Supermarket forecasting errors and ‘pay to stay’ hurt suppliers

Groceries Code Adjudicator Christine Tacon has welcomed an increase in contact from suppliers

Supermarkets charging for forecasting errors, consumer complaints, margin maintenance, payments to remain listed – or being delisted without sufficient notice – or for better positioning instore and delayed payments, are some of the top problems raised by suppliers in the UK food and drink supply chain, according to the Groceries Code Adjudicator (GCA) Christine Tacon.

“I’ve only really started to notice within the last week, we seem to be getting many more issues being raised with us by suppliers,” said Tacon, speaking at the Westminster Food and Nutrition Forum seminar on Wednesday (March 8).

Tacon welcomed the increase in contact from suppliers. “They are starting to overcome the fear factor and they have recognised that by speaking to me something good will come out of it.

‘Starting to overcome the fear’

“The awareness of the Groceries Supply Code Of Practice [GSCOP] in the UK is very high – it’s nearly 90%. Overseas, that’s lower, and we are trying to do more to raise awareness of that.”

On Monday March 6 the GCA’s 2017 annual survey of suppliers was launched and this will remain live until April 17.

Tacon urged as many suppliers as possible to contribute towards it, with the aim once again of getting more than 1,000 responses.

The larger the response, the better her chances of getting changes when she raised issues with the 10 large supermarkets to which the GSCOP applied, said Tacon.

“I am hugely dependent on the survey to know what are the issues,” said Tacon. “The sort of things that come out in the survey are incorrect deductions from invoices, but new issues come up.

Delays in payments had been the number-one issue for quite a long while, reported Tacon. “It manifests itself largely as incorrect deductions from invoices.”

Tesco had been in breach

This is where she found Tesco had been in breach of the GSCOP, which the supermarket had now addressed, she added.

Margin maintenance is where supermarkets demand payment shortfalls from their suppliers when the targets set for sales margins fail to be achieved over the period of a contract. However, she reported that this was less of a problem than it once was.

Tacon on suppliers

“They are starting to overcome the fear factor and they have recognised that by speaking to me something good will come out of it.

“On forecasting, this is something that I looked at a while ago. I did a best practice on forecasting and I looked at it very much under paragraph 10 of the code, which is compensation for inaccurate forecasting,” said Tacon.

“But now that I am hearing more evidence from suppliers, I am going to expand that to include other areas of the code, such as over-ordering [stock] for promotions. I am aware from suppliers that this is still a big issue.”

Two workshops for suppliers are being organised by the GCA, one in London on March 27 and another in Manchester on April 3, said Tacon.

Both events would deal specifically with the problems of forecasting and “pay to stay”, which she admitted was a difficult area, since suppliers viewed it as a lump-sum cash demand, while retailers saw it as part of a retendering process.

She reported that while supermarket compliance had improved considerably since she was appointed in 2013, there were still issues to be resolved.

The future of the GCA is currently the subject of a review by government. A number of stakeholders in the UK supply chain, in particular the National Farmers Union, would like the powers and remit of the GCA extended to cover primary food producers as well as more retail – including online retailers – and foodservice outlets. The results of the review have yet to be published.

Top supplier problems
  • Supermarkets charging for forecasting errors
  • Consumer complaints
  • Margin maintenance
  • Payments to remain listed
  • Being delisted without sufficient notice
  • Payments for better positioning in-store
  • Delayed payments

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