Ethics in Purchasing: Is Being Ethical Really That Difficult?

I hope that you have enjoyed the article "Purchasing Ethics: 7 Sensitive Situations."

In that article, I describe seven situations that may result in internal customers questioning your ethics. Yet I also write "that is not to say that all of these circumstances are inherently unethical."

So what do I mean?

Can it actually be ethical to be involved in these situations?

I mean, after all, shouldn't it be pretty clear how one can comply with ethics if they avoid these situations?

Well, avoiding these situations will keep you out of trouble, for sure. But there is a challenge when avoiding these situations may be doing a disservice to your company.

Take for example the first situation: "A purchasing team member accepted a gift - perhaps even a low-value item like a pen - from a supplier." Sounds easy to comply with, right?

Well, what if you were beginning a relationship with a supplier in a country where an exchange of gifts of nominal value is an important part of their business culture? Where refusing a gift may insult the supplier and ruin the potentially profitable relationship before it begins. Should you accept the gift?

In these cases, it may be the right thing to do to accept the gift but, instead of personally using it, you pass it on to an internal customer, raffle it off among the non-purchasing employees of the company, or give it to charity. By reading this, you may have realized that ethical compliance requires a little more thinking, huh?

Is that first situation an exception? Are all the other situations pretty cut and dried?

No!

Consider the second situation: "A purchasing team member has a personal or financial relationship with a supplier or an employee of a supplier." How might this situation be appropriate?

Well, imagine that there are only two suppliers of a certain, critical product: a great performing supplier and a poor performing supplier. What if a purchasing employee was married to an employee of the great performing supplier? Should the company have no choice but to select the poor performing supplier?

That would be ludicrous!

However, care should be taken to ensure no ethical boundaries are crossed. The employee married to the supplier's employee should disclose to management the relationship. That employee should recuse him or herself from the decision-making process. The company should be careful not to share confidential information about the supplier selection process with that employee. The purchasing department should be forthright with key affected internal customers about the relationship and the steps it is taking to ensure ethics.

If the company follows these steps, ethical complaints are unlikely.

So, as you can see, ethics are not always as straightforward as one might like them to be. This fact can make it easy for some to push the ethical boundaries too far.

But as long as you strive for transparency and ensure that decisions solely benefit your company and not yourself, there is a high probability that you will be viewed as an ethical purchasing professional.

To Your Career,
Charles Dominick, SPSM
President & Chief Procurement Officer
Next Level Purchasing, Inc.
Struggling To Have A Rewarding Purchasing Career?
Earn Your SPSM^® Certification Online At
Next Level Purchasing . com

A Fun Negotiation Video I Came Across

I came across this negotiation video on the GoDaddy site.

Like you may have, I've always associated GoDaddy with crossing the line into outrageousness in their advertisements and, as a result, hadn't respected the company much. So, I was surprised to see that they have some decent educational videos on their site.

I thought that this negotiation video had some decent tips. And the eye candy didn't hurt either...



To Your Career,
Charles Dominick, SPSM
President & Chief Procurement Officer
Next Level Purchasing, Inc.
Struggling To Have A Rewarding Purchasing Career?
Earn Your SPSM^® Certification Online At
Next Level Purchasing . com

Whitepaper Wednesday - Strategic Sourcing Lessons Learned

Welcome back to another installment of Whitepaper Wednesday here on the Purchasing Certification Blog. Today, I'll be reviewing a whitepaper entitled "Lessons Learned from the
Recession: Strategic Sourcing" from Ariba.

At the core of this whitepaper are 10 lessons about strategic sourcing that were learned during this most recent economic recession. Despite the appeal of a title that relates to current events, these lessons are really timeless procurement principles that aren't exactly new. But that's not a bad thing. It just goes to show that the need to "bring more spend under management," "expand your category coverage to include non-traditional 'sacred cows'," and "mitigate risk and manage supplier performance by implementing an enterprise-wide supplier management program" isn't going away any time soon.

However, what I would like to focus this post on is the material that isn't so traditional in nature. For instance, Lesson #2 - "Reconsider 'best-in-class' spend analysis" - highlights how far spend analysis systems have come by discussing how some of them now include rich supplier information such as "financial information, risk ratings, diversity details and, more recently, suppliers who are certified as green due to pro-environmental practices." This lesson encourages buyers to use such systems to analyze sourcing market dynamics by watching price indices, peer benchmarks, or results-oriented savings figures.

Now that is some exciting stuff!

Technology advances also permeate Lesson #5, "Leverage automated supplier discovery tools." Though Ariba was not as descriptive with these tools as they were in the section on spend analysis tools, you certainly can't help but be curious about what they have available in this category as they lambaste a variety of means of finding suppliers ranging from Google to peer recommendations.

Finally, I personally love Lesson #9, "Work more collaboratively with key suppliers to jumpstart innovation." Though a concept that's been talked about for over a decade, I think that buyer-supplier collaboration may finally be ready for prime time. The whitepaper says "Best-in-class procurement organizations realize that driving sustainable cost reduction in the supply chain would require a more-collaborative relationship with their strategic suppliers who can help with innovation, demand-generation and creative cost savings projects."

Amen. Now let's just figure out how to do it!

Like I said, there are a few new ideas in this whitepaper and many "oldies but goodies." It's definitely worth a download. You can get your own copy from Ariba's Web site (registration required).

To Your Career,
Charles Dominick, SPSM
President & Chief Procurement Officer
Next Level Purchasing, Inc.
Struggling To Find More Good Resources For Procurement Leaders?
Check Out Our Web Site's New Whitepaper Section At
http://www.NextLevelPurchasing.com/WPcharles

The Importance of Training: Some Purchasing Managers Understand It (and the Dumb Ones Don't)

A couple of my recent posts have revolved around excerpts from the book "Treat Your Customers" by Bob Migliani. Though most of those excerpts discussed the importance of purchasing in business, today I will share a few excerpts that highlight how smart managers know the importance of training. Whether you manage a purchasing department or some other function, having well-trained employees is a key to success.

In Chapter 14, Migliani talks about the importance of quickly adapting to new trends and technologies in order to succeed. He recalls a point in time where a decision to try something new paid off for his business and having trained employees was the key: "Sure, we could have hired someone else to do this for us, and hiring a consultant may work in some cases, but we wanted to ensure that we kept this competitive advantage inside the store, and for us that meant training an existing employee...Change is always going to be around...It's what forces us to learn new things. Embrace it by educating yourself and your people."

But training isn't something that should only be provided in times of change. It is a manager's responsibility to ensure that employees are trained to perform to their potential. The following excerpt really drives that point home...

"Your employees represent you, your company, and your products and services. Make sure you invest in them. Whether it's the weekend or a Wednesday-train them. Take time out of your schedule to spend an hour talking to them about what they're doing and offer them encouragement and guidance on how to do it better. As managers and businesspeople, we have to recognize that our job is mainly about helping our employees do the right things so that we make it easier for our business to succeed.

"If you believe that your employees are an important asset to your business, then show them by investing in their training....This investment will give you and your business a tremendous return."

Cue the choir: Amen!

To Your Career,
Charles Dominick, SPSM
President & Chief Procurement Officer
Next Level Purchasing, Inc.
Struggling To Have A Rewarding Purchasing Career?
Earn Your SPSM^® Certification Online At
Next Level Purchasing . com

Purchasing Is Important In Small Business, Too! Part II

As I mentioned in a post last week, I had just finished reading a book entitled "Treat Your Customers" by Bob Migliani and was surprised to find many purchasing lessons, primarily directed at small businesses.

In that post, I shared the author's lessons learned on the subject of paying suppliers on time. In today's post, I wanted to share the author's purchasing principles discussed in a chapter entitled "Always Offer Your Delivery Guys A Milkshake."

In that chapter, the author describes how he and his family, who owned a Dairy Queen store, would, on every hot day, offer something cold to drink to their supplier's delivery men. Not only did this receive appreciation from these supplier employees, but the author explains that "this professional kindness has helped us to weather many storms known as inventory shortages."

The author goes on to explain that holiday weekends are the worst time to run out of inventory. This is because the suppliers' delivery truck drivers are usually off those days.

However, the author writes, "if the supplier finds a driver willing to do it, they OK it. Our delivery guys have gone out of their way for us because they know important it is to our business. They've come through because we've treated them well - like more than just inventory suppliers; like friends...Anything is possible when you have a good relationship with your suppliers."

Now, it is unlikely that you have a soda dispenser at your desk. And most of your interaction with supplier employees is likely by phone or email. But, after reading this, I am hoping that you can acknowledge that sometimes you need your suppliers' employees to go above-and-beyond the call of duty for you.

Are you inspiring your suppliers' employees to go out of their way to help you the next time you're in a jam?

The seeds of a good relationship you plant today can pay you back many times over when supplier employees can give you assistance that they normally wouldn't give to "the average customer." So treat your supplier contacts well!

To Your Career,
Charles Dominick, SPSM
President & Chief Procurement Officer
Next Level Purchasing, Inc.
Struggling To Have A Rewarding Purchasing Career?
Earn Your SPSM^® Certification Online At
Next Level Purchasing . com

Is ISM No Longer A True Procurement Association?

Earlier this week, Purchasing Magazine reported the results of ISM's controversial membership vote regarding whether or not salespeople were allowed to join ISM and attend ISM events. The results were that about 75% of voters voted to allow salespeople to join.

I admit to being surprised by the outcome of this vote. Nearly every person I had spoken to was vehemently against allowing salespeople to join. And other professional associations (e.g., the American Institute of Certified Public Accountants, the American Medical Association, etc.) strictly limit their membership to those in a specific role and exclude salespeople.

So, with this change, what has ISM become?

Can it really be considered a true procurement association going forward?

Can ISM now be considered more of a "chamber of commerce" - connecting buyers and sellers - than a professional association?

Will it lose the 23% of members who voted against it?

What proportion of the membership will be comprised of salespeople?

Will it recruit enough new sales members to offset the loss of procurement members in order to help the organization return to financial health?

Will ISM change its name (again) to reflect this change in audience? Long-time procurement professionals know that the organization has changed its name multiple times in its history.

What do you think?

To Your Career,
Charles Dominick, SPSM
President & Chief Procurement Officer
Next Level Purchasing, Inc.
Struggling To Have A Rewarding Purchasing Career?
Earn Your SPSM^® Certification Online At
Next Level Purchasing . com

Purchasing Is Important In Small Business, Too! Part I

I love short business books. There's something rewarding about tearing through a good business book in a week and learning something or being inspired.

I felt that rewarding feeling recently when I received as a gift the book "Treat Your Customers" by Bob Migliani - a book about service lessons a Fortune 500 executive learned while working at his family's Dairy Queen store. While I expected to enjoy the book's tips on service, I didn't expect to read purchasing advice aimed at small business owners.

In this post and future parts of this series, I will share some purchasing-related excerpts. And I encourage you to keep an eye out for the book - I think my wife saw it at the Dollar Tree - so that you can enjoy the other inspirational business lessons.

In Chapter 22, the author recounts a time when he first became responsible for purchasing, inventory management, and payment. He recalls an incident where he "must have put [a certain supplier's] invoices in a folder and simply forgotten about them." The result was a deterioration in supplier performance: being put on hold for a long time, late deliveries, and curt treatment from a customer service representative.

It didn't occur to the author that the root cause of this service decline was his failure to pay the supplier on time. That is, it didn't occur to him until he received a "very firm collection notice."

Having never experienced this type of supplier treatment, the author discussed the matter with another supplier. According to that supplier, "the relationship between companies and their suppliers was about respect." The supplier went on to say that companies that fail to pay on time, get a bad reputation in the supplier community and that suppliers "react by not giving them good customer service or a fast response to their orders if the company didn't have enough respect to pay the supplier on time."

This incident helped the author learn an important lesson that he passes along to business owners: "A good relationship between you and your suppliers is invaluable for your business in terms of better customer service, more favorable finance terms, or just plain faster deliveries. For obvious reasons, a customer who pays on time is valued. And a valued customer can demand many favorable terms - which include not paying during the tough times.

"Since that incident, we've never neglected to pay our bills on time and have benefited greatly in terms of better discounts and faster and more frequent delivery times. Always pay your bills on time. It's the fair thing to do and can lead to enormous rewards for your business in the long run."

You probably work for a company much larger than an independently owned Dairy Queen shop and you probably know that on-time payment is important. But have you followed through to make sure that on-time payment happens for your suppliers?

When it comes to helping your company, it never hurts to have a gentle reminder.

To Your Career,
Charles Dominick, SPSM
President & Chief Procurement Officer
Next Level Purchasing, Inc.
Struggling To Have A Rewarding Purchasing Career?
Earn Your SPSM^® Certification Online At
Next Level Purchasing . com