Suppliers complain of ‘forensic’ investigations by retailers
Tacon announced at an event today (February 3) in London that she was seeking agreements from the major retailers to restrict their use of such “forensic” investigations.
She said she was waiting to hear from the big 10 supermarkets that are subject to the Grocery Supply Code of Practice (GSCOP) about whether they would limit such claims to the current financial year and the previous one. Her actions followed a large number of complaints from suppliers under the GSCOP, she revealed.
Speaking at a conference titled The Groceries Code Adjudicator and the next steps for the food supply chain, organised by the Westminster Food & Nutrition Forum, Tacon made the announcement as she described the main areas in which she had received complaints from suppliers.
‘The biggest complaint’
“The biggest complaint I get of all is what I call forensics," said Tacon. "This is when retailers are using no-win, no-fee third parties to go through books up to six years previously and find evidence of promotions or sampling campaigns or some reason why the supplier owes the retailer some money.
“So they might produce one email that says this promotion that we had 100,000 cases at £5 a case. We’ve got an email here that says it’s £105,000. You owe us £25,000 and we are going to deduct it from payment. Which comes under my hook of paying people on time; that if you are deducting payment you are not paying people on time.”
Tacon added that while it was legal to make claims going back six years, it wasn’t in the spirit of the GSCOP, since it would be very difficult for suppliers – particularly small ones without the resources to gather evidence – to disprove such claims when the buyers and sellers involved in the original transaction might well have left.
“To go back five years and say you owe me some money is horrific,” she said. “It is causing enormous burdens on suppliers. In some cases they are getting demands for very large sums of money – I’m talking hundreds of thousands.”
Following meetings with GSCOP compliance officers working for the supermarkets, Tacon has asked for voluntarily restrictions on such practices.
If they agreed, Tacon said she would be less likely to instigate a formal investigation which could lead to naming or shaming or at worst fines equivalent to 1% of a supermarket’s UK turnover.
The agreement would be that such requests for money from suppliers would only apply “to the current financial year and the year back”. “And the message I’m getting back from suppliers is that if you can contain that, that would be absolutely incredible,” she added.
Shrinkage and poor forecasting charges
Another frequent complaint from meat suppliers relates to retailers deducting payments for failure to receive full orders as a result of ‘shrinkage’ (theft of product) in the supply chain after goods have been dispatched, said Tacon.
“There will always be errors; there will always be a bit of theft in the chain [say the suppliers], but they are saying some of the retailers are running at twice the rate the others are.”
Poor forecasting by retailers where big last minute alterations are made to orders, was another major source of complaints from suppliers, said Tacon. “The retailer will then fine them £10 a case for being short.”
In other situations, they might fine their suppliers for lost profit associated with claims that the service level they received was below that expected.
“Retailers could do so much more to forecast … the best people to get the forecast right are the retailers,” she added. “The amount of waste that this inability to forecast is creating is having a global impact.”
