Tesco complains to suppliers about 'avoidable damage' of late deliveries

Tesco has accused its suppliers of costing it millions in lost sales after imposing a new system of fines to tackle availability problems.

A letter seen by The Grocer reveals the retailer is charging suppliers £10 a case for missed or late deliveries, which it says are causing depot shortages. Lost sales opportunities amounted to nearly £50m of “avoidable damage”, it claimed in the letter sent to suppliers in October.

The top 40 food suppliers had failed to deliver more than 6.2 million cases - a shortfall of more than four million on its Depot Service Level targets, it said.

“These shortfalls are directly having an impact on our sales,” wrote category director Derek Lawlor.

However, suppliers accused Tesco of unfairly targeting them to bolster its own balance sheet. The fines were enough to put some suppliers out of business, they warned, adding that they were only now finding out the deductions being made.

“The sort of sums involved are enough to take a small company down,” said one. “This sort of approach totally alienates the supply base and it’s going on across the board.”

Tesco was being too heavy handed, agreed another. “They are the squeezing the pips as never before,” he said, adding that the sums Tesco was deducting were far higher now than in previous year-end situations.

However, a Tesco spokesman defended the charges. “They represent reasonable and legitimate compensation due from suppliers for not meeting their contractual obligations,” he said. “The terms are set out in the contractual documentation agreed up front.”