Supply Chains


Last updated: April 2017

 
 

Groceries Code Adjudicator

 

Thomas Wills, Policy Officer at Traidcraft Exchange, explains that for greater fairness in supply chains we need a more powerful Groceries Code Adjudicator.

 

The Groceries Code Adjudicator (GCA), which has been nicknamed the ‘supermarket ombudsman’, was established in 2013 to prevent the UK’s biggest supermarkets from bullying their suppliers. 

It does this by enforcing a legal code of fair dealing which obliges supermarkets to conduct their supplier relationships ‘in good faith’, and identifies a number of purchasing practices that supermarkets must avoid. These include delaying payments, obliging suppliers to pay for better shelf space, and charging suppliers over the odds when a customer complains about their product. 

 

Photo credit: Nic Taylor

 


Standing up to supermarkets

The GCA has done a good job exercising this remit, meeting regularly with supermarkets and suppliers to clarify what it considers to be acceptable purchasing practices. It hasn’t been afraid to go public either, hitting the headlines in January 2016 when it published a scathing report into Tesco, in which it found that the retail giant had been deliberately delaying payments to its suppliers. These payments were in some cases over £1 million, and in some cases, were delayed by more than two years. 

In this and more, the GCA has represented excellent progress for the groceries sector.

 

A limited scope, limited impact

The Adjudicator was established in recognition that all suppliers to supermarkets were vulnerable to unfair purchasing practices, whether selling directly or via intermediaries. But it has limited scope in that it only reviews supermarkets’ relationships with their direct suppliers.

By supporting a better relationship between supermarkets and direct suppliers, it was hoped that the GCA would prevent unfair risks and costs being pushed down the supply chain and onto small, indirect suppliers – a group that includes the majority of the farmers that grow our food.

This benefit has not materialised as hoped. 

 

Problems persist

Traidcraft have heard stories from farmers and groceries businesses, both in the UK and exporting to the UK from abroad, that are still having to deal with issues including last-minute order cancellations, unexplained deductions from invoices and requests for ‘donations’ from their buyers that make it almost impossible to accurately predict business income and to plan and invest accordingly.

Indeed, The Times reported that “predatory practices” have driven more than 150 groceries producers out of business in the last year alone.

 

Image: Grocery Code Adjudicator

 


Climate of fear

Why hasn’t the GCA led to better purchasing practices in the whole of groceries supply chains? 

Firstly, there is a significant climate of fear in the groceries sector. Suppliers are reluctant to speak out for fear of being identified as troublemakers and losing business. For many small and medium suppliers, upsetting even one retailer might lead to them going bankrupt. In this situation, a supplier to a supermarket being asked to pay inappropriate costs is likely to simply pass on those costs to their own suppliers, rather than to appeal to the GCA. 

 

Power imbalance

Secondly, power in supermarket supply chains lies not just with the big retailers. Many direct suppliers are significant players in their supply chains and, without the regulation of the GCA, are free to purchase abusively from their suppliers. 

 

The solution

The solution to this is clear. The GCA already has many of the tools needed to effectively prevent unfair purchasing. The office understands the sector, is funded via a simple levy on supermarkets, and is building up trust from a nervous supplier community. All that is needed is for the government to empower the GCA by giving it the remit to support fairer trading relationships wherever they are found in the supply chain. 

Sitting back and allowing big brands and supermarkets to trample over a broken groceries sector is tantamount to the government saying that it is relaxed about suppliers being bullied and driven out of business. As Small Business Minister, Margot James should bring forward plans to extend the GCA remit so that it can investigate allegations of unfairness at any stage of the supply chains that serve our supermarkets. It is only then that consumers can be assured that the food we buy is traded on terms that we would recognise as fair and reasonable. 

 

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