Significant steps are being taken to ensure supermarkets treat their suppliers lawfully and fairly but more information is needed to change the culture among UK retailers for good
The Groceries Code Adjudicator (GCA) is urging all suppliers and trade associations to come forward with any information – good or bad – about trading experiences with the 10 major UK retailers involved in the consumer-driven scheme: Aldi, Asda, the Co-operative Group, Iceland, Lidl, Marks and Spencer, Morrisons, Sainsbury’s, Tesco and Waitrose.
With its second annual survey now open, GCA adjudicator Christine Tacon says more information and evidence is needed to change from the top down “an embedded culture” among retailers in order to work towards a “more collaborative” supply chain.
“My very existence is making a difference but the more information I get, the more I can do,” Tacon explained to a London-located Westminster Food & Nutrition Forum keynote seminar, titled ‘Next steps for improving the UK food supply chain and priorities for the Groceries Code Adjudicator’.
“In GCA’s survey of April 2014, eight out of 10 suppliers said they’d experienced a breach of the Groceries Supply Code of Practice [GSCOP] but were handling it,” Tacon indicates. “Although one supplier may be coping with the issue others may not. So, you still need to report it to GCA so we can stamp out these practices. Once upon a time you used to tell children to fight back at bullies and now you tell them to report the problem.
“This time around [in the second survey at the end of March] we want to improve the response rate,” she continues. “We believe there are 8,000 suppliers still to respond. The code is there is ensure suppliers are fairly treated so even if you’ve had a great year I need to know.”
Trade associations can help
With 58% of those in the first survey claiming they feared retribution by retailers if they raised a complaint, Tacon gave her assurance that anonymity is a top priority. “I have a duty to protect suppliers’ confidentiality so I’m looking for suppliers to come to me in numbers, then I can go to a retailer to challenge the issue and they won’t know which supplier has raised the complaint,” she points out.
To that end, Tacon suggests trade bodies can help with consolidating complaints from suppliers and thereby helping to protect their anonymity. “I could take evidence from trade associations,” she confirms. “This is a big opportunity – if you’re a member of a trade association, challenge them to support you.”
John Noble of British Brands Group agrees there is a “real opportunity” for trade organisations to add value for their members and build a sustainable supply chain. “Trade associations should offer suppliers information and advice,” he suggests. “[At British Brands Group] we’ve set up an advice line where we provide that kind of service. We also work with four leading legal firms who offer one hour’s free advice to suppliers.”
Noble adds that trade bodies can quickly determine if an issue raised by one supplier applies to others. If that issue appears to be prevalent, he says the trade association can serve as a conduit of information to the GCA. “There’s a real role for trade associations to add meaningful value and safeguard suppliers’ confidentiality,” Noble explains.
Things are getting better
Despite intensifying competition on the UK grocery retail market, Tacon says she has received comments to indicate the trading environment is improving. “Given the rise in retail competition you’d expect it to be getting worse,” she states. “But there is more evidence of suppliers taking issues to retailers’ code compliance officers.
“This is a huge opportunity to make recommendations on how retailers should do business and to change areas in businesses where errors may creep in,” she adds. “We’re looking to transfer our findings into binding guidance.”
While the code has been around for one-and-a-half years already, Tacon points out it’s not just about properly understanding the code, rather it’s about changing an embedded culture in among retailers and looking at a more collaborative supply chain. “That’s a big job,” she states, “but we will get a new generation of buyers. Buyers understand they must not discuss pricing and their understanding of the code has to go the same way.”
As demand rises for improved food safety, food security and food integrity and with UK retailers seeking greater efficiency to compete with the discounters, Tacon says the grocery sector is naturally being pushed towards a more collaborative and shorter supply chain.
Suppliers themselves want a more collaborative supply chain too, says Jack Ward, chief executive of the British Growers Association. “UK growers understand the changing consumer shopping habits; their focus on quality, choice and value,” he notes. “UK horticulture is up for this challenge and they see a great future in offering consumers a great retail experience but the supply-retail relationship is key.”
Indeed, with exciting varieties like Beneforté broccoli and initiatives like Linking Farming and Environment (LEAF), Ward says there is a “really good outlook” for UK horticulture but admits that sense of optimism isn’t shared by all growers.
“The underlying cause is a lack of confidence to invest in the future which is critical for the offer given to consumers,” he explains. “There needs to be a greater sense of trust – growers and retailers need to be on the same team. UK growers believe there is a real opportunity to win the battle for customer loyalty. And a working, collaborative team is more likely to succeed and survive.”
Understanding the code
To prevent and reduce anti-competitive activities, Tacon says both buyers and suppliers must understand the code in order to stop dead any conversations that must not arise. On the retail front, GCA is clamping down on retailers’ training to ensure they are putting enough rigour into their programmes.
Asda’s code compliance officer Alex Simpson, who was also present at the Westminster forum, says his company has trained over 700 of its employees, including its buying teams and those not primarily involved in the food chain, as well as Asda’s direct buying arm International Procurement & Logistics (IPL), which is also covered by GSCOP.
“We spend a lot of time training our senior buyers who then work with lawyers to train the junior buyers,” Simpson says. “ It’s very important for them to hear it from their line manager.”
Any new buyers who join Asda’s team from other organisations where they may have experienced different training or a different culture are also retrained in the Asda way, according to Simpson.
“Asda is trying to neutralise ‘the climate of fear’ by saying it’s not the appropriate way to deal,” he explains. “Any issues that are brought up are dealt with immediately with the buying team. They have accepted that this is now our culture as a modern business.”
Training for suppliers is just as important to ensure they understand the code too. “We get a lot of calls from suppliers about issues that are not covered by the code,” Tacon reveals. “Trade associations could therefore help to train suppliers in GSCOP.”
British Brands Group already offers a training course for direct suppliers to supermarkets on GSCOP and GCA.
Progress to date
Following a year of raising awareness and carrying out surveys and case studies, the GCA is focusing on five areas of the code which garner the most complaints.
GCA’s target areas
- Forensics: third party audits
- Drop and drive: delivery performance
- Forecasting/service levels
- Request for lump sum payments
- Packaging and design charges
According to Tacon, most of the large retailers are being proactive in addressing these issues and, as such, the GCA is starting to make progress. However, some of the issues, e.g. improving forecasting, are very complex in nature and will take time to resolve.
Already, Tacon says forensic auditing has been resolved after eight of the 10 retailers (Aldi, Asda, the Co-operative Group, Lidl, Iceland, M&S, Tesco and Morrisons) voluntarily agreed to time limit their search for missed claims in suppliers’ trading accounts to the current and two previous financial years, rather than the six years stipulated by the code. This is on a reciprocal basis where suppliers agree to make the same commitment.
Tacon is also satisfied that drop and drive is also progressing in the right direction so there is no need for any further GCA involvement. Delays in payments overall, however, firmly remains in the top five, while forensic auditing has been replaced with the issue of customer complaint charges passed on to suppliers and, in particular, the ways in which these are set by retailers.
Meanwhile, GCA’s investigation into Tesco for delays in payments and payments for better positioning of goods between June 2013 and February 5, 2015 is now calling for evidence. “It’s about not being paid in full across various areas,” Tacon explains. “Evidence must be reported by suppliers by April 3, but I can take some after that date if there is a problem in gathering information.”
Following the progress made, the GCA’s work has attracted interest from overseas. Enquiries have been received from: Australia, Belgium, Canada, Denmark, Ireland, New Zealand, Norway and Portugal as well as the European Commission, which has a voluntary initiative and is interested in whether it should be legislated.
The Groceries Code Adjudicator (GCA) was formally established on June 25, 2013 by an Act of Parliament to ensure supermarkets treat their suppliers lawfully and fairly.
The GCA is currently seeking views from the groceries sector on how retailers are complying with GSCOP in its 2015 survey. Take the survey