Tesco accounting scandal laid bare as watchdog reports findings
Tesco has said it accepts the damning findings of GCA report, and commits to continue to build trusted partnerships with suppliers Tesco will continue to work collaboratively with suppliers to further build trust, following today’s publication of the Groceries Code Adjudicator’s (GCA) report into historic supplier issues.
Dave Lewis, Group Chief Executive Officer, Tesco said: “In 2014 we undertook our own review into certain historic practices, which were both unsustainable and harmful to our suppliers. We shared these practices with the Adjudicator, and publicly apologised. Today, I would like to apologise again. We are sorry.
“I am grateful to the Adjudicator for the professional manner in which the investigation has been conducted. We accept the report’s findings, which are consistent with our own investigation.
“Over the last year we have worked hard to make Tesco a very different company from the one described in the GCA report. The absolute focus on operating margin had damaging consequences for the business and our relationship with suppliers. This has now been fundamentally changed.
“In January 2015, we made material changes to our business that addressed the majority of the historic practices referred to in the report. We have changed the way we work by reorganising, refocusing and retraining our teams and we will continue to work in a way which is consistent with the recommendations.”
According to today’s report, the overwhelming majority of Tesco’s suppliers are more positive towards the company today, compared to the period under investigation.
The improvement in supplier relations follows a comprehensive review of how Tesco works with all of its 3,000 UK suppliers. As a result, Tesco implemented 14 significant initiatives to improve the way it works with suppliers and how it runs its business.
New initiatives included Tesco becoming the first UK retailer to publish its payment terms with its suppliers, resulting in a fair, transparent and consistent approach across its supply base. The move introduced payment terms of 14 days for hundreds of small and medium-sized businesses across the UK.
Tesco also created a 2,500-strong Supplier Network and set up a special helpline for suppliers to solve any issues which might arise, within 48 hours.
Dave Lewis added: “We have made a lot of progress, but there is still more we can do. Today our colleagues are empowered to do the right thing for our customers and for our suppliers, and I am extremely proud of the way they have responded over the past year.”
A recap of the supplier-related initiatives Tesco has implemented since 2014 is as follows:
Working with suppliers:
- Carried out a comprehensive review of how we work with all our 3,000 supplier partners across the UK.
- Reorganised our Product team structure, with clearer objectives to focus on long-term relationships with suppliers and expanded responsibility for stock and ordering, technical, trade planning and space, range and merchandising management.
- Built new supplier induction training programmes.
- Established a Supplier Network of over 2,500 suppliers to improve communication, share ideas and address common challenges.
- Created a Supplier Helpline to deal with invoice queries and other supplier issues in 48 hours.
- Started an independent Supplier Protector Line to encourage a ‘speak up culture’ with Tesco’s partners.
- Made building trusted partnerships with suppliers a key business performance measure.
- Retrained all Product colleagues in the UK on the Groceries Supply Code of Practice.
- Updated and relaunched its Code of Business Conduct to all Tesco colleagues.
- Relaunched Colleague Protector Line to encourage a ‘speak up culture’ within Tesco.
Simplifying how Tesco buys and sells:
- Changed the way it buys and sells as a business, to focus on the cost price of products wherever possible rather than commercial income.
- Reduced the number of ways it calculates commercial income – from 24 to five this year, and targeting three next year.
- Changed to measuring sales and profit rather than margin rate, putting the focus on what the company sells rather than what it buys.
- Improved invoice management within the business by an independent operations team.