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MNP2601 CHAP6
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CHAPTER 6
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CHAPTER 6 - SUSTAINABLE PURCHASING AND SUPPLY MANAGEMENTTHE ROLE OF PURCHASING AND SUPPLY MANAGEMENT IN CORPORATE
GOVERNANCE
Mounting corporate scandals and accounting misdeeds worldwide have given rise to
new laws and regulations globally. In South Africa the King Reports (I,II,III) compel
business organisations to act and report responsibly and to take precautionary
measures to insure the financial well being of the organisation and the protection of
the interests of all stakeholders.
King III points out that the economic value of a company can no longer be based on
the balance sheet alone but it can be impacted by a range of non-financial issues; for
example: Brand and reputation, stakeholder relationships and good-will, an evolving
and forward-looking strategy, environmental sustainability, social responsibility and
quality of governance.
Purchasing and Supply Management is the largest spender of an organisations
funds so this has certain implications on the business. To comply with governance
measures, purchasing and supply personnel not only have to act ethically and
lawfully, they also have to ensure that the most beneficial value package is obtained
with every purchasing transaction.
Purchasing and supply personnel must always:
1. Act professionally in the interests of the organisation and the stakeholders they
represent
2. Be fair and honest in the awarding of contracts
3. Have an intimate knowledge of the products/service they purchase, the supply
market and the market conditions
4. Keep up to date with the newest developments in the purchasing and supply field
THE SOCIAL RESPONSIBILITIES OF PURCHASING AND SUPPLY
MANAGEMENT
Corporate Social Responsibility (CSR) can be viewed as the organisation's
consideration of, and response to, issues beyond the narrow economic, technical
and legal requirements of the organisation.
Purchasing and Supply Social Responsibilities (PSSR), can be defined as meeting
the discretionary responsibilities expected by society. This definition encompasses
the activities relating to:
1. Community
2. Diversity
3. Environment
4. Ethics
5. Financial Responsibility
6. Human rights
7. Safety
, UNETHICAL CONDUCT IN PURCHASING AND SUPPLY MANAGEMENT
Unethical conduct is the act of enriching oneself or gaining personal favours for
granting a contract, or giving preferential treatment to to a specific supplier. Personal
favours include gifts, money in the form of kickbacks and even bribes.
There are subtle areas in which the purchaser can consciously or unconsciously act
unethically:
1. A purchaser may put his own interests before those of his employer. Example: Is
the purposeful awarding of a contract to a family member, friends and/or people with
political influence.
2. A purchaser may be unethical on their part, if they do not report a colleagues or
superior's unethical conduct.
3. If a purchaser places orders for himself/herself, friends and colleagues in the
enterprises name in order to obtain products at a much lower price, this is a misuse
of power.
4. Withholding information from a supplier may be unethical if the supplier's position
is harmed in competing for a transaction.
5. Information on suppliers obtained from written quotations, tenders or sales
representatives should be treated confidentially.
6. The setting of specifications by the users of the items or by the purchasers to suit
one specific supplier, there by cutting out competition, is unethical.
7. Disclosure of confidential information on the purchaser's own organisation can
damage the organisations financial and competitive position.
THE ROLE OF PURCHASING AND SUPPLY MANAGEMENT IN ETHICAL
CONDUCT IN THE SUPPLY CHAIN
Businesspeople, space managers and individuals are not as concerned about ethical
conduct in any other area or function of the enterprise as much as they are in
purchasing and supply. The reasons for this are as follows:
1. Purchasers have more power over large sums of money.
2. Purchasers probably have the greatest say in terms of which supplier will receive
an order.
3.On account of the two previously mentioned factors, a purchaser, more than any
other employee, could be exposed to unethical temptations.
4.Unethical action by purchasers influence relations with suppliers.
5.Temptations influence a purchaser's objectivity and rational thinking.
AREAS WHERE PURCHASING AND SUPPLY CHAIN MANAGEMENT CAN
MAKE A CONTRIBUTION TO ENVIRONMENTAL AND SUSTAINABILITY
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