Ethics in Purchasing

Definition of ethics
A set of moral principles that mature and decent people feel should guide behavior.
Business ethics is centered on Honesty

Fairness
Respect
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Ethics in Purchasing
Firms have reputations, just like individuals.

Buyers can have significant influence on corporate reputations.

Buyers have great authority in granting

contracts. Sometimes suppliers attempt to secure this business with unethical practices. Unfortunately, temptation is always present when large amounts of money are involved
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Ethics is a big issue in purchasing

Buyers, more than any other group within the firm experience enormous pressures to act in unethical ways Firms reputation is involved Firms competitive position is at risk

Four general standards for buyers to keep in mind

A buyers loyalty must be to his organizations goals, to the exclusion of personal gain. A buyer must avoid every real or perceived conflict of interest or personal obligation to a supplier. A buyer must act professionally and ethically toward suppliers and potential suppliers. A buyer must consider any potential actions in light of How would this look if reported in the

company newsletter?

Types of Unethical Behavior

Gratuities (receiving something of value from a supplier with intent to influence)

- The issue of meals - Foreign cultural practices The issue of gifts Conflicts of interest Sharp business practices
Misleading

Quibbling
Small print

Taking Advantage

Types of Unethical Behavior

Gratuities (receiving something of value from a supplier with intent to influence) - The issue of meals - Foreign cultural practices The issue of gifts Conflicts of interest Sharp business practices Poor treatment of confidential information Poor treatment of supplier representatives [Personal purchases for employees]
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Types of Unethical Behavior

Acceptance of samples from supplier representatives for evaluation without proper follow-up Inappropriate conduct in competitive bidding by not . .

Inviting only those firms to whom you would consider awarding the contract to bid Honoring the bid-close date Treating all bidders alike with regard to information Keeping proprietary information confidential Notifying suppliers of errors in the bid (and thereafter taking advantage) Awarding to the lowest responsive bidder or being prepared to explain why you did not Closing the loop with unsuccessful bidders
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Ways to promote professional standards and ethics in a purchasing organization

Support of top management is critical. Expectations and standards of conduct should be formalized in the PPM. Policies on standards of conduct should be formally reviewed periodically in training programs or otherwise. Whistle-blowing policy Encourage suppliers to report sub-standard practices Rotate buyers Do post-purchase audits occasionally Informally observe buyer lifestyles
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