Purchasing Ethics
CASE
Scenario 1
Bryan Janz was just arriving back from lunch when his office phone rang. It was his wife, Nina, calling from home. Nina told Bryan that FedEx had just delivered a package addressed to her. The package contained a beautiful clock now sitting over the fireplace. In fact, Nina said, “the clock looks absolutely beautiful on our living room fireplace”. Thinking the clock was from a family member, Bryan asked who sent the present. She said she did not recognize the name—the clock was from Mr. James McEnroe. Bryan immediately told Nina that she had to repack the clock because it was from a supplier who has been trying to win business from Bryan’s company. They definitely could not accept the clock. Nina was very upset, and responded that the clock was perfect for the room and, besides, the clock came to their home, not to Bryan’s office. Because of Nina’s attachment to the clock, Bryan was unsure about what to do.
Assignment
1. What should Bryan do about the clock?
2. What does the Institute of Supply Management (formerly the NAPM) code of ethics say about accepting supplier favors and gifts?
3. Why do you think the supplier sent the clock to Bryan’s home and addressed it to his wife?
4. Does the mere act of sending the clock to Bryan mean that Mr. McEnroe is an unethical salesperson?
Scenario 2
Lisa Jennings thought that at long last, her company, Assurance Technologies, was about to win a major contract from Sealgood Instruments. Sealgood, a maker of precision measuring instruments, was sourcing a large contract for component subassemblies. The contract that Assurance Technologies was bidding was worth at least $2.5 million annually, a significant amount given Assurance’s annual sales of $30 million. Her team had spent hundreds of hours preparing the quotation and felt they could meet Sealgood’s requirements in quality, cost, delivery, part standardization, and simplification. In fact, Lisa had never been more confident about a quote meeting the demanding requirements of a potential customer.
Troy Smyrna, the buyer at Sealgood Instruments responsible for awarding this contract, called Lisa and asked to meet with her at his office to discuss the specifics of the contract. When she arrived, Lisa soon realized that the conversation was not going exactly as she had expected. Troy informed Lisa that Assurance Technologies had indeed prepared a solid quotation for the contract. However, when he visited Assurance’s facility earlier on a prequalifying visit, he was disturbed to see a significant amount of a competitor’s product being used by Assurance. Troy explained his uneasiness with releasing part plans and designs to a company that clearly had involvement with a competitor. When Lisa asked what Assurance could do to minimize his uneasiness, Troy replied that he would be more comfortable if Assurance no longer used the competitor’s equipment and used Sealgood’s equipment instead. Lisa responded that this would mean replacing several hundred thousand dollars worth of equipment. Unfazed, Troy simply asked her whether or not she wanted the business. Lisa responded that she needed some time to think and that she would get back to Troy in a day or so.
Assignment
1. The buyer at Sealgood Instruments, Troy Smyrna, is practicing a certain type of unethical behavior. What is the term for this behavior? Why is it considered unethical?
2. What should Lisa do in this situation? Formulate a response.
Scenario 3
Troy Gibson, the purchasing manager at Coastal Products, was reviewing purchasing expenditures for packaging materials with Jeff Joyner. Troy was particularly disturbed about the amount spent on corrugated boxes purchased from Southeastern Corrugated. Troy said, “I Ben’t like the salesman from that company. He comes around here acting like he owns the place. He loves to tell us about his fancy car, house, and vacations. It seems to me he must be making too much money off of us!” Jeff responded that he heard Southeastern Corrugated was going to ask for a price increase to cover the rising costs of raw material paper stock. Jeff further stated that Southeastern would probably ask for more than what was justified simply from rising paper stock costs.
After the meeting, Troy decided he had heard enough. After all, Troy prided himself on being a man of action. There was no way he was going to allow that salesman to keep taking advantage of Southeastern. Troy called Jeff and told him it was time to rebid the corrugated contract before Southeastern came in with a price increase request. Who did Jeff know that might be interested in the business? Jeff replied he had several companies in mind to include in the bidding process. These companies would surely come in at a lower price, partly because they use lower-grade boxes that would probably work well enough in Southeastern’s process. Jeff also explained that these suppliers were not serious contenders for the business. Their purpose was to create competition with the bids. Troy told Jeff to make sure that Southeastern was well aware that these new suppliers were bidding on the contract. Troy also said to make sure the suppliers knew that price was going to be the determining factor in this quote, since he considered corrugated boxes to be pretty much a standard industry item.
Assignment
1. Is Troy Gibson acting legally? Is he acting ethically? Why or why not?
2. What should Southeastern Corrugated do when they receive the request for quotation from Coastal Products?
Scenario 4
Sharon Gillespie, a new buyer at Visionex, Inc., was reviewing quotations for a tooling contract submitted by four suppliers. She was evaluating the quotes based on price, target quality levels, and delivery lead time promises. As she was working, her manager, Ben Cox, entered her office. He asked how everything was progressing and if she needed any help. She mentioned she was reviewing quotations from suppliers for a tooling contract. Ben asked who the interested suppliers were and if she had made a decision. Sharon indicated that one supplier, Apex, appeared to fit exactly the requirements Visionex had specified in the proposal. Ben told her to keep up the good work.
Later that day Ben again visited Sharon’s office. He stated that he had done some research on the suppliers and felt that another supplier, Micron, appeared to have the best track record with Visionex. He pointed out that Sharon’s first choice was a new supplier to Visionex and there was some risk involved with that choice. Ben indicated that it would please him greatly if she selected Micron for the contract.
The next day Sharon was having lunch with another buyer, Mark Smith. She mentioned the conversation with Ben and said she honestly felt that Apex was the best choice. When LUC asked Sharon who Ben preferred, she answered Micron. At that point Mark rolled his eyes and shook his head. Sharon asked what the body language was all about. Mark replied, “Look, I know you’re new but you should know this. I heard last week that Ben’s brother-in-law is a new part owner of Micron. I was wondering how soon it would be before he started steering business to that company. He is not the straightest character.” Sharon was shocked. After a few moments, she announced that her original choice was still the best selection. At that point Mark reminded Sharon that she was replacing a terminated buyer who did not go along with one of Ben’s previous preferred suppliers.
Assignment
1. What does the Institute of Supply Management (formerly the NAPM) code of ethics say about financial conflicts of interest?
2. Chapter 16 (Purchasing and the Law) presented a framework of ethical purchasing behavior. The model gives four variables that affect a buyer’s ethical perspective: organizational environment, cultural environment, personal environment, and industry environment. Analyze scenario 4 according to this framework.
3. What should Sharon do in this situation?