DROP AND DRIVE HITS THE NEWS AGAIN. THIS TIME ON RADIO
Following on from Christine Tacon’s interview on BBC Radio 5Live last week, I was invited by the station provide the context about Drop and Drive as an insider who has the seen challenges facing both suppliers and retailers. Speaking to Sean Farrington and Louise Cooper on BBC Radio 5Live’s ‘Wake up to Money’, we explored the issues behind the retailer deductions from invoice for short-delivered goods, which many chilled suppliers are facing, as a result of Drop and Drive practices.
(The podcast can be downloaded from http://www.bbc.co.uk/programmes/b0070lr5/episodes/downloads – 11/04/2017, starting at 17:00 and concluding at 26:26. It’s available until Tuesday the 18th of April, but if you missed it, or aren’t in a listening mood, here’s a summary of the issues we discussed, below.)
Drop and Drive and the Grocery Code Adjudicator
Delayed Payments, one of the Grocery Code Adjudicator’s top 5 focus initiatives, features Drop and Drive as its most prominent issue. Our Drop and Drive Claims Workgroup has been raising awareness of the challenge with retailers, with the continued support of the GCA. We are actively engaged with each of them and are working together to resolve the issue as swiftly as possible, to head off the threat of the GCA calling an investigation.
The Drop and Drive Claims Workgroup
Simply Supply Chain is leading a select group of chilled suppliers called the Drop and Drive Claims Workgroup. This forum works collaboratively with retailers to address the embedded process issues and causes of error, to ensure that suppliers are paid for the correct quantity of goods they deliver.
The 20+ members of the Workgroup are being deducted circa £10m a year for claimed ‘short deliveries’ caused by flawed Drop and Drive practices, where deliveries are unloaded and then counted by the retailer after the driver has departed. If the Workgroup suppliers are suffering deductions at this level, then we estimate that the impact across the entire sector could be 5-6 times as great.
Although no evidence of impropriety has been found by the Workgroup, retailer counting processes are prone to relatively high levels of error, particularly when compared with best-practice supplier picking processes (typified by those who have invested in Radio Frequency picking in conjunction with Perpetual Inventory). As a consequence, suppliers are currently footing the bill for this level of retailer error, claimed and deducted from invoice in the name of ‘short delivered’ goods.
Technology advancements should improve this for many retailers, over time, but the journey to implementation is years rather than months and only one retailer is close to delivering a solution.
For the remainder a work-around approach is required to ensure suppliers are paid in line with the level of accuracy they deliver.
Good Faith Receiving
Two retailers are rolling out a programme referred to as Good Faith Receiving:
Operationally, little changes for the receiving site, other than a third party auditor is introduced to run random checks on approved supplier deliveries. They forensically audit the delivery accuracy, double-checking and capturing the actual number of errors versus the delivery paperwork, to build an impartial record or Gross Error Rate (GER). The GER is then applied retrospectively to a period of receipts (typically 3 months) to generate an invoice directly in line with the error level recorded, thereby ensuring the supplier is paid in full for the invoice raised, and all but eliminating the current cause of claims, delayed payments and deductions without a known reason.
For those suppliers who have engaged in this programme, from either retailer, claims levels have reduced by 80-90%. In addition, payment terms are being met and the time currently spent chasing and disputing claims can be spent on improving product availability and retailer collaboration initiatives.
Join us to enable best-practice for both suppliers and retailers
We are actively working with the remaining retailers to deliver a similar improvement, but need suppliers who face the same issue to join us and share their evidence, and help us maintain the momentum to ensure we change this practice for good, across the sector.