Detecting Unethical Practices at Supplier

Detecting Unethical Practices at Supplier Factories: The Monitoring and Compliance Challenges

The modern day business community is facing more and more challenges. The emergent challenges are the result of various advancements within the political, economic, technological and even social fields. The new context raises new demands from the economic agents, who have to ensure the delivery of the highest quality products and services, the full commitment to the satisfaction of the needs and wants of customers, the hiring and retention of the best skilled and trained staff members and so on. In other words, the economic agents are faced with the same objective of registering increased financial gains, but they now have to attain their objectives through the satisfaction of the needs and wants of various stakeholder categories, such as employees, customers, business partners, the general public, governmental and non-governmental organizations and so on.

The role of ethics

Within the new and incrementally dynamic market place, the behavior of the economic agents is continually under microscope. This specifically means that the modern day firms have to behave in a most economically and socially responsible manner. In other words, it is now insufficient for the company managers to ensure that their agencies obey the law, but it has become imperative for the firms to also behave in an ethical manner. Additionally, the ability of the firm to behave in an ethical manner stimulates stakeholder trust in the respective institution and increases its chances of attaining its objectives. In other words, within the contemporaneous society, the ethical behavior on the part of the companies is a necessity as well as it is a generator of competitive strengths and advantages.

3. Definition of business ethics

"The study and philosophy of human conduct, with emphasis on determining right and wrong" (Ferrell, Fraederich and Ferrell, 2009).

"Business ethics comprises the principles and standards that guide behavior in the world of business. Investors, employees, customers, interest groups, the legal system, and the community often determine whether a specific action is right or wrong, ethical or unethical. Although these groups are not necessarily "right," their judgments influence society's acceptance or rejection of a business and its activities" (Ferrell, Fraederich and Ferre, 2009).

"Morality generally refers to rules and standards of conduct in a society. It is specific to societies that exist in a certain time and place and is concerned with practices defining right and wrong. Ethics is often restricted to rules and norms relating to specific codes for specialized groups, e.g. code of ethics of the accounting profession" (Rahim, 2010).

"Business ethics is the behavior that a business adheres to in its daily dealings with the world. The ethics of a particular business can be diverse. They apply not only to how the business interacts with the world at large, but also to their one-on-one dealings with a single customer" (Crystall, 2011).

4. The company-supplier relationship

The supplier is one of the most important sources of organizational success. The modern day literature focuses primarily on the role of the staff members as creators of organizational values, as well as on the need for the company to fully satisfy the needs and wants of the customer base. The third edge of the triangle is however composed by an efficient relationship with the supplier.

The supplier is the party which provides the organization with the necessary commodities which in turn allow the company to create its products and deliver them within the market. In other words, the purveyors are directly responsible for the timely manufacturing and delivery of the products, as well as for the meeting of the necessary quality standards in the manufacturing of the products or the delivery of the services.

The company-supplier relationship (continued)

Another important aspect of the relationship between the supplier and the firm is represented by the ethical conduct of the parties, with emphasis on the ethical behavior of the supplier. This aspect is noteworthy as the behavior of the supplier directly affects the general perception over the firm. If it is perceived as conducting business operations with partners of low ethical standards, the company itself would be perceived as implementing low ethical standards. In other words, the public perception of the firm would suffer, and in turn so would the sales, the profits and the company's chances of attaining its objectives.

Additionally, if the firm develops business operations with unethical suppliers, the business relationship could in essence be negatively impacted. Some examples of the impact of unethical conduct at the level of the supplier refer to the following:

Untimely delivery of the commodities

Inefficient communications

Unjustified delays

Eventual lack of trust.

6. Elements which impact the company-supplier relationship

The incremental pressures from both parties

The changing size and purpose of the organizational agents

The incremental stakeholder pressures on the part of both companies

The higher levels of competition which impact both company as well as supplier

Changing dynamics, namely the impact of the forces of globalization, such as outsourcing, which generates mutations in the traditional operations. Modern day organizations outsource most of their non-core operations, such as pension plans, call centers, facilities management, fleet management and so on, with the objective of focusing on the core operations, but also creating organizational efficiencies. This in effect means that managers have to manage the company's external operations with the various providers (HR Team). This creates additional complexities.

7. Elements which generate compliance challenges

The desire to gain competitive advantages

The desire to increase and consolidate the customer base

The desire to register quick gains

The desire to maintain a positive public perception of the company

The desire to increase the number of served customers

The desire to hinder the access to information which could harm the company's image and relationship with customers and so on

8. Monitoring and compliance

Given the previously mentioned means in which a supplier's unethical conduct could impact the economic agent, a new need arises in that of efficiently identifying and addressing the ethical issues at the level of purveyors. This objective would be attained through the development and implementation of supplier management programs.

The supplier management program is the direct consequence of the changing dynamics within the business community, which also generates needs for change at managerial levels. Supplier management would as such represent the response and the coping mechanisms to the new challenges.

9. Supplier management defined

"Supplier Relationship Management (including analysis) is the proactive management of an ongoing business relationship to secure a competitive advantage for your own organisation. The focus is on overall relationships between the supplier and the buying organisation rather than a focus on a specific contract. Its purpose is to encourage purchasing and business management to develop a structured understanding of the nature of current relationships that exist within and between your organisation and the suppliers" (the Office of Government Commerce, 2010).

The scopes of a supplier relationship management program, or supplier management in short, are those of:

Reducing costs

Improving the services

Creating customized solutions, and Integrating flexibility (the Office of Government Commerce, 2010).

10. Supplier management practices

The supplier management programs vary within each organization, as they are tailored to meet the specific needs of the company. Nevertheless, some of the more commonly encountered practices at the level of supplier management refer to the actions underwent with the scope of supporting the following:

The life cycle of the supplier

The selection of the supplier

The assessment of the risks involved

The definition of the key performance indicators

The identification of measuring mechanisms to be employed in the assessment of the performance

The review of the meetings with the suppliers

The emphasis on positive relationships

The identification of the company and supplier objectives

The movement from a supplier relationship to a partner relationship

The management of conflicts (HR Team).

11. Importance of supplier management

The aim of a supplier relationship management program is that of creating mutual benefits for both parties. Through the development and implementation of a customized plan, the parties could attain a series of objectives. These results, the main supporters of the importance of a program, refer to the following: