The document outlines the importance of ethics and social responsibilities in supply management, detailing key concepts, principles, and standards that guide professional purchasing practices. It highlights survey findings indicating a perception that ethical conduct is often undervalued in American business, despite a strong belief in the positive impact of good ethics on business success. The document also addresses management responsibilities, dealing with ethical gray areas, and poses reflective questions about personal ethical conduct and its implications.

1. 19-1
Chapter 19
Ethics and Social
Responsibilities

2. 19-2
Key Concepts
• Ethics Defined
• Ethics in the Supply Management Context
• Professional Purchasing and Supply Management Ethics
• Principles and Standards of Purchasing and supply
Management Practice
• Management Responsibilities
» Written Standards
» Ethics Training and Education
» Departmental Environment
» Miscellaneous Factors
• Dealing with Gray Areas
» The Four Way Test
• Social Responsibilities

3. 19-3
Ethics in Supply Management
• Ethics are the guidelines or rules of
conduct by which we aim to live
• Does running an ethical operation yield
positive results for a company?
• A literature review of papers investigating
whether increased social responsibility
results in favorable financial performance
found:
» 33 studies showing a positive relationship
» 5 studies showing a negative relationship
» 14 showing no effect or inconclusive results

4. 19-4
Survey of 4,035 Employees Across a Variety of
Industries
• 97% said good ethics are good business
• 67% said that ethical conduct isn’t
rewarded in American business
• 82% believe that managers generally
choose bigger profits over “doing what’s
right”
• 25% said their companies ignore ethics to
achieve business goals
• 33% reported that their superiors had
pressured them to violate company rules

5. 19-5
Professional Supply Management Ethics
• The pressures that the marketplace exerts
on supply management departments and
on individual buyers make it essential that
top management and supply management
recognize and understand both the
professional and ethical standards
required in the performance of their duties

6. 19-6
Principles of Supply Management Practice
1. Loyalty To Your Organization
2. Justice To Those With Whom You Deal
3. Faith In Your Profession
» From these principles are derived 12
standards of supply management practice

7. 19-7
Twelve Standards
1. Ethical Perceptions
2. Responsibilities to
the Employer
3. Conflict of Interest
4. Gratuities
5. Confidential
Information
6. Treatment of
Suppliers
7. Reciprocity
8. Governing Laws
9. Small,
Disadvantaged, and
Minority Owned
Businesses
10. Personal Purchases
for Employees
11. Responsibilities to
the Profession
12. Global Supply
Management

8. 19-8
1. Ethical Perceptions
• Avoid the intent and appearance of
unethical or compromising practice in
relationships, actions, and
communications.

9. 19-9
2. Responsibilities to the Employer
• Demonstrate loyalty to the employer by
diligently following the lawful instructions
of the employer, using reasonable care
and only the authority granted.

10. 19-10
3. Conflict of Interest
• Refrain from any private business or
professional activity that would create a
conflict between personal interests and
the interests of the employer.

11. 19-11
4. Gratuities
• Refrain from soliciting or accepting
money, loans, credits, or prejudicial
discounts, and the acceptance of gifts,
entertainment, favors, or services from
present or potential suppliers that might
influence, or appear to influence, supply
management decisions

12. 19-12
Guidelines in Dealing with Gratuities
• Business Meals
» Occasionally appropriate
– For specific business purpose
– Frequent meals same supplier should be avoided
– Attempt pay for meals as frequently as the supplier
• Global Supply Management
» Foreign cultures, special circumstances
» Reciprocal gift giving of nominal value
» Careful evaluation of nominal value

13. 19-13
5. Confidential Information
• Handle confidential or proprietary
information belonging to employers or
suppliers with due care and proper
consideration of ethical and legal
ramifications and governmental
regulations

14. 19-14
Examples of Confidential Information
• Pricing and cost date
• Bid or quotation information
• Formulas and process information
• Design information (drawings, blueprints, etc.)
• Company plans, goals, strategies, etc.
• Personal information about employees or
trustees
• Supply sources and supplier information
• Customer lists and customer information
• Computer software programs

15. 19-15
6. Treatment of Suppliers
• Promote positive supplier relationships
through courtesy and impartiality in all
phases of the supply management cycle.

16. 19-16
7. Reciprocity
• Refrain from reciprocal agreements that
restrain competition

17. 19-17
8. Governing Laws
• Know and obey the letter and spirit of laws
governing the supply management
function, and remain alert to the legal
ramifications of supply management
decisions

18. 19-18
Key Laws and Regulations in the USA
• Uniform Commercial
Code
• The Sherman Act
• The Clayton Act
• The Robinson-Patman
Act
• The Federal Trade
Commission Act
• The Federal
Acquisition
Regulations
• The Defense
Acquisition
Regulations
• Patent, Copyright, and
Trademark Laws
• OSHA, EPA, and
EEOC Laws
• Foreign Corrupt
Practices Act

19. 19-19
9. Small, Disadvantaged, and Minority Owned
Businesses
• Encourage all segments of society to
participate by providing access for small,
disadvantaged, and minority-owned
businesses.

20. 19-20
10. Personal Purchases for Employees
• Discourage supply management’s
involvement in employer-sponsored
programs of personal purchases that are
not business related

21. 19-21
Recommended Guidelines for Personal
Purchases for Employees
• Avoid using an employer’s purchasing
power for special purchases
• Make certain of fair arrangements for
personal purchase programs
• Use caution to ensure that employer-
sponsored programs do not force special
concessions on the supplier
• Suppliers should be made aware that such
purchases are not for the employer, but
for the firm’s employees

22. 19-22
11. Responsibilities to the Profession
• Enhance the proficiency and stature of the
supply management profession by
acquiring and maintaining current
technical knowledge and the highest
standards of ethical behavior.

23. 19-23
12. Global Supply Management
• Conduct international supply management
in accordance with:
» the laws, customs, and practices of foreign
countries,
» consistent with your country’s laws,
» your organization’s policies,
» and these Ethical Standards and Guidelines

24. 19-24
Important Areas Requiring Amplification
• Avoid Sharp Practices
• Competitive Bidding
• Negotiation
• Samples
• Treating Salespeople with Respect
• Substandard Materials and Services
• Gifts and Gratuities

25. 19-25
Avoid Sharp Practices
• Evasion and indirect misrepresentation
• Just short of actual fraud
• Sharp practices focus on short-term gains
and ignore the long-term implications for a
business relationship

26. 19-26
Examples of Sharp Practices
• A supply manager talks in terms of large
quantities to encourage a price quote on that
basis
• A large number of bids are solicited in hope that
the buyer will be able to take advantage of a
quotation error
• Bids are obtained from unqualified suppliers that
the supply manager would not patronize in any
case
• A supply manager who places in competition the
prices of seconds, odd lots, or distress
merchandise misrepresents a market

27. 19-27
Examples of Sharp Practices
• An attempt is made to influence a seller by
leaving copies of bids, or other confidential
correspondence, where a supplier can see them.
• A concession may be forced by dealing only with
“hungry” suppliers
• Obscure contract terms of benefit to the supply
manager’s firm are buried in the small type of
contract articles
• A supply manager may take advantage of a
supplier who is short of cash and who may seek
only to cover his/her out-of-pocket costs

28. 19-28
Competitive Bidding
• Invite only firms to whom they are willing
to award a contract to submit bids.
• Normally, award the contract to the lowest
responsive, responsible bidder.
• Keep competitive price information
confidential.
• Notify unsuccessful bidders promptly so
that they may reallocate reserved
production capacity.

29. 19-29
Competitive Bidding
• Treat all bidders alike.
• Do not accept bids after the announced
bid closing date and time.
• Do not take advantage of apparent
mistakes in the supplier’s bid.
• Do not “shop” or conduct auctions for low
prices.

30. 19-30
Negotiation
• A professional should maintain high
ethical standards, such as:
» Competitors are informed of the factors that
will be involved in source selection.
» All potential suppliers are given equal access
to information and are afforded the same
treatment.
» Supply professionals strive to negotiate terms
that are fair to both parties
» Do not take advantage of mistakes in the
supplier’s proposal

31. 19-31
Samples
• Many potential suppliers offer, even push,
the acceptance of samples—”Just try it
and see if it doesn’t do a superior job for
you”
• When a sample is accepted, supply
professionals ensure that appropriate
tests are conducted in a timely manner

32. 19-32
Treating Salespeople with Respect
• Appointments with salespeople should be
meticulously kept
• A mutually effective policy is for supply
management personnel to see every
salesperson on his or her first call

33. 19-33
Substandard Materials and Services
• Two proprieties:
» The supplier should be given prompt notice.
» The appropriate supply manager should
conduct negotiations for adjustments with the
appropriate sales personnel in the supplier’s
organization.

34. 19-34
Gifts and Gratuities
• “There’s No Such Thing as a Free Lunch”
» A minority of supply professionals feel that
any form of gratuity constitutes a conflict with
ethical standards
• Traditional Sales Techniques
» The majority consider many of gifts and
gratuities to be traditional sales tools
• Cultural Ramifications

35. 19-35
Management Responsibilities
• Written Standards
• Ethics Training and Education
• Departmental Environment
• Miscellaneous Factors

36. 19-36
Dealing with Gray Areas
• Employer
• Suppliers
• Colleagues

37. 19-37
The Four Way Test
• Is it the TRUTH?
• Is it FAIR to all concerned?
• Will it build GOODWILL?
• Will it be BENEFICIAL to all concerned?

38. 19-38
Concluding Remarks
• If you were to write your own obituary,
what would it say?
» How did you treat other people?
» Did you touch the lives of others?
» What would you want it to say about your
ethics?
• Now think about this:
» You are writing your obituary each day of your
life by the way you choose to live