Premier Foods procurement strategy going from bad to worse

Last year I wrote about the procurement strategy of Premier Foods which has suddenly become a hot topic and now looks as if the chief executive has been coerced into setting aside.

Initially the rationale of the Premier Foods procurement strategy was to supplier reduction and a focus on strategic suppliers. The objective wasn't necessarily wrong but the implementation was flawed in both rationale and implementation.

Now to add to that confusion the chief executive has said "in my view that is just one of many kinds of discounts. It's an investment on growing our business and that's entirely appropriate". That seems a massive shift in last year's justification! Did the chief executive understand the 2013 rationale? Was there any Board buy-in to the risks of what could happen and the potential fallout which has now led to adverse national press and media converage?

Gavin Darby, the chief executive, to me, has made things worse by stating:

If the optics of this scheme for some people feel uncomfortable, I'm happy to move on and move the scheme to a more traditional discount .. we would just say we have an invest-to-grow campaign, we want people to come with us to invest in our business and that would be reflected in a discount soon the terms they have offered in the past.

If Premier Foods had wanted "[suppliers] to come with us" they should have thought a bit more about how they would bring the supply market with them.

Darby seems to forget that some of last year's suppliers appear to have now chosen to opt out of supplying and some who did pay-to-stay never received any business anyway. How will Premier Foods go about negotiating the new discounts with those firms? Let's face it Premier Foods have now lost the initiative and common sense would suggest that suppliers should just refuse to budge on discounts.

Setting all that aside, we have yet another example of procurement damaging brand value and I assume adding to remedial costs associated with retrieving reputation.

Then we have the issue of do they really understand the concept of strategic supplier management? Sadly, I fear, Premier Foods are working to their own recipe and it has a remarkably bad taste.

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?

Fighting about Indian defence procurement

The world is certainly richer for discussions on Indian defence procurement.  Recently I tweeted a bizarre report from the BBC on significant delays to Indian defence procurement which were likely be the outcome of an unsuccessful challenge over the age of one of the generals.  Separately I questioned how the Eurofighter consortium, of which the UK is a part, could be readmitted to the bidding.

By way of an update, the UK are part of a consortium bidding to build 127 fighter jets.  The bid is worth £7-10bn (reports vary) and if the UK bid isn't successful a thousands of jobs are at stake.  At the start of the month it was reported that the French (Rafale) were the preferred bidder and the UK bid would progress no further.  Cameron wasn't happy, claiming that the Eurofighter bid was lowest, it was unfair that we were out.  Cameron planned to do all in his power to get the Eurofighter bid readmitted to the competition.  I questioned how that could happen and the potential political and procurement implications of the readmission.

Yesterday, it was reported that all is not well with the Indian negotiating team. It appears that two of the senior officials have now gone public stating