Tesco’s and Suppliers

If you’re not sure about the local arguments for/against Tesco, how about some consideration of the people who supply Tesco…

The giant was in the news again this week, and not just for the supply of horse-filler burgers and other ready meals. Suppliers have this week been presented with invoices up to £1,000,000.00 – that’s a lot of zeros! With just a few days to pay.

What are the invoices for? Late deliveries. So if you supply Tesco, and for any reason you deliver late, they charge you for the privilege. This might not sound unreasonable, until you realise the draconian nature of the scheme and the way it’s applied. Some people are being charged £10 for delivering something late which is only worth £4 – so if your van gets stuck on the motorway, Tesco charge you £10 for the £4 delivery you’d made every effort to deliver. Seems a little unfair at the very least!

But I guess it helps offset the cost of horse burger-filler.

And it’s not just suppliers who are growing increasingly tired of Tesco’s approach to supplier management – even city hedge funds are concerned – stating that the way Tesco treats suppliers is unsustainable.

I know personally of a factory in Colchester which supplies cakes to a major supermarket chain, and because of the terms of their supply contract, they have to supply cake for less than it costs to make. Seems to make no sense at all, but they do it, because it’s a source of turnover and better to make something at a loss than to make nothing at all. But how long can it continue, and what effect will it have on quality?

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