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Tesco aside, supermarket-supplier relations improve in the UK

Jonathan Cooper-Bagnall
Jul 7, 2015 10:04:00 AM

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Tesco aside, supplier relations improve in the UK

We are in an age where companies of all shapes and sizes turn to global suppliers more than ever before. There is perhaps no group of companies more reliant on suppliers than supermarket chains. Without suppliers, the supermarket chain is nothing more than a store with empty shelves, baskets and a neon sign.

With this reality, it would seem counter-intuitive that a supermarket chain would engage in supplier bullying tactics, especially after already coming under public scrutiny for their business practices. Yet, that seems to be the case with UK supermarket giant Tesco.

A new report suggests that scandal-plagued Tesco has not made significant headway in its rehabilitative efforts with its supplier base since its bullying practices came to light late last year and again in February this year. In a study of supermarket suppliers in the UK, 31% of respondents said that Tesco’s compliance with the UK’s Groceries Code, which guards against supplier abuse, continues to be lacking. A shocking 54% of all issues raised by suppliers were related to Tesco.

If there is some good news to be found, it is that these results seem to fly in the face, somewhat, of the bigger picture trend; suggesting that relations between suppliers and grocers across the industry may be improving. Three-quarters of supplier respondents acknowledge that the culture has become more collaborative, while the percentage of suppliers who have experienced problems with their supermarket clients has dropped from 79% last year to 70% currently. While it's possible suppliers may not be reporting all problems out of fear of retribution, the results could be characterised as encouraging.

Further, our own experience in this environment sees companies going through a ‘reflective’ period – drilling into internal activities that drive commercial aspects of their business. Starting with an interrogation of behaviours and internal processes, before looking to the market for solutions, typically yields different and (often better) commercial opportunities.

In a fiercely competitive industry where margins are razor thin, the squeezing and mistreatment of suppliers is counterproductive and can only serve to hurt businesses in the long run. Tesco’s reputation has taken quite a beating since its accounting improprieties surfaced, almost immediately followed by supplier bullying allegations. But if there is a silver lining, it seems at least the retail market is heeding the lessons learned of others’ misfortunes by working to improve their standing with their supplier base.

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