Premier Foods – an innovative supplier management approach

Premier Foods – past winners of the CIPS SM awards (indeed, overall winners as recent as 2011) have now taken their advanced thinking about procurement matters to new levels.

They’ve previously announced that they intend to halve the number of suppliers, because it just so happens that 50% of the current supply base is exactly the right number of suppliers to meet their needs in an optimal fashion.

But now, according to reports, they’ve written to suppliers of equipment and services  to inform them that if they wish to stay on the approved list, they need to pay them £5,000 to go through some sort of supplier assessment process.

This is  a great way to ensure that your key suppliers feel really positive about your business and treat you as a preferred supplier. It’s also good news for smaller, innovative suppliers who just love handing over a fair chunk of their profit margin in this way. And it must fill the suppliers with great confidence about the future of their customer.

And that's relevant, as some cruel observers have pointed out that Premier themselves are not in the best financial position  - as the Mail’s  “This is Money” points out.

“Premier has debts of £890million, more than double its stock market value of £360million. It is facing an increase in the rate of interest it pays on that debt next year and will have to find new loans to replace at least part of that lending”.

So here’s some advice to Premier Foods suppliers. If you’re making decent margins, then by all means pay up with a smile.

But in return, if I was a supplier, I’d seriously think about insisting on a change in payment terms for Premier. Cash on delivery please.  Because it is always worth remembering where unsecured creditors – like suppliers of goods and services - come on the priority list if things go wrong. As suppliers to businesses as diverse as Tom Aitkens and his Michelin starred restaurants, and Portsmouth Football Club, found to their cost.

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