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Enhancing Supply Chain Efficiency: 1st Annual Report on Grocery Industry Practices (2014)

This inaugural report delves into the complexities of the grocery supply chain as of March 2014, assessing market size, product diversity, and strategic cost-reduction practices. It reviews the impact of discount retailers on supply chain efficiency and statutory compliance under the GCA Act 2013. Key challenges faced by suppliers, including delivery performance and forecasting inaccuracies, are highlighted alongside proposals for improvement. The report outlines case studies and guidance, aiming to foster better supplier-retailer relationships and enforce code compliance for optimal industry standards.

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Enhancing Supply Chain Efficiency: 1st Annual Report on Grocery Industry Practices (2014)

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Presentation Transcript

  1. 1st Annual Report March 2014

  2. The groceries supply chain • Very complex • Market size; product range; volumes; geography • History of practices to reduce the cost of supply • Discounter success • Simplicity • Efficiency • Code compliance

  3. Statutory reporting requirements The GCA Act 2013 sets out the information we must report: But there is so much more we have achieved...

  4. Promoting the work of the GCA

  5. Providing advice and guidance • Statutory duties • Investigations and enforcement guidance issued • Maximum financial penalty proposed • Arbitration policy issued • Other guidance • How to raise an issue • Escalation of disputes

  6. Acting on supplier issues • Raising issues with CCOs • 3 stage process • Consider and prioritise • Clarify • Formal guidance or investigation • Case studies • Charging for optimum shelf positioning • Payments for failure to meet target service levels • Planning for investigations

  7. Key Issues raised on Code compliance Initial ‘Top 5 Issues’ to consider

  8. Delivery performance • Why this is an issue • Supplier recorded deliveries don’t match retailer receipts • Deductions are made from invoices • Suppliers find it difficult to prove their case • Code • Part (5); No delay in payments • Proposal • Retailers asked to review depot performance

  9. Forecasting and service levels • Why this is an issue • Inaccuracies in retailer forecasting • Forecasts can vary significantly when orders are placed • Suppliers claim to bear all the risk from poor forecasts • Code • Part (10) :No Compensation for forecasting errors • Proposal • Retailers asked to review forecasting practice and accuracy rates

  10. Requests for lump sums • Why this is an issue • Requested without notice • Sums can be significant, especially for smaller suppliers • Joint business plans are not always agreed • Code • Part (3): Variation of supply agreements and terms of supply • Proposal • Retailers asked to review their practice

  11. Packaging and design charges • Why this is an issue • Suppliers claim over-charging for photography and packaging • Multiple design changes increase supplier costs • Code • Part (6) No obligation to contribute to marketing costs • Part (11) No tying of third party goods and services for payment • Proposal • Retailers asked to consider limiting design changes • Retailers asked to ensure practices are Code compliant

  12. Forensic auditing • Why this is an issue • Statutory Limitation of 6 years • Audits are complex and challenge systems and resources • Significant sums involved; most negotiated not settled; some deducted without notice • Code • Part (5): No delay in payments • Proposal • Retailers asked to consider voluntarily reducing the time to settle accounts

  13. Forensic auditing: Success Aldi Stores Ltd Asda Stores Ltd Co-operative Group Ltd Iceland Foods Ltd These retailers have agreed voluntarily to: “Limit the auditing of suppliers’ trading accounts from missed claims, by internal or external auditing processes, to no more than the current and previous two financial years on a reciprocal basis.” Each retailer will set out how they will implement this commitment Lidl GmbH Marks and Spencer plc Tesco plc Wm Morrison Supermarkets plc

  14. Other issues

  15. Forward Look • Responding to YouGov survey • Validate responses to first survey • Continued need to raise awareness • Repeat next year • Building confidence among suppliers to raise issues • Further progress on key issues • Assessment of other issues

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