“The main problem with the supermarket code of practice is that it”s weak, vague and loosely worded. But it would be quite simple to improve its effectiveness.
“The reason why the OFT laments a lack of evidence to assess whether the code has been effective or not is that the code does not require the additional particular terms” to which suppliers are often subject, to be confirmed in writing by the supermarkets to the supplier.
“If it did we would now be discussing what the industry already knows – the existence of of clear evidence which shows how the disproportionate power of the major multiples is damaging suppliers.
“The principle of a code remains valid but to really make a difference it needs to include:
The stipulation that there must be an agreed written contract between supplier and supermarket for each SKU (Stock Keeping Unit), irrespective of point of delivery.
Each contract should also contain the minimum terms:
30-day notice of contract termination, sole exceptions being contamination or public health matters.
Supermarket notifying supplier one week forward of total order requirement of which 70% is guaranteed for payment by the supermarket if over 70% of that order requirement has been made available by the supplier to the supermarket at the relevant time.
All retrospective financial discounts or contributions related to volume or otherwise to be recorded in the contract prior to relevant supply being made. Failure to record rendering such discount or contribution requirements invalid.
Payment for SKUs supplied and accepted, or amount equivalent to guaranteed order requirement, to be made to supplier within 30 days without deduction.
“Making it a requirement for the supermarkets to provide such written confirmation is not onerous. But it is a step which would significantly improve the transparency in the buyer/supplier relationship.”