Aldi recall demonstrates the importance of supplier relationship management

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Discount retailers looking to upset the monopoly held by the big four supermarket brands must have complete confidence in the robustness of their supply chain.

Discount retailers looking to upset the monopoly held by the big four supermarket brands must have complete confidence in the robustness of their supply chain.

If this can’t be guaranteed then these organisations must be prepared to re-evaluate existing relationships and in some cases walk away, if the supplier isn’t able to demonstrate visibility, compliance and traceability across their processes, according to Alison Walthew, Manager at global supply chain consultancy, Crimson & Co.

In recent years, discounters such as Aldi and Lidl have shaken up the British supermarket industry, challenging the dominance of the big four. They now account for a tenth of all British grocery sales. Alongside this growth, public scrutiny of these brands has intensified.

Recently, Aldi was forced to recall a range of snacks, biscuits and sweets made by a supplier based in Middlesbrough, on the grounds that the foods had been produced in unhygienic conditions, citing pest contamination. According to Walthew, the incident demonstrates the importance of robust supplier relationships. Failure to rigorously manage suppliers can potentially be disastrous for a brand’s reputation:

Walthew commented:

In recent years the growth of discount retailers has taken the supermarket industry by storm, with consumers enticed by growing product ranges at relatively low prices. A key ingredient to the successes behind this lies within the relationships these businesses have formed with their suppliers.

If you look at Aldi for example, it has a strong reputation amongst industry practitioners for the robustness of its supply chain. Its limited number of lines means that it is often judged as ‘best-in-class’ and whilst it is not high tech, it is incredibly lean, with every product a best seller and great on-shelf availability. The discount retailer has established long-term partnerships with its suppliers, built on trust. While on paper the theory is sound, the recent recall suggests that more needs to be done.

As a business, Aldi has worked incredibly hard to grow its reputation amongst British consumers and it is only in the last couple of years that those efforts have been rewarded with significantly increased market share. The news of the recall will be a big knock to the brand and it is imperative that consumers see action to address the risk in its supply chain.

Retailers are rightly held accountable for the origins of the products in their stores so it’s important to ensure total visibility, compliance and traceability. For Aldi, trust has played an integral role in supplier relationships, as it should in any successful partnership, but the recent event demonstrates the importance of supplier relationship management.

Retailers must be prepared to visit supplier sites and not rely on second hand feedback from distributors and suppliers. Long-standing relationships are likely to be tested if compliance, risk assessments and quality control processes do not meet strict standards – in the event that this occurs, and the retailer is unable to receive the necessary assurances they must be prepared to walk away.

Walthew concluded:

As we’ve seen historically with high profile scandals such as the horse-meat scare, trust in your supply chain can only be gained through total transparency and traceability. Consumers are much wiser to the journey their food takes and incidents of malpractice, unethical behaviour or poor quality control are no longer tolerated and can have a significantly detrimental impact on a business’ reputation. It’s imperative that swift and decisive action is taken to get to the route cause of any problems to restore consumer confidence.