Tesco Launches Social Network to Increase Collaboration with Suppliers

Tesco has launched a new online interactive platform to boost collaboration across its suppliers.

The embattled supermarket chain said in a statement that its new Supplier Network will provide a forum where more than 5,000 members from around the world can connect with each other.

Tesco further noted that it would encourage suppliers to share their thoughts and ideas online in a bid to “improve the products that our customers enjoy”.

It is hoped that members will also use the platform to discuss issues such as energy, food waste and innovation.

The group’s commercial head, Jason Tarry, said that the network “will play an integral part in our partnerships with suppliers to deliver for our customers”.

The initiative forms part of chief executive Dave Lewis’s five-year plan to transform Tesco’s fortunes and rebuild transparency and trust in the retailer after a particularly torrid year for the grocer, which was rocked by a £263 million ($394m) black hole in its finances and a string of profit warnings (Retailer announces raft of measures to put company back on track).

The move also comes just days after Tesco was heavily criticised for the way it deals with its suppliers in a BBC Panorama documentary, in which former boss Sir Terry Leahy claimed that the grocer had allowed consumer trust to be ‘eroded’ (‘Failure of leadership’ behind Tesco troubles, says former CEO Leahy).

As reported by Graham Ruddick of The Telegraph, the Tesco Supplier Network, which it claims will help 5,000 members to communicate with the retailer and other suppliers about a broad range of issues, potentially providing the platform for suppliers to complain about how they are being treated.

Tesco’s new chief executive, Dave Lewis, has pledged to overhaul the company’s relationship with suppliers after a slump in sales and the discovery of a £263m ($394m) accounting scandal. Tesco has been heavily criticised for its tough tactics when dealing with suppliers in the past.

David McCarthy, an analyst at HSBC, said: “The Christmas trading statement confirmed our belief that momentum is building, with investments in quality, service and price delivering results.

“Some of the factors which hurt Tesco and aided discounters in recent years are reversing. Consumers are better off, while Tesco is combating the discounters more effectively.

“If Tesco had followed the right strategy several years ago, the discounters would have a smaller share today than they did in 2008, in our view.”

The supplier network was created by Jason Tarry, Tesco’s new commercial director, who was moved to the role by Mr Lewis. Mr Tarry was previously the boss of Tesco’s clothing business F&F.

Mr Tarry said: “This new community of Tesco teams, suppliers and producers from around the world gives us the opportunity to improve communication, share ideas and continually improve the products that our customers enjoy.

“The network will play an integral part in our partnerships with suppliers to deliver for our customers.”

Bruno Monteyne, an analyst at Bernstein, said: “The message from Christmas is not all shoppers want to shop at the discounters; there is a place for well-run big-box supermarkets that don’t rip you off.

“Nothing that Tesco has done is rocket science: targeting certain prices, improving availability on core products, rationalising range and improving service sound like something that all retailers should be doing every day. Simply by applying these measures, Tesco was able to show market share gains over Christmas.

“Christmas was encouraging, but Tesco threw a lot of weight at it - advertising, price cuts that have not been sustained post-Christmas, vouchers - we therefore need more evidence that this was not a blip and the recovery can be sustained.”

Sources: Jane Tindall, Invezz | Graham Ruddick, The Telegraph

Related: Why Supply Chains Should Be More Socially Engaged