How can retailers avoid breaking GSCOP

Logic dictates there are two reasons why retailers may continue to break The Grocery Supply Code of Practice (GSCOP) guidance: malice or incompetence. However, more and more it seems that there is a third reason – complexity.

Retail is a complex industry – the large supermarkets have trading agreements in place with around 3,000 suppliers, for upwards of 50,000 SKUs. These products all go through complex depot networks on a daily basis, and get promoted regularly. Keeping accurate records for the price, ranging, delivery, movement of products, and the numerous conversations and negotiations that buyers and suppliers have, is almost impossible.

Many antiquated retail systems are not up to the job. It’s no wonder mistakes are made, or that there is some ambiguity on what some retailers should be doing to improve.

Let's take a quick step back and look at the purpose of the GCA. It was formed to regulate the power of UK supermarkets over their direct suppliers. It’s role is to stop unfair practices, provide guidance to retailers and suppliers, to investigate complaints and breaches of the code, and ultimately punish and fine retailers who do not comply. They produced the Groceries Supply Code of Practice (GSCOP) as guidance on what the UK’s largest retailers must follow. As well as the actual Code of Practice, the GCA also publishes numerous and more detailed guides on topics such as De-listing – to expand on the principles outlined in GSCOP.

GSCOP is a way of working. It is effectively telling retailers to:

  • Treat suppliers fairly
  • Not vary trading agreements
  • Not levy charges that have not been agreed
  • Pay suppliers in full, and on time
  • Give suppliers accurate forecasts

The theoretical fines that the GCA can impose on retailers for breaking the code are hefty. This alone should be enough for retailers to take the code very seriously (and on the whole, they do). Yet in reality many observers feel that the GCA has been lenient over the past 6 years. As despite numerous reports of breaches of the code, currently, the GCA has not imposed any fines.

Why is the code still being broken?

I honestly believe that the GCA has been a force for good – if nothing else it has raised the issues, it has built awareness, it has (on the whole) changed retailer practices, and provided a framework for a much better way of working. In addition to educating retailer teams, many suppliers are also now aware of their rights, and it provides a framework and language for retailers and suppliers to be more collaborative and open.

Buyers receive comprehensive training on what they can and can’t do, and suppliers are more aware of their rights.

I don’t believe it is deliberate or malicious behaviour that is causing retailers to break the code. I think the main reasons are:

  • Lack of good quality training: some buyers just ‘forget’ the detail.
  • Lack of process: deals are still done verbally, or by email – leading to ambiguity, and lack of audit trail.
  • Poor systems: many retailers do not even share EPOS sales data in a systemised way, let alone forecast and supply-chain data (a process that the supplier should be fully involved in, and have the right to challenge).
  • Lack of clarity: what is meant by ‘provide forecast data’ – retailers deal with this in different ways – which means by definition there is no uniform ‘best-practice’. Fair notice for product delists is still ambiguous, and is regularly challenged.

How could things be improved?

  1. The GCA could give clarification on a number of areas – forecasting being the most obvious. What is meant by a forecast? How often should it be shared with suppliers? How accurate should it be? What action will be taken if retailers consistently get it wrong?
  2. The retail Industry could learn from best practice in other industries. For instance, the building supplies sector seems to be leading the way when it comes to cost-price transparency, price change and rebate management. The building supplies sector is complex – there are over a million SKUs, and a high proportion of retailer profit is derived from rebates and promotional funding. It is critical to get it right, and to have ongoing accurate views of accruals. In comparison, grocery retail is a simple industry, and yet many supplier funding deals are still recorded on emails and spreadsheets, and rebate reconciliation is opaque.
  3. Put the suppliers first. There are still a number of retailers who provide no data to their suppliers, and very few (if any) who supply granular, accessible, usable data and robust forecasts. The retailers have enormous amounts of data, and so are much better placed than their suppliers to be able to provide robust forecasts. There are numerous cloud-based solutions for sharing data in a way that suppliers can use, and advances in machine-learning techniques are making astonishing improvements in meaningful demand forecasts.

Working within a consistent framework, using the best available technology, and fostering an environment where suppliers are genuinely treated in a collaborative way could have enormous benefits to both retailers and suppliers. The GCA has been a force for good, and could be the independent body that could help retailers to get this final piece of the jigsaw completed.