Tesco puts poor-performing suppliers in 'intensive care'

Tesco has threatened to put under-performing suppliers in "intensive care" with action plans and regular reviews, warning them that it expected much more from them if they were to continue doing business with the supermarket chain.

Tesco supply director Tony Mitchell said one in four gaps in Tesco's stores was caused by short deliveries from suppliers, holding back sales for Tesco - and for the suppliers. He said that Tesco would be working much closer with suppliers that were struggling to get service.

They would be put on "life support" with specific action plans and regular review meetings to get things back on track. "There are some fairly big suppliers in that process," he admitted.

Supplier performance was key to improving Tesco's availability, Mitchell said. "We are having good conversations with many of our suppliers to improve things."

Fresh food was a typical example, said Mitchell. Despite the problems with the weather this year, Tesco had managed to improve availability by 2% compared with last year. But, he said, supplier availability had stood still.

Speaking at grocery think-tank IGD's recent Supply Chain Summit in London, Mitchell outlined Tesco's efforts to improve its supply chain efficiency. It had moved to centralised order processing, reduced stock record errors significantly and cut lead times, he said. It was now working closely with suppliers that had a good track record to improve its performance in areas such as critical paths, collaboration and promotion forecasting.

Tesco also expected to have a new promotional forecasting model in place by next April.

This would use aggregated forecasting for distribution centres, which averaged store forecasts, to more accurately predict trends, quickening Tesco's reaction time, he said.