Sealord tells suppliers to cut costs by 10 per cent

Sealord Group is demanding that businesses supplying it with goods and services cut their charges by 10 per cent within 13 months.

It has warned that if they do not comply, Sealord will put its business out to tender to find firms who will.

A letter sent by Sealord to some Nelson businesses has been called heavy-handed, but Sealord chief executive Doug McKay said it was standard business practice.

It was part of an ongoing review of the firm's cost structure, he said.

The letter, dated May 30, tells firms Sealord has embarked upon a "major review of its supply chain with consolidation, rationalisation and cost reduction as key aims".

It calls on firms with Sealord supply contracts to make immediate cost cuts of 5 per cent and draw up a proposal for total cost reductions of at least 10 per cent by July 2004.

Sealord told firms to respond with their proposals by June 16.

"In categories where supplier proposals are considered insufficient, alternative suppliers may be sought through a further tender process," the letter said.

One firm which received the letter, but preferred to remain anonymous, said Sealord was using a "fairly blunt stick".

"It was unfortunate. I didn't think it was characteristic of their normal activities at all," the manager said.

He said it was unrealistic to ask for 10 per cent, which would seriously eat into his firm's profit margins.

"My response is going to be: 'If I secure the savings you're looking for from our suppliers we'll happily pass them on'.

"I can't imagine for the life of me that firms are going to throw away what is probably all their net profit for them or anybody else."

McKay would not say how many firms had been sent the letter, or how much Sealord hoped to save from it.

The move did not relate to recent layoffs of some management positions, or cuts to European hoki contracts announced last week, he said.

"It's not linked with anything in particular. It's about running as productive a business as we can.

The company's approach was "even handed" and "equitable" and provided good business incentives, he said.

"The guys who come up with the best answers are going to get more of our business."

- NZPA