The intricacies of balancing ethical supply relationship management with other core procurement functions, such as sourcing savings and other areas of cost reduction, have come to the fore this week, as FTSE100 companies were called on to help eradicate the “supply chain bullying” of smaller firms.
The Chairman of the Federation of Small Businesses (FSB), Mike Cherry, has written an open letter to all FTSE100 companies, highlighting the tendency among many large firms to use their relative size to squeeze smaller suppliers by delaying payments to enhance their cash flows.
Mr Cherry said: “This is supply chain bullying, pure and simple, and it starves suppliers of their own working capital.”
Criticising the UK’s big business culture as “unique” in its normalisation of late payments for small firms, Mr Cherry added: “As a country, we are behind almost every other industrialised nation in our ability to pay small businesses on time.”
The collapse of Carillion, he continued, had brought unacceptable corporate practices into sharp relief after a joint parliamentary committee report had anatomised how unfairly it had treated its suppliers in terms of payment delays.
The committee’s report, Cherry noted, had highlighted the fragility of the Prompt Payment Code (PPC). He had written directly to Carillion last July when it was brought to his attention that the giant firm had presided over payment delays of up to 120 days. This is by no means singular, he added, and there is mounting evidence of poor payment practices from bigger businesses across the UK economy.
In his letter, Cherry wrote: “My request to you, as a leader of one of the UK’s largest companies, is that you personally shine a light on your own company’s payment practice.”
He encouraged FTSE100 leaders to inquire if their companies had received complaints from suppliers, if their CEOs had ever met with small suppliers and whether they were signatories to the PPC.
Steve has over 28 years of success as CPO, MD and Procurement BPO leader in a range of industries. Steve is COO at Odesma, responsible for Odesma’s delivery capability & infrastructure.