Suppliers slate retailers for shifting supply terms

By Rod Addy contact

- Last updated on GMT

Tacon: 'We will look at the results in more detail'
Tacon: 'We will look at the results in more detail'

Related tags: Audit

Grocery suppliers highlighted retailers altering agreement terms as their top complaint under the Groceries Supply Code of Practice (GSCOP), according to survey findings published a year after its launch.

Out of 574 respondents to the research, conducted between May 8 and May 26, two fifths said they had experienced variation of supply agreements and terms of supply.

That included issues such as lack of written supply agreements and introduction of audits paid for by suppliers. Payment terms were also sometimes not adhered to, with some deductions from invoices occurring without notice or explanation and some invoices regularly going missing.

A total of 37% of respondents reported facing unjustified charges for consumer complaints, 36% said they had been obliged to contribute to retailers’ marketing costs and 35% had encountered delayed payments. A third claimed retailers had offered no compensation for significant errors in forecasting orders.

However, Groceries Code Adjudicator (GCA) Christine Tacon was upbeat about the first year of GSCOP’s implementation. In a report covering the period June 23 2013 – March 31 2014, she highlighted the positive impact the code had made in the short time it had been in existence.

Forensic audits

In particular, she welcomed the agreement of eight out of the 10 top UK grocery retail chains to limit time covered by forensic supplier audits to a maximum of three financial years. Previously, Tacon claimed, audits could rake over accounts going back more than six years, causing considerable disruption.

Sainsbury and Waitrose did not agree to limit such audits. However, a spokeswoman for Sainsbury said: “Given our excellent record in supplier relations, the agreement isn’t really relevant to us. Standardised industry agreements that are voluntary are not the best way forward. Experience shows they can often simply provide camouflage for those who have not seriously addressed an issue.”​  

A Waitrose spokeswoman added: “We believe that our approach to the use of forensic auditors is appropriate and fair. We work with them ​[forensic auditors] to ensure t​hat audits are conducted in a manner and in a spirit that enables long-term supplier relationships to be maintained and to flourish …

“We review ​ and will continue to review – our approach to the use of forensic auditors and will always consider, where appropriate, shorter audit periods on a case by case basis.”

Contentious decisions

The GSCOP paper also cited two case studies in which the code had led to retailers scrapping potentially contentious decisions. 

In the first instance, Tesco had requested a payment from suppliers for better shelf positioning of their products, which Tacon had concluded was contrary to the code. The supermarket giant investigated the issue and consequently reminded buyers the code did not permit such payments and rescinded the request.

In the second case, the Cooperative Group had requested compensation payments from suppliers for failure to meet target service levels. Tacon considered this was contrary to GSCOP rules relating to supply terms; the practice was stopped and all suppliers were notified.

Welcoming the GSCOP report, Tacon said:  “We will look at the results in more detail but I see a clear priority is to improve awareness of the code. In the coming year the GCA team will work with retailers’ code compliance officers and trade associations to ensure there is better supplier knowledge and understanding of the code and role of the GCA.”

Related topics: Supply Chain

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