Premier, which sent a highly controversial email inviting recruitment agencies to contribute £10,000 to participate in its 2011 Preferred Supplier Programme (PSP) late last month, said its approach to engaging with suppliers had been endorsed by the Chartered Institute of Purchasing & Supply.
Stuart Read, Head of Corporate Services, Procurement, at Premier Foods, told FoodManufacture.co.uk: “That’s why last year, in line with this best practice, we instigated a Preferred Supplier Programme for our suppliers in permanent recruitment.
“We received really positive feedback from those who participated in the programme last year. They told us that they are seeing clear value from being part of the programme and over 75% have already confirmed their interest in taking part again in 2011.”
The £10,000 price tag attached to the scheme – branded by some suppliers as a “disgrace” – reflected a “mutual investment in the development of business”, he said.
“It is not compulsory and there are no sanctions against those who choose not to participate. For those who do participate, the benefits are clear.”
Supplier rationalisation programme
Premier Foods had more than 11,000 suppliers immediately after it acquired RHM and Campbell UK, and has since whittled that number down to less than 7,000, noted Read. But the ultimate aim was to get down to less than 5,000.
“We recognised it was impossible to have meaningful relationships with that number of suppliers so we set out on a journey to consolidate our supply base to less than 5,000 by 2012.
“At the start of this year we had just over 7,000 suppliers, with 78% of our total spend now with our top 250 suppliers. Indeed our top 100 suppliers, representing 45% of our spend, have experienced real growth of 33% [in their business with Premier Foods] over the last three years.”
Increased business for suppliers
A company spokesman added: “It stands to reason that if you have a smaller group of people fishing in a pond with the same number of fish, they stand to catch more. If Premier halves its supplier base then suppliers that remain could double their business with us.”
However, he stressed that Premier was not whittling down its supplier base on the basis of which suppliers contributed the most money.
“The money contributed by members of the PSP is a mutual investment in the development of the business. But we’re not using this as the basis for cutting suppliers and we are not asking for people to buy their way onto our supplier lists.
“Once we have a smaller number of suppliers, there may be those amongst them that choose to invest in the future of the business and get closer to the business and potentially achieve growth rates over and above what other suppliers are achieving.”
Bullying exercise?
However recipients of the email announcing the 2011 scheme, which was sent to recruitment suppliers on October 29, described it as "a bullying exercise".
One told FoodManufacture.co.uk: "I have worked in recruitment for many years and have been involved with many PSLs [preferred supplier lists]. This is the crassest attempt to exploit a recruitment supplier I have ever seen."
He added: “We are already working at a really low fee rate with Premier Foods, and we will have to make four or five placements just to recoup the £10k they want.
“I for one will not be paying Premier Foods £10k and I urge others on the PSL to make a stand and don’t pay.”
Click here to read comments posted on FoodManufacture.co.uk about the PSP