Operators working for Mars UK have hit out at a change in their payment terms, which have increased from 90 to 120 days, claiming the situation will damage cashflow so much that they may not re-tender for the business.
Last month Mars UK was named and shamed in the national media by the Forum of Private Business (FPB) for the extension in its payment terms. However, Mars UK argued that it had introduced a supply-chain finance scheme, which actually allows its suppliers to be paid quicker, albeit at a cost.
“It is rubbish. It is absolute rubbish,” said a source close to the Mars UK supply chain. “It is a larger company flexing its muscles unnecessarily. We’ve been put on to 120 days, but told there is an invoice discounting arrangement, but it costs us money to do that. Cashflow is fundamental to our business model. Everyone has told them to stick it.”
Motortransport.co.uk understands that logistics contracts with Mars UK are up for tender in March, and has been told by several sources that few operators are interested in re-tendering for the business on the stipulation of 120-day payment terms. One operator said he would have to see how it goes between now and next March.
The source explained that many operators would be reluctant to step away from Mars UK, even if the contract was run at a very small margin, as the high-volume nature of the contract determined vehicle movements across entire operations – meaning that replacing goods on empty legs would prove difficult.
A Mars spokesperson said: “For some suppliers, Mars has introduced extended payment terms together with a supplier financing programme, which allows suppliers to receive payment earlier, improve cashflow and reduce administrative costs, among other benefits. This programme is being introduced gradually for suppliers in the packaging, raw materials and indirect sectors.
“We are not imposing new payment terms on all suppliers. Mars will always work with each of our suppliers individually to ensure our relationships are mutually beneficial.”
FPB chief executive Phil Orford said that while it was supportive of supply-chain finance schemes in the right circumstances, “they should not be used as a reason for a company to extend its payment terms to its suppliers”.
The FPB has written to the government highlighting the ways companies use suppliers to “support their own finances when things get tough”, he added. “We are also calling on them to look at ways to protect smaller firms.”
