The retailer plans to replace complex terms with a standard approach including shorter payment times for small and medium-sized businesses.
Suppliers who deliver products worth up to £100,000 a year will be paid within 14 days as part of the changes due to be implemented by the end of June 2016.
Terms for medium supplier
Tesco's announcement
“By introducing a new standardised policy across each category for our larger suppliers, and shorter payment terms for our small and medium suppliers, it will help us to deliver a fairer, more transparent and consistent approach across our supply base.”
- Dave Lewis, chief executive officer at Tesco
Medium suppliers, who provide goods worth up to £10M a year, will have their accounts settled five days quicker than larger suppliers in the same category.
Payments will be standardised for different categories such as grocery, dairy and alcohol beverages.
Tesco’s chief executive officer Dave Lewis stressed the importance of collaboration with suppliers during the IGD conference in London today (October 6).
“To help with this process, we’re announcing the standardisation of our payment terms,” Lewis told the conference.
‘Fairer, more transparent’
“By introducing a new standardised policy across each category for our larger suppliers, and shorter payment terms for our small and medium suppliers, it will help us to deliver a fairer, more transparent and consistent approach across our supply base.”
Under the plans Tesco said its smallest suppliers will typically be paid 34 days earlier than before. The retailer said it was also introducing a new vendor payment scheme.
Lewis said: “One of the things that made Tesco great was the little things we did to help our customers.
“We want to work with our suppliers to get back to innovating on behalf of our customers and these changes will make it easier for us to do that.”
Meanwhile in July, the National Farmers Union said that Aldi’s pledges to UK growers could “change the face of retailer and supplier relations”.
The discount retailer’s promises included simple net cost price agreements, with no back margin mechanisms like overriders or penalty rates.
For a full breakdown of Tesco's new terms see the table below:
