Question

A manufacturing company in your area is experiencing procurement and supply challenges. As CIPS student you are requested to advise the board members of this organization on the following:

3. Ethical procurement and supply

Answer 1

Ethical behavior for an organization refers to doing things the right way. An organization's operations have a deep impact on the society, be it manufacturing goods & services or selling those, therefore it becomes very important for an organization to have an ethical behavior in everything it does. It marks an adherence to the good values basically like fair trade practices, equality, sustainability, diversity, honesty etc.

Now as stated above that ethical behavior needs to be practiced in every function of an organization, it exists in procurement and supply department too. Ethical procurement and supply can be defined as a process of making sure that the products are sourced and procured in a responsible and sustainable manner that the proper care and measures have been taken for the workers involved in the procurement process and social and environmental factors are taken into consideration while executing the process.

Why is it important to have Ethical procurement and supply?

• Procurement is an ideal part of a manufacturing company and is related to providing business to suppliers. Any unethical behavior will bring in negative publicity of the company.
• Procurement professionals have to make several decisions while procuring and supplying goods like selecting a supplier, negotiation, evaluation, contract etc and there are high chances that external forces like suppliers can force them to act in unethical manner as the decision involves a lot of money. Therefore a proper ethical policy is required to avoid such scenarios.
• Ethical procurement and supply helps an organization to build goodwill in the market and with suppliers too.
• Ethical procurement and supply helps to avoid chaos and practices like bribery, favoritism etc in an organization.

What are unethical behaviors?

• Accepting favors or gifts from suppliers and in return favoring them while buying the goods for the company.
• Conflict of interests
• Leaking Confidential information
• Unbiased and unequal treatment for someone while executing procurement process
• Dishonesty

How to ensure that a manufacturing company procurement and supply ethics are upheld?

1. An ethics policy: The most important step to ensure that ethics are followed in procurement process is to have an ethics policy which should clearly state the do's and don'ts' of procurements process. It should also state the consequences or implications of non adherence to the policy for everyone.
2. Training on Ethics: A proper training should be imparted to each and every employee so that they are aware about the ethics and their importance in procurement and supply chain. The training will help them to take the decisions related to their day to day work much easily as they will be able to differentiate between what is right and what is wrong.
3. Procurement control checks: Besides training it is important to have different checkpoints before procurement decision is taken in an organization. Upper management should review every procurement or supply order to ensure that proper guidelines of ethical behavior were followed.
4. Audits: There should be timely audits to verify that the ethics are being followed by the procurement staff and proper action should be taken if found with any discrepancy.

As CIPS student, my advice to the manufacturing company would be that they should have a proper code of ethics for their procurement process. It would help them to solve many of the procurement and supply challenges. Employees must be trained on ethical behavior which will bring greater efficiency and value to their procurement and supply process. The brand image of the company will improve in the eyes of customers, supplier and government authorities.