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Supply Chain News: UK Grocers Ask Suppliers to Help Foot the Bill for Higher Transportation Costs

 

Demand actually Seems Reasonable after Costs to Provide Distribution Services Soar

 
July 28, 2021
SCDigest Editorial Staff

Here’s an idea: in the face of rising transportation costs, require suppliers help pick up the tab.

Supply Chain Digest Says...

Defending its move, Tesco sent an email to vendors saying the chain is doing “everything they can” to reduce transport costs.

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That in fact is the strategy being used by a trio of uK grocers, as reported this week by the SupplyManagement.com web site.

With a driver shortage across the pond at least as severe as here in the US, UK driver wages have recently increased as much as 12%.

That led leading UK grocer ASDA to send an email to its product vendors asking for 5% more in what it charges for logistics services to help cover increased costs.

A spokesperson for ASDA said that “Due to the unprecedented driver shortage, the third-party logistics providers that we use to collect goods from suppliers and deliver them to depots have significantly increased their rates in recent months and to date we have absorbed this additional cost.”

ASDA, however, wants to change that situation at the vendors’ expense.

Actually, It appears the UK grocers already charge most vendors a fee for distributing their goods to stores. With rising costs to execute the service, higher fees would seem to have merit.

“Whilst passing on any costs to suppliers is a last resort, the challenges in the logistics industry remain unresolved and as a result we are looking to work closely with our supply partners to change the rates we provide for this service,” the ASDA spokesperson added.

Fellow UL grocery chain Tesco has asked suppliers for increased payments of up to a whopping 18%, while Sainsbury’s has asked for a much more moderate 2.9% increase.

Defending its move, Tesco sent an email to vendors saying the chain is doing “everything it can” to reduce transport costs, including increasing the volumes goods moved on rail, supporting training academies for drivers, and engaging with the government to look for other solutions.


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A Tesco spokesperson said that: “We’re doing all we can to manage the current challenges facing the logistics industry and ensure our customers are able to get the products they need. Due to higher costs across the industry, we have contacted suppliers about a rates increase for our Tesco Primary distribution service.”


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