Transcript The Groceries Code Adjudicator

1st Annual Report
March 2014
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
Statutory reporting requirements
The GCA Act 2013 sets out the information we must report:
Statutory report
Disputes referred to arbitration under the Groceries Supply Order
Two but not commenced
Investigations carried out by the GCA
None
Cases in which the GCA has used enforcement measures
None
Recommendations made to the OFT for changes to the Code
None
But there is so much more we have achieved...
Promoting the work of the GCA
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
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
Key Issues raised on Code compliance
Initial ‘Top 5 Issues’ to consider
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
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
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
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
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
Forensic auditing: Success
Aldi Stores
Ltd
Asda Stores
Ltd
Lidl GmbH
Marks and
Spencer plc
Co-operative
Group Ltd
Iceland Foods
Ltd
Tesco plc
Wm Morrison
Supermarkets
plc
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
Other issues
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