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Rio backs down on dynamic discounting

Company was facing intense scrutiny over supplier payments

Staff reporter
Rio backs down on dynamic discounting

Rio was asking suppliers to accept a discount on their invoices if they want to be paid ahead of the normal 30-day term.

The scheme caught the eye of Australian Competition & Consumer Competition chair Rod Sims.

Rio said yesterday it was committed to paying small and medium business suppliers with up to A$1 million of annual expenditure within 30 days of receipt of invoice, in line with the Australian Supplier Payment Code.

The company said it was continually striving to improve supplier experiences, and its on-time supplier payments rate, which currently stands at about 96%.

It introduced a voluntary online portal last year to offer suppliers greater transparency on their payment status, including viewing invoices and tracking payments.

Rio said feedback regarding the portal had been largely positive, with suppliers reporting favourably on the added ability to track payments, but the company invited feedback via email and a soon-to-be-established supplier hotline.

The portal provided an option for discounted accelerated payments for those requiring shorter payment terms than the agreed 30 days.

The company said after review, it would no longer offer this accelerated payment option and would work on transition arrangements for those suppliers, representing about 3% of Rio's 10,000 Australian suppliers, that had selected the option.

"Our suppliers are vital to our business success and we will continue to work to improve our partnerships with them," Rio chief commercial officer Simon Trott said.

"A supply chain of strong local suppliers is good for our business, good for local communities and good for the economy. We are committed to the Australian Supplier Payment Code.

"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."

In 2018, Rio spent A$4.4 billion with around 1800 WA-based businesses, including $281 million with Pilbara-based businesses.

At its Amrun bauxite mine in far north Queensland, Rio has spent more than $2 billion with 1130 Australian suppliers, including more than 770 Queensland businesses during construction.

A growing series of reports, each focused on a key discussion point for the mining sector, brought to you by the Mining News Intelligence team.

A growing series of reports, each focused on a key discussion point for the mining sector, brought to you by the Mining News Intelligence team.

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