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Ethics in Purchasing

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Definition of ethics

A set of moral principles that mature anddecent 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 grantingcontracts. Sometimes suppliers attempt to securethis business with unethical practices.Unfortunately, temptation is always present whenlarge amounts of money are involved

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Ethics is a big issuein purchasing

Buyers, more than any other group

within the firm experience enormouspressures to act in unethical ways

Firms reputation is involved

Firms competitive position is at risk

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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 asupplier.

A buyer must act professionally and ethicallytoward suppliers and potential suppliers.

A buyer must consider any potential actions inlight ofHow would this look if reported in thecompany newsletter?

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Types of Unethical Behavior

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

- The issue of meals- Foreign cultural practices

The issue of gifts

Conflicts of interest

Sharp business practicesMisleading

Taking Advantage

Quibbling

Small print

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Types of Unethical Behavior

Gratuities (receiving something of value from a supplierwith 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 forevaluation without proper follow-up

Inappropriate conduct in competitive bidding by not . .

Inviting only those firms to whom you would considerawarding 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 takingadvantage)

Awarding to the lowest responsive bidder or being preparedto explain why you did not

Closing the loop with unsuccessful bidders

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Ways to promote professional standardsand ethics in a purchasing organization

Support of top management is critical. Expectationsand standards of conduct should be formalized in thePPM.

Policies on standards of conduct should be formallyreviewed periodically in training programs orotherwise.

Whistle-blowing policy

Encourage suppliers to report sub-standard practices

Rotate buyers

Do post-purchase audits occasionally

Informally observe buyer lifestyles