Every time Sir Terry Leahy appears on TV or radio and is questioned about the way Tesco is performing, eventually he says that everything the supermarket does is led by what its customers tell it they want. Heard often enough, this may begin to sound a little like “I was only following orders”, or something of that nature, but it does go a long way towards explaining the company’s actions, in the UK at least.
And one of the principal things that shoppers seem to want, time after time, is lower prices – a reality that can only be achieved by consistently driving cost out of the supply chain across a business. However, this need not mean battering suppliers until they surrender and take the red pen to prices. It can actually mean doing things better and a little more efficiently.
A visit last week to shopfitter Patton Fit-Out at Ballymena, Northern Ireland, illustrates the process in action. Patton does quite a lot of work for Tesco, building stores and, in some cases, equipping them internally. Walking round the offices of this institution, it quickly became apparent that what it does is rather more about project management and sub-contracting than sawing pieces of wood or bashing bits of metal – although it does a fair amount of that too.
This is a company that manages a large number of suppliers and, when it works for Tesco, it does this the Tesco way. Practically, this means that every supplier working on a Patton/Tesco site is scored by the shopfitter using a traffic-light system that has been approved by the retailer. If a contractor is working as expected, it receives a weekly green light. Problems will result in an amber grading and an unsatisfactory performance equates to red. If red scores keep occurring, the supplier in question will be left to knock on other doors for new business – it will have become an ex-Tesco supplier.
This might sound harsh, but it does provide a powerful incentive for all concerned to keep delivering and it is also fair to remark that Patton in its turn is also subjected to the same regime by the grocer.
Now consider the fact that Pattons’ suppliers on Tesco jobs are paid directly by the supermarket and the kind of grip that is exerted becomes apparent. Nothing is easy in life and, clearly, working for Tesco is no exception. On the other hand, there is an inherent fairness in this system, which all but the most curmudgeonly could not fail to acknowledge.
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