Ethical Issues in Supplier Relations and Service Conditions

Lecture- 6A (BECG)

Prof. C. Anand Faculty IBS, Hyderabad

Contents
Typical Problems in Business Ethics: Ethical Issues in: (a) Supplier Relations (b) Service Conditions

Ethical Issues in Supplier Relations

(a). Supplier Relations:

Purchasing is one of the main activities of business and the purchase manager plays a major role in getting the right quality of material, in the right quantity at the right time. The purchasing department is in direct contact with the suppliers. A long term relationship with these suppliers is possible only if there is an open communication and trust between the suppliers and the buyers. By behaving ethically, purchasing department can build up a good image of the company and become profitable.
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1. Supplier Relations
(Contd.)
The Role of Purchasing Department with reference to the Suppliers: 1. To ensure continuity of suppliers of raw materials. 2. To identify and develop new vendors (suppliers) and maintain good relationship with existing vendors. Vendor relations, vendor monitoring, or vendor evaluation and development of new vendors is an integral part of the purchasing executives job. 3. To develop good procedures and systems for the purchasing department. 4. To co-ordinate with other functional departments to achieve continuity of information flow for closer buyer- supplier relationship.
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Ethical Issues in Purchasing

Most purchasing managers resort to the following unethical practices: Accepting free gifts (Buyers are reluctant to acknowledge that suppliers are bribing them; but most buyers are honest and ethical in working with suppliers) Deceiving Suppliers (Asking exaggerated questions about quality of suppliers and pressurizing them to cut prices and get orders, which may destroy trust that is vital for maintaining vendor relations. Encouraging free and honest communications can eliminate such practices)
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Ethical Issues in Purchasing (contd.)

Showing favoritism to some suppliers (Discrimination to some suppliers and favoritism to others is unethical purchasing behavior). Purchase managers often favor suppliers who are also good customers, thus developing a mutually beneficial relationship. They also favor some suppliers who are close to top management so that they can gain the support and confidence of top officials. This discourages other good suppliers who can supply better quality products. Disclosure of confidential information to suppliers leads to suppliers confidentially rewarding the purchase manager and getting benefit of selection in tender/bid system. 6

Ethical Issues in Purchasing (contd.)

Forward buying (Sometimes, instead of buying the stock to meet future requirement, future stock is bought to make speculative profit against the inventory, which is unethical).

Ethical Issues in Purchasing (contd.)

Following will help reduction of unethical practices in Buyer-Supplier Relationship : Reducing the differences between buyers and suppliers perceptions Minimizing the deceitful practices of buyers Ethics Training (Helps buyers to behave ethically) Causing least damage to long-term buyer-supplier relationship rather than striving for short-term success. Disregarding the suppliers relationship when they are most involved in unethical practices. Understanding that the suppliers perform less effectively when they behave unethically.
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(b) Ethical Issues in Service Conditions

These include: Harassment at work Stress at work Congestion at work Poor sanitary conditions Individual problems (Health, financial, social) Irrational processes Hazardous working conditions (Safety Issue) Gender problems (Female & Male managed Orgns.)
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(b) Ethical Issues in Service Conditions

Unique challenges faced in certain industries [ Exp. (i) IT Industry: PAPAPrivacy, Accuracy, Property, Accessibility with regard to information or MIS; (ii) Genome research] Irrational Processes Anxieties (Social groups within organizations defend individual workers)
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Undue Exploitation (Sacrificing people for profit) Negligence of employee care Unethical attitude of the management (Apathy towards just and fair practices)

One positive solution to the above issues would be the Psycho Analysis Approach and implementation of Psycho Dynamics Approach which views Organizational Development similar to Individual Development because like individuals, the organizations are living organisms that have some sort of collective consciousness that nurtures the organization.
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The End

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