Sunday, 10 November 2013

Premier Foods redefine strategic suppliers

How would you define a strategic supplier? To me it's a supplier who is core to business success, and one you really need to keep working with. You would also embed them in your procurement risk management and have effective contract management in place. You may not want the supplier to know they're strategic as that places them in a greater position of bargaining power.

That said, today's Mail on Sunday suggests that Premier Foods, the UK's largest food manufacturer, is adopting a more strategic approach to its suppliers. There will be a reduction in suppliers of approximately 50%. Surprisingly they have written to suppliers and given them the option of becoming a strategic supplier - very odd. This new approach to dealing with the market will introduce a formal supplier appraisal process. I don't know whether or not that means Premier Foods didn't previously have a supplier appraisal process in place but it's scary, given the attention to food supply chain failures over the last year, if this is a first for Premier Foods.

Anyway, introducing this supplier appraisal process will incur costs - strange that it won't lead to cost reductions - and to cover those costs suppliers are being asked to fork out £5,000 plus VAT.

It would be interesting to learn of Premier Foods procurement strategy:

  1. What will they do if some, or all, of the real strategic suppliers decide that they do not want to pay?
  2. How do they know that the supply base of 3,299 is too large and 1,650 is just right?
  3. Is this really the first time Premier Foods have introduced a supplier appraisal process?
  4. Have the profiled the supply risk?
  5. Does payment of £5,000 by a supplier mean they successfully navigate the supplier appraisal process, and, if they don't, will the supplier receive a refund?
  6. Will other forms of accreditation be acceptable to Premier Foods?
  7. What will the selection criteria be for 'preferred supplier' (Premier Foods strategic supplier) status? 
  8. If Premier Foods didn't have a supplier appraisal process in place previously, did they have contract and procurement risk management processes in place?
  9. Is the strategy to designate all suppliers as strategic?
  10. What do Premier Foods plan to do if their strategic suppliers start to expect faster payment terms or even payment on delivery?
  11. What is Premier Foods policy if their own customers impose an obligation to pay for supplier appraisal - will Premier Foods pay? 
In an environment where others are adopting supply chain financing this is certainly a novel strategy but is it a clever strategy?

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