Code of conduct dream falls short of reality

06/05/2014 02:04:00 PM
Tom Karst

Tom KarstWill investments in sustainability, improved worker conditions and other initiatives pay off for suppliers?

Coverage from the United Kingdom suggests there is some worry, both from the buying and supply side, about how these initiatives play out in the market place.

The online publication Supplymanagement.com said that Friends of the Earth, speaking for an alliance of suppliers’ and farmers’ groups, have accused the “big four” supermarkets in the U.K. — Tesco, Asda, Safeway and Sainsbury’s — of bullying suppliers.

The group wants the government to appoint an independent retail watchdog to take legal action against retailers that break the Department of Trade and Industry’s code of conduct for supermarkets and suppliers. The code is voluntary to the big four supermarkets, who control about 75% of the retail market.

Suppliers say they are concerned retailers are pushing price cuts back on producers without thought of what it will do to the supply chain. It is hard to invest in environmental or welfare standards because of the unreasonable cuts imposed by retailers, they say.

Meanwhile, the inference from some retailers is that code should not apply only top to the Big Four, since that means some of their competitors aren’t bound by the code.

If Aldi isn’t on board, what’s the point?

It is an uphill battle enforce a code of conduct between suppliers and buyers, whether that code is voluntary or not. If the code is broken, the self-enforced supplier code of silence doesn’t allow a proper airing of the grievance anyway.

The sharp edge of competition - notably supplier versus supplier and buyer versus buyer - must solve most issues.

I think the best hope for mutually beneficial relationships between suppliers and buyers, whether in the U.S. or the U.K., is the cultivation of long term preferred vendor agreements. In that way, both suppliers and buyers adjust their practices to precisely meet the needs of the other in the most efficient way possible.

 

Other reading: 

Supermarket power - implications for consumers

Competition inquiries into the groceries market



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