Could the Groceries Code Adjudicator increased powers change procurement?
Founded in 2013, the Groceries Code Adjudicator (GCA) is a supermarket watchdog set up to regulate the relationship between food retailers and their suppliers. Its intention is to ensure the fair treatment of suppliers to reduce their exploitation.
We were met with news earlier this year that Tesco is facing a formal investigation by the GCA, after suspicion arose that it breached regulations on supplier contracts. After Tesco overstated its profits, the GCA looked into the supermarket chain and found ‘reasonable suspicion’ that it had breached the code of practice for grocers. It’s not just retailers that have shown unethical treatment of suppliers: world-famous food brand Heinz has come under fire for reportedly doubling the length of time it takes to pay suppliers.
The GCA has been granted increased power through new legislation and now has the power to fine retailers up to 1% of its annual UK turnover. That means that the GCA could sting Tesco with fines of up to £400 million. Suppliers may soon enjoy a more equal relationship with retailers and the tough terms that they have previously had to cope with could ease. Food retailers may need to modify how they operate to ensure compliance and the procurement process could well be among these changes.
Supplier contracts will now need to comply with GCA regulation, meaning potential changes to contract terms. Contracts will probably now require more constant review and close auditing to ensure that they remain compliant. Procurement will now have additional terms to contend with and this could create the need for automated contract management. This would enable procurement staff to easily ensure contract terms were met in practice.
Grocers may need to think of new ways to bridge their communication with suppliers. The GCA’s increased power may compel grocers to be more transparent with their suppliers, which they could do by using a supplier portal. If successful, this would mean suppliers using the portal to get access to up to the minute information about orders, invoices and payments as well as being able to self-manage product catalogues and create easier two way dialogue. The portal could build supplier reassurance that they’ll be paid on time.
Fully automated Source to Pay processes could also help with GCA compliance by managing all sourcing and purchasing activity in line with GCA terms. This would track all of a grocer’s dealings with a supplier, from on-boarding, to ordering, to invoicing and payment.
An environment of prompt supplier payments necessitates a close examination of a grocer’s cash flow. Procurement would have to respond by increasing cash visibility and allowing for more frequent scrutiny of expenditure. We recently heard of the drop in annual profits for Waitrose and Morrisons; such stories may become a more common news story as the GCA is given greater influence and grocers become less free to stall supplier payments.
In reality Britain’s ‘big four’ supermarkets are too powerful to be forced into a complete overhaul of their procurement processes overnight. However, the GCA’s increased power may well mean that supermarket chains alter their procurement systems and improve communication to suppliers to achieve and demonstrate compliance. Only time will tell whether supermarkets respond to the GCA’s greater influence and whether that influence strengthens over time.
By Daniel Ball, Director at Wax Digital.
SAP Ariba to digitise procurement for Expo 2020 suppliers
The global trade event, this year hosted in Dubai, was rescheduled from last year and will now take place between 1 October 2021 and 31 March 2022.
As the event’s Innovative Enterprise Software Partner, SAP Ariba solutions will fully digitise and automate the procure-to-pay lifecycle, providing a streamlined experience for thousands of market leading, global suppliers and strengthening the global supply chain with enhanced transparency and efficiency. The cloud-based platforms operate through on SAP Ariba’s UAE public cloud data centre and connects to the Ariba Network.
Expo 2020 "a long-term investment"
Mohammed AlHashmi, Chief Technology Officer, Expo 2020 Dubai, said the world trade event is “a long-term investment in the future that aims to enhance opportunities for sustainable business connectivity and growth”, which stretches beyond Expo 2020’s six-month window.
“Our partnership with SAP is an example of what can be achieved with the invaluable support of our technology partners to host one of the most digitally advanced World Expos ever,” he added. “The implementation of SAP Ariba solutions has transformed our end-to-end procure-to-pay cycle and helped set new standards of procurement automation for projects of this scale.”
To date, more than AED 1bn has already been transacted by Expo 2020 suppliers through SAP Ariba. The platform promotes collaborative partnerships and allows registered users to participate in sourcing events, negotiate and initiate contracts, and centralise their invoicing and payments in real time.
Claudio Muruzabal, President of EMEA South, SAP, said: “Expo 2020 Dubai is demonstrating global best practices in digitising its procurement process with SAP Ariba solutions to help gain visibility into its spend, tighten collaboration with its suppliers, and achieve process automation, including completely paperless invoicing.”
About Expo 2020 Dubai
Expo 2020 will take place in Dubai and is the first of the long-running World Expos to be hosted in the Middle East, Africa and South Asia territory. The original World Expo, called the Great Exhibiton, was hosted in 1851 at the Crystal Palace in London, designed as a showcase for the innovations of the Industrial Revolution.
Expo 2020 was originally due to run 20 October 2020 to 10 April 2021, but was last year postponed in light of COVID-19 restrictions - though some business has already taken place virtually. The event will place greater emphasis on innovation in sustainable solutions through the Sustainability District, blending technology and culture. It is expected that around 70 per cent of the 25 million attendees will be international visitors.