Overview of Tesco Deals and Charges

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1 Overview of Tesco s and s Introduction This document provides you with a summary of all the Tesco s and s and also outlines how you will receive each of these. We have also included s and s that relate to promotional funding activity or cost price changes. There are five clear groups: - s - s - Cost Price Changes - Promotional Funding - Third Party s What are s and s? s are a type of funding agreement. Tesco will complete a prescribed activity in return for a negotiated amount of money. These can include gate fees for feature space, or overriders to promote mutual growth. It is important you understand the details and that a formal agreement exists. If you are unclear or have any questions, speak directly with your Buyer. s are applied by Tesco in return for either: a) Non-compliance e.g. barcoding non-compliance, short delivery, Emergency Product Withdrawals (EPWs) b) Activity for which we seek reimbursement e.g. Artwork and Packaging s, Distribution s, product testing What are Cost Price Changes? A Cost Price Change is a permanent change to the cost of goods, either lower or higher than the last agreed cost price. The change is made in conversation with your Tesco Buyer and will have a start date only. An Off Invoice Discount is a temporary lowering of the cost of goods so suppliers are able to maintain a list price. This type of change is also agreed with your Tesco Buyer and will have both a start date and an end date. Supplier Training 1

2 What is Promotional Funding? Promotional Funding is an agreement to fund part of the difference between the previous selling price in-store and the promotional price. This is known as the giveaway. For example, if a product was selling at 1 and will be 75p in a promotion, a supplier may offer to fund part of that 25p giveaway. The agreement only covers units sold during the promotion and the full amount is calculated as till sales (units) x agreement of funding (per unit) e.g. 1,000 units sold x 25p per unit = total payment of 250. Fees for premium promotional feature space (such as a gondola end) are also a form of promotional support. These are agreed using the Feature/Promotional Space. What are Third Party s? These are s from third party suppliers we work with, to provide services to you such as audits and specification and artwork checking. How do I agree a? The terms are agreed as part of your usual negotiations with your Tesco Buyer. It is important all of those details are captured in the correct format, checked by both you and your Buyer and entered into Tesco systems. Before you approve the, please check you have all the correct information such as date ranges and products (TPNDs, case size, description). This will mean your agreement is captured right first time. s will also be entered into the Tesco system e.g. s and s Webform and then sent to you for approval. Once accepted, a confirmation will be sent to you and your Buyer/ -raiser. Please keep this as your record of the / as they make any subsequent queries can be dealt with quickly. This will ensure both you and Tesco have a record of all agreements made, in formats that make sense. This allows information to be entered immediately and accurately into Tesco systems, reducing queries and incorrect or delayed invoicing. Please accept, challenge or decline a as soon as possible after you receive notification. While all s require explicit agreement, we will assume acceptance and process s after 30 days if you haven t responded. Supplier Training 2

3 How do I query a? To query any after payment please contact our Invoice Query Team. You can contact via: Fresh Food and Packaged products: UKFoodInvoicequeryteam@uk.tesco.com General Merchandise products: NonFood.InvoiceQueryTeam@uk.tesco.com Tesco s and s Table This table provides you with the definitions of all of the Tesco s and s alongside the 5 broader and groups. Further details of all the s and s can be found in the Understanding Tesco s and s guide available on s Artwork and Packaging Barcode Non-scan Coupon Redemption Clubcard Points Redemption Customer Returns Delivery Non- Conformance (grocery only) Emergency Product Withdrawal Equipment Rental A charge incurred where you have agreed to contribute towards the production, approval and supply of artwork and reprographics for Tesco own label products. A charge incurred when products arrive into depot and the barcode at outer case level does not scan or is not recognised against the ordered product (TPN D) forcing the delivery to be handled differently rather than by the scan of the barcode itself. A charge to reimburse us for supplier-funded coupon redemptions. A charge to reimburse us for supplier-funded points offer(s) that customers receive in quarterly mailings to redeem in store. A result of faulty product complaints that are logged by customers in-store, these charges are based on the type of complaints raised and may include handling fees, gesture of good will), cost price and VAT. For General Merchandise products No returns agreements can also be negotiated at the start of the year and will be applied to all products received. A charge raised to recover costs incurred by our Distribution Centres where your delivery has not met in-bound Tesco standards. s for compensation of costs and losses incurred through product recalls. These s apply when you rent plastic (green) trays and other equipment. They only apply if you have opted-in to use the equipment rental service. Supplier Training 3

4 Distribution Product Development Testing Service Level Surveillance Testing Specification Check Waste Primary Distribution s are standard charges for use of the haulage services for you to deliver your products from delivery location to Tesco Distribution Centres (DCs). We operate this service by paying external haulage companies to transport your volume, and then we charge this cost back to you (including a small uplift to cover handling and admin). Store Distribution charges are used on an exceptional basis where goods are delivered direct to our stores. Any agreement to cover these costs will be negotiated in advance. Product Development testing charges are made for new product development testing/research which has not been approved by the category. A charge to compensate for stock that has not been delivered to us in full. A core part of our due diligence programme, this charge is for testing finished products to ensure they are safe, legal and authentic. A charge which is only levied in the event of products supplied to us that do not meet the agreed contractual obligation. A charge to support disposing of stock that has been rejected due to being damaged, having quality issues, being wrongly labelled, and/or being the subject of an emergency product withdrawal. Cost Price Changes Cost Price claim Where we claim money back for an incorrect cost price invoiced by you. This can occur following a cost price change. Off-Invoice Discount A discount (fixed amount per case or % of case cost) applies to all purchases of that product. The agreed discount will be reflected in the invoice price. It is managed as a cost price adjustment because it directly impacts Buying Gross Margin (Front Margin). s Third Party Cost Price Equalisation Commodity Cost Price Overrider Cost Price Reconciliation Distribution Storage Forecourt Services Revenue Share A deal to reconcile the difference in cost price between you and the 3 rd Party we have chosen to deliver your goods to our smaller format stores e.g. Palmer & Harvey deliveries to Express and Forecourts. A deal intended to prevent the need to frequently change cost price on fluctuating commodities e.g. Meat, Fish, Poultry etc. A Cost Price Reconciliation is a one-off deal, agreed in advance with you. It may be used for an adjustment on stock held by us after a back-to-front movement or cost price reduction, or where you have invoiced an incorrect cost price and we agree to correct it. An agreement with you where you pay us to hold stock at one of the Tesco distribution centres on your behalf. A deal where we agree to share the profits you make providing services from our Petrol Forecourts, e.g. car washing. Supplier Training 4

5 Forecourt Services Site Fee Feature / Promotional Space Foreign Exchange Adjustment Markdown / Exit Support Marketing Fees Overrider An agreed fee you pay us for permission to provide services from our Petrol Forecourts, e.g. car washing. The gate fee for premium space to promote your goods during a promotion. A Foreign Exchange Adjustment is used when we have purchased stock from you in a currency other than GBP (British Sterling), and have a previous agreement to align your cost prices with GBP fluctuations. Negotiated level of funding to support the cost of marking down an item or exit support deals e.g. post Easter stock reductions. A deal for marketing activities across TV / Press / Multimedia / POS. A deal offering a discount on goods if we meet pre-agreed targets, e.g. increasing volume of your supply. Promotional Funding Simple Price Promotion Missing Promotional Funding Promotional Funding Reconciliation A deal in which you agree to fund part of the difference between the previous full selling price in store and the promotional price on a single product cross out offer.this difference is often called the giveaway value. A charge incurred where evidence of missed income (errors and/or omissions in funding) has been identified as part of our joint review of the previous year s supplier-funded activity. Promotional Funding Reconciliation s apply to Complex promotions where our systems cannot calculate the total funding. The funding method has to be agreed between both parties in advance, but the final amount is calculated post-promotion and charged using this type in the Webform. It can also be used where we find evidence that we have not properly invoiced you for agreed promotional activity within the year. Errors and omissions mean you still owe use some promotional funding. This funding, in essence, is a short term cost price adjustment based on the sales of the product. Third Party s Ethical Audit Ethical Online Database Site Audit Ethical Audit charges are applicable when we require suppliers of Tesco brand products (including other Tesco owned brands such as F+F), loose produce, or suppliers of services may be required to undertake independent ethical audits of their sites. These ethical audits must be conducted by audit bodies and auditors recognised by Tesco. These audits must then be published and made visible to Tesco on the Tesco SEDEX system. All s are invoiced directly by the third party audit body. A membership fee to join SEDEX - an online ethical database organisation used by multiple retailers to manage the supply chain. We require all own label suppliers, with some exceptions, to become a member. SEDEX (Supplier Ethical Data Exchange) is a not-for-profit ethical data exchange organisation, independent of Tesco. It enables suppliers to share ethical workplace data with their customers, including us and many other organisations. Site Audit s cover the cost of audits performed by second party audit service providers. Site audits are required by us, to ensure all supplying sites meet our technical standards. All sites must be audited and approved before you start supplying product, and regular audits occur for as long as you supply to ensure compliance our high standards. Approval can only be given following a physical inspection (audit) at your production premises. The second party auditor invoices you directly for the Site Audit. Supplier Training 5

6 Specification & Artwork Check A charge for checking the acceptability/legality of a Tesco-branded product s label, packaging and specification. This charge is often based on the complexity of the product and the amount of time it will take to complete the necessary legal checks (for example, a carton of milk will have a simple legal description and ingredients list compared to a ready meal that will have multiple ingredients and processes). Help and Support For further information, please speak to your Tesco Buyer who will be able to discuss the specifics within your category. For further learning on your Supply Agreement at Tesco, you can visit: Supplier Training 6