Groceries Code Adjudicator Christine Tacon has told Tesco to introduce significant changes to practices and systems after finding Britain’s largest supermarket seriously breached a legally binding Groceries Supply Code of Practice to protect groceries suppliers.
During a thorough investigation covering the period June 25, 2013 to February 5, 2015 it was revealed that the retailer had acted unreasonably when delaying payments to suppliers, often for lengthy periods of time.
The adjudicator has used her powers to order the retailer to make significant changes in the way it deals with payments to suppliers, including stopping Tesco from making unilateral deductions from money owed for goods supplied, insisting that the company corrects pricing errors within seven days of notification by a supplier, improving Tesco’s invoices by providing more transparency and clarity for suppliers and to put its finance teams and buyers through training on the findings from the adjudicator’s investigation.
Tesco Group CEO Dave Lewis says the company accepts the findings of the GCA report and is committed to continue building trusted partnerships with suppliers.
“In 2014 we undertook our own review into certain historic practices, which were both unsustainable and harmful to our suppliers,” he said. “We shared these practices with the adjudicator and publicly apologised. Today, I would like to apologise again. We are sorry.
“Over the last year we have worked hard to make Tesco a very different company from the one described in the GCA report. The absolute focus on operating margin had damaging consequences for the business and our relationship with suppliers. This has now been fundamentally changed.”
According to the recent report, the overwhelming majority of Tesco’s suppliers are more positive towards the company today, compared with the period under investigation.
The improvement in supplier relations follows a comprehensive review of how Tesco works with all of its 3,000 UK suppliers. As a result, Tesco implemented 14 significant initiatives to improve the way it works with suppliers and how it runs its business.
New initiatives included Tesco becoming the first UK retailer to publish its payment terms with its suppliers, resulting in a fair, transparent and consistent approach across its supply base. The move introduced payment terms of 14 days for hundreds of small and medium-sized businesses across the UK.
Tesco also created a 2,500-strong supplier network and set up a special helpline for suppliers to solve any issues which might arise, within 48 hours.
“We have made a lot of progress, but there is still more we can do,” Mr Lewis said. “Today our colleagues are empowered to do the right thing for our customers and for our suppliers, and I am extremely proud of the way they have responded over the past year.”