Modern supply chain management includes many employees from other tangential disciplines. Most have little to no procurement training, including business ethics.
Over time, the procurement profession has found its integrity footing and overcome its past sordid reputation of grifting and pay-to-play supplier selection. But now, it's worrisome that those new to the supply chain might be ripe for unethical supplier behavior.
It doesn't take much for an unscrupulous supplier to take advantage of a naive planner, logistician or engineer to put companies in jeopardy. Some, remembering the stereotypical purchasing agent, may think they are now in position to accept gifts, or even extort a supplier.
Here are four things that procurement teams can address today to safeguard the supply chain from theft, corruption and ethical lapses.
1. Adopt or create a code of conduct
Procurement needs to strongly lead on the issue of integrity in the supply chain. Many buyers and organizations have adopted the Institute for Supply Management's comprehensive Principles and Standards of Ethical Supply Management Conduct.
Create and publish a statement of ethical behavior for the supply chain management function. Incorporate rules and expected behaviors for anyone with direct and indirect supplier contact, including those in operations, logistics and finance.
If your company has a values statement, be sure elements of the code of conduct are incorporated. Seek to add a procurement related ethics statement to your company's mission statement. Discipline or terminate those caught violating the policy. Expect nothing less than ethical behavior.
2. Set expectations with suppliers
I believe that most suppliers are fundamentally honest. But there may be rogue salespeople that try to gain influence or more sales with gifts or bribes.
In the past we saw "holiday letters" to suppliers warning them that holiday gifts to buyers were not permitted. While I saw fewer cookie platters in the coffee room, I did hear buyers brag about the gifts that they accepted at home.
Be clear with suppliers and their employees about your year-round ethical standards. Stress the importance of ethical practices to downstream suppliers as well.
3. Be realistic about relationship building
Sometimes accepting gifts and lunch are not a sign of corruption, but part of an ongoing buyer-seller relationship. There may be a gray area around culture and travel that needs some interpretation. Let's call it business courtesies.
Suppliers from Japan would present small intricately wrapped gifts to buyers and management. These gifts would have nominal value, but it was an important cultural obligation for the supplier. While this technically violated the no gifts policy, it was determined that the harm to the relationship needed to be considered. Often small gifts were given to the supplier as well, as a sign of mutual respect.
As a road warrior, I had an expense account that covered all my travel to suppliers. We often shared meals as part of the visit, but separate checks were awkward and not a comfortable solution. Alternating who paid for meals was. And often, I used my expense account to treat suppliers to lunch or dinner for a job well done, an important part of the business relationship.
4. Watch for red flags
I worked with a planner who was away on vacation. He told me he had gone to Florida and stayed in a supplier's condo. I had a manager who did the same thing and bragged about it. And he had his airfare paid for as well.
Another time, the general manager of a large electronics company called me, upset that I had rejected the gift of a gas grill for my new home. He said I had to take it or risk ruining the business relationship. The supplier relationship withstood this ethical breach, but I requested a new sales representative, one who didn't presume that "all buyers take gifts."
As we focus on the ethical and social supply chain, let's ensure our policies and behavior set the right example. But also be on the lookout for those who are dishonest. They could just be down the hall or waiting in your lobby.
This story was first published in our weekly newsletter, Supply Chain Dive: Procurement. Sign up here.