The world of Suppliers, Supermarkets and FMCG is changing. New legislation is telling Supermarkets what they can and cannot do with their Suppliers. You might have heard of ‘GSCOP’ or the ‘Groceries Supply Code of Practice’ or just that there’s something different about how Supermarkets deal with their Suppliers. You’re right, there is.
Five years ago a piece of legislation was passed. One that would see the biggest restriction on how Supermarkets could work with their Suppliers since time began. This piece of legislation is known as GSCOP and was brought-in to protect Suppliers. However 5 years on 76% of Suppliers do not understand the Code, according to the 2015 Annual Summary by the Groceries Code Adjudicator (The lady with the power to fins supermarkets up to 1% of their turnover). Associations, Suppliers, and concerned bodies have lobbied since the first Competition Commission’s investigation into the Groceries market in 2001 for regulations to be brought-in, yet the very thing that has been successful to help suppliers is largely not understood or misunderstood.
The Groceries Supply Code of Practice is known throughout the UK Grocery Industry as ‘GSCOP’. This is the law across 7 pages affecting the largest 10 Supermarkets in the UK. Three examples of why this Code is so important for Suppliers to understand are:
- Not supply arrangements can be made retrospectively, unless in accordance with specific detailed arrangements in the supply agreement.
- Suppliers can only be de-listed with reasonable notice and only for genuine commercial reasons.
- No payments are required for wastage, unless as stated in the written supply agreement.
The very important piece for Procurement Managers and Packaging Manager is ‘tying’. GSCOP states that:
Part 11 – No tying of third party goods and services for payment: ‘A retailer must not directly or indirectly require a Supplier to obtain goods or services, or property from any third party where that retailer obtains a payment for this arrangement from any third party…’ (Exceptions apply).
This has implications on where Suppliers buy labels, which transport they use, packaging Suppliers that they use and many more. By not understanding the new tying regulations Suppliers could just do what they always do without knowing that they may have a choice.
There are many other parts of the Code that a Supplier should know because if these are the new rules of the game, shouldn’t you know whether a foul has been made? It’s ok not to know the off-side rule of football, unless you’re a footballer! Supermarket Buyers have to be trained in the Code, which is written by law, so you could say that they have ‘the upper hand’. The aim of the GSCOP book is to provide Suppliers with an easy way to understand the rules and have a reference point to come back to. The GSCOP book is available for £9.95.
The much lesser understood part of the new legislation is that the Code (GSCOP) is part of the ‘The Groceries (Supply Chain Practices) Market Investigation Order’. A law passed in 2010 that contains GSCOP. The Order is 19 pages containing 7 pages of GSCOP. The entire Order really should be understood by Suppliers if they wish to play as equals with the Supermarkets. For example, the Order talks of Code Compliance Officers at each Supermarket that Suppliers can turn to, and each Supplier having a written supply agreement.
To operate in this new world I suggest 3 steps; 1. Understand the Order, 2. Join the GSCOP Aware Association so that you can declare that you understand the Code, and 3. Identify issues that you want to discuss with your Buyer. The Association aims to enable Suppliers and Supermarkets to trade openly, honestly and collaboratively by displaying the GSCOP Aware logo, so that both parties are ‘playing by the rules’.
Darren A. Smith, Founder of Making Business Matter wrote this article for http://fmcgnews.co.uk. He spent 12 years as a Category Manager/Trading Manager for one of the big four UK supermarkets and now manages Making Business Matter (MBM). MBM is a training provider specialising in Suppliers to the big four UK supermarkets using their unique method of Sticky Learning ®, they invite you to be trained in Negotiation Skills.