PROCUREMENT ETHICS

(Major Ethical Consideration in Supply Management)

Supply Chain Management by:

David Burt, Sheila Petcavage & Richard Pinkerton
(Chapter 19 : Ethics in Supply Management Context)
pages 437 - 453

Judge Oscar P. Barrientos Reynan M. Guerrero MBA

Professor (Materials & Procurement Mngt.) DBA Student (Reporter)
Ethics Class Rules
1. Only one person speaks at a time.
2. Pay attention to the person who is speaking.
3. Speak to other student, not just to the teacher.
4. Give other a chance to speak.
5. Build on others idea.
6. Silent your mobile phone.
7. No put downs.
Objectives :
1. Understand the basics on which organizational ethics are judged.
2. Define the most important ethical principles for supply managers.
3. Understood how global management tempers ethical considerations.
4. Describe confidential supplier information and the responsibility of
the supply manager towards that information.
5. Define a supply manager's responsibility to supplier.
6. Describe the “sharp practices” supply managers can fall into using.
7. Define a supply manager's responsibility in the area of ethics.
What is
Procurement Ethics?
PROCUREMENT ETHICS
Being ethical means being in accordancewith the rules or
standards for right conduct or practice, especially the
standards of a profession.
For instance: procurement is involved in supplier
selection, evaluation, negotiation, contracts sign off and
awarding business to suppliers. When interacting with
suppliers, procurement should treat them in fair and
unbiased manner.
Why ethics are important for procurement professionals?
1. Procurement represents their organization and is responsible for awarding
business to suppliers. Any unethical behavior will have a negative impact on the
brand image of the organization.
2. Procurement professionals experience enormous pressure from internal and
external forces to act in unethical ways as they usually have control over large
sums of money.
3. Ethical behavior in conducting business helps in establishing a long term
relationship and goodwill with suppliers.
4. An ethical person is respected in the business community. Once a buyer earns
a reputation within an industry, it is difficult to change it. A professional
reputation is something a buyer carries throughout his entire career.
Principles & Standard of Ethical Supply Mngt.
Conduct
Integrity in your decisions and actions
Value for your employer
Loyalty to your profession
Standard of Supply Management Practice:
1. Perceived Impropriety
2. Conflict of Interest
3. Issues of Influence
- Business Meals
- Personal Relationships
- International Practices
- Political Consideration
- Advertising
- Market Power
- Specification and Standards
Standard of Supply Management
Practice:
4. Responsibility to your Employer
5. Supplier and Customer Relationships
6. Sustainability and Social Responsibility
7. Confidential and Proprietary Information
8. Reciprocity
9. Applicable Laws, Regulations and Trade Agreements
10. Professional Competence
National & International Supply Management Conduct
Be especially sensitive to customs and cultural differences with respect to
social and business behavior and issues of influence.
Recognize that supplier may not be familiar with laws, customs, and practices
of various countries or with the company's policies. Consequently, it is
important to ensure that appropriate information is communicated
effectively to each supplier.
Recognize which national laws may apply and which do not apply in other
countries.
Utilize organization management, legal counsel, and other available
resources for guidance whenever there is uncertainty about which actions to take.
Maintain an awareness of national and international standards
(ISO 9000, ISO 14000, Ethical Trade Initiative, etc.).
Management Responsibilities
1. Written Standards
2. Ethics Training Education
3. Departmental Environment
4. Miscellaneous Factors
Imporatant Areas Requiring Amplification
1. Avoid Sharp Practices
2. Competitive Bidding
3. Negotiation
4. Samples
5. Treating Salespeople with Respect
6. Substandard Materials & Services
7. Gifts & Gratuties
Dealing with Gray Areas
1. Employer. Guidance should focus on the characteristics of loyalty,
analytical objectivity and a drive to achive results that are in the very
best interest of the employing organization.
2. Supplier. The essence of the guiding spirit in dealing with the supplier
community is honesty fair play.
3. Collegues. All individuals engaged in supply management work are
regarded by outside observers as members of an emerging profession. As
such, they have an obligation to protect and enhance the reputation of
that body of professionals.
Guidance by seeking answers to the following questions:
1. Is this action acceptable to everyone in my organization?
2. Is the action compatible with the firm's responsibilities to
its customers, suppliers, and stockholders?
3. What would happen if all buyers and salespeople
behaved this way?
4. If I were in the other person's shoes, how would I feel
about this action if it were directed toward me?
5. Would it be comfortable to have this act or action
reported to the general public?
Summary:
Organization must have a strong code of ethics for their business processes
and procurement process. Employees must be given training regularly on
ethical behavior.
The advantages will be greater efficiency and value from procurement
activities, a better brand image for the organization concerned, and
increased loyalty from end-customers and appreciation from the public in
general.
References:
1. Supply Management: David Burt. etc. : McGraw Hill/Irwin: 8th edition (1/05/2009)

Further reading:
https://www.procurement-academy.com/ethics-procurement/
(Ethics in Procurement: What are you doing to keep procurement ethical?)
https://www.ungm.org/Areas/Public/pph/ch04s04.html (Ethics in Procurement)
YouTubeph videos:
https://www.youtube.com/watch?v=iCMceYIi4hE
(procurement role & ethics)
https://www.youtube.com/watch?v=24Gi70W5HjA
(procurement code of ethics)