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:
- What will they do if some, or all, of the real strategic suppliers decide that they do not want to pay?
- How do they know that the supply base of 3,299 is too large and 1,650 is just right?
- Is this really the first time Premier Foods have introduced a supplier appraisal process?
- Have the profiled the supply risk?
- 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?
- Will other forms of accreditation be acceptable to Premier Foods?
- What will the selection criteria be for 'preferred supplier' (Premier Foods strategic supplier) status?
- If Premier Foods didn't have a supplier appraisal process in place previously, did they have contract and procurement risk management processes in place?
- Is the strategy to designate all suppliers as strategic?
- What do Premier Foods plan to do if their strategic suppliers start to expect faster payment terms or even payment on delivery?
- 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?