A pioneer in mining and metals has been accused of short changing its suppliers with the help of automated technology.
Rio Tinto allegedly used computer programs to gather large amounts of information about its contractor base to determine the minimum amount they would be willing to work for.
The Australian Small Business and Family Enterprise Ombudsman is investigating claims the company misused supply chain finance products to take advantage of small businesses.
‘Disturbing’ and ‘not okay’
“Recent reports of big businesses using supply chain finance platforms that use artificial intelligence to calculate the discount a supplier may be willing to accept, are disturbing,” Kate Carnell said in a public statement. “These types of reverse factoring products that vary based on how desperate the supplier is, are being closely looked at as part of our ongoing Supply Chain Financing Review.”
Carnell believes the business practice, if found to be true, is unacceptable and promised to introduce tougher rules that will deter mining giants from manipulating contractors.
“It is clearly not okay for big businesses to use their dominant position and access to technology to further squeeze small business margins,” she said. “Unfortunately the only way to level the playing field is through further regulation and legislation, which means more red tape.”
She said contractors must be paid on time and preferably within 30 days of issuing the invoice.
“Supply chain finance can be a legitimate and effective tool to free-up cash flow for small and family businesses. However, it should never ever be a replacement for reasonable payment terms being offered, 30 days or less from invoice,” she said. “It is imperative small businesses are paid on time.”
Fast ‘discounted’ payments end
The mining giant defended its track record for paying small and medium business suppliers within 30 days, admitting 4 per cent of payments were late and that a website had been set up to give suppliers access to invoices and the status of payments. It also claimed it would end the option for about 300 existing contractors who were paid sooner provided they gave Rio a discount.
“We are concerned about any reports that suggest we are not meeting supplier expectations and encourage suppliers to work with us and continue providing feedback about how our processes can be enhanced,” Rio chief commercial officer Simon Trott said in a public statement. “We are committed to the Australian Supplier Payment Code.”
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Late payments are estimated to cost the national economy $7 billion each year according to the watchdog. An interim report is promised to be released in March and a full report by the end of April.
Contractors who suspect they have been underpaid or received unreasonably late payments are encouraged to email the Ombudsman at inquiries@asbfeo.gov.au
Rio also welcomed feedback at vendorfeedback@riotinto.com
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