Time for supply chain quid pro quo
Isn't it interesting how retailer-enforced changes in the supply chain are often better supported by suppliers than by the retailers' own staff!
As one part of the move to retail-ready packaging, for example, Tesco has put great pressure on a few high volume producers to create new pallet configurations that can be wheeled into the in-store fixture. This will save Tesco much of the cost and effort of placing cases one at a time on the shelf.
Given that a few suppliers have invested very large sums of money in creating this capability, it must therefore be terribly frustrating for them that Tesco has shown such poor commitment in the field to an initiative that it promoted so heavily. It was meant to not only save Tesco money but improve availability and total sales for the investing suppliers. Yet its piecemeal implementation has prejudiced the outcome, probably fatally.
On a related tack, factory gate pricing (FGP) was trumpeted as the Tesco way to take significant cost out of the supply chain. Yet its implementation was full of compromises that allowed the progress of FGP to appear satisfactory while the reality was very different.
Service levels were appallingly bad at the start and still bedevil the smooth running of the supply chain.
I am also aware of examples of Tesco complaining to suppliers about late delivery that was demonstrably the fault of the Tesco FGP collection process.
Indeed, there is suspicion that some FGP deals were struck more to meet the Tesco board metric than for the commercial benefit of either party.
I have a question for manufacturers' supply chain directors and their sales colleagues. When will you predicate agreements with retailers to change supply chain structures on mutual performance achievements?
I know it is hard work getting retailers to commit to performance-related deals, but why will they ever change if suppliers continuously make their commitments with none from the retailer?
Tim Knowles is director, Proactive.
