were steadily improving as unprofitable lines were dropped, new, higher margin premium products introduced, and costs were taken out of the business.

Although Northern was selling its chilled pastry division it would not pass up acquisition opportunities if they arose.