As the Adjudicator’s conference approaches, the big question is whether Christine Tacon, the Adjudicator, is making any difference. A distant observer might point out that the Tesco investigation gave no surprises, the Adjudicator has closed drop and drive and consumer complaints with little apparent action, no-one has been fined and the forensic accounts arrangements are voluntary.
But look closer - the steps may be subtle but might just be setting up a pathway to real change.
Take forensic accounting. It might be voluntary but broadly the supermarkets have stopped pursuing new claims that go back over three years. Yes, supermarkets are now making sure they raise the disputes quicker, but at least suppliers get some certainty.
With drop and drive and also consumer complaints, the Adjudicator’s investigations into these areas appeared to simply be closed. The impression is that the Adjudicator found no concerns. But look closer and you can see that is not the case. The Adjudicator has agreed it is possible for retailers to charge for consumer complaints. But they must not profit from the charges and, if they are to charge, retailers must provide the data quickly.
This sets a trap for the retailers. If they make a disproportionate charge for consumer complaints or do not provide consumer complaints data quickly so that it is useful, then they will find themselves in breach. Similarly with drop and drive (recording delivery of short-life products) the Adjudicator has revealed the wide variation in retailer warehouse practices. She has made it clear that if retailers do not achieve more consistent best practice then, if poor delivery practices continue, they are exposed to enforcement action.
Therefore the Adjudicator has made it clear that any supermarket which does not have adequate procedures in place to deal with errors, which unilaterally deducts amounts from supplier invoices without good reason, which delays payment to flatter financial performance, will risk enforcement action and fines. The Tesco report impacts all supermarkets.
So the Adjudicator has set a series of traps that have the potential of changing behaviour in areas that really matter - improving payment and delivery practices. The concern, though, is that driving out bad practices might not actually create a higher value supply chain. Setting out what good practice in forecasting should be risks leading to supermarkets avoiding providing forecasts. In the Tesco report the practice of paying for category champions/range reviews etc is under review, leading to some retailers backing away from conditional payments. Lump sum payments are also under review.
This all means the supermarket relationship becomes all about unit price. In an environment where a supplier has no larger relationship, no security of supply and does not even get a forecast, does that not mean more risk is passed to the supplier? And short-term volatile relationships built solely on the lowest price are hardly a recipe for investment to create a high-value supply chain.
David Lowe leads the food and drink sector at international law firm Gowling WLG
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