Vendor Selection Procedures Term Paper

Excerpt from Term Paper :

Tony Roma's Restaurant, a franchise in the restaurant industry that focuses on Italian food products. The company may employ anywhere from a dozen to 20+ employees per individual restaurant at any given time. Tony Roma's like any restaurant in the food service industry has concerned itself with many different ethical issues and considerations including ethics related to vendor selection processes.

Research suggests that a company such as Tony Roma's must be particularly aware of ethical issues related to vendor selections, to ensure that vendors are selected for service in a fair and ethical manner along the strictest business morals. There are many opportunities for bribery and other ethical violations to occur in the vendor selection process.

The purpose of this report is to identify potential breeches of ethical conduct with regard to vendor selection and to help established a code of ethics related to vendor selection that is based on the highest ethical standards available in the restaurant industry. It is recommended that Tony Roma's employees adopt a policy which prohibits acceptance of gifts or other personal items no matter how insignificant in nature, to prevent potential ethical violations or establishment of relationships that might be construed as unfair. In addition regular assessment of vendor performance should be encouraged to ensure that at all times the vendor relationship remains business like and founded on the highest moral and quality standards. The report provided below details all of the aspects of ethical considerations with regard to vendor selection in the restaurant industry, with specific attention to practices Tony Roma's staff can adopt to ensure the highest moral standard of conduct.

Dear Management Team:

The report below is provided as a frame of reference for identifying potential violations of ethical conduct with regard to vendor relations. In order to maintain the integrity of vendor relations it is vital that any potential violations of the ethical code of conduct be established, and that a procedure for conducting business in an ethical manner is upheld. This will ensure that every vendor is selected based on business credentials and qualifications rather than based on the personal benefit of one or more persons.


Tony Roma's is a leader in the restaurant industry providing Italian food selections to customers nationwide. It is vital that the corporation establish a code of ethical conduct with regard to vendor selection that ensures that the company's best interests are considered rather than the best interests of individuals working for the company at any given time.

In the type of industry that Tony Roma's operates, it would be easy for an individual or for several individuals to abuse the vendor relationship and enjoy kickbacks. It is vital for the long-term success of the company that any potential for abuse be avoided if at all possible. Thus the following evaluation of ethical conduct is offered as a mechanism for ensuring fair and equitable vendor selection processes.

Situational Analysis

Tony Roma's is a smaller but well established and well-known company in the restaurant industry. Customers include families, individuals, fast food clients, and high, middle and low income people from across the nation. The company is committed to delivering the highest quality products to consumers and maintaining ethical and safe business practices at all times. Because many of the restaurants are franchised owned, there are several opportunities for abuse with regard to the vendor selection process. Therefore the establishment of a stringent code of ethics is vital to the health and well being of the organization at large.

There are many ethical issues surrounding vendor selection. Of utmost importance is the company's ability to select vendors based on service quality and capability. Vendors should be selected on an as needed basis, based on whether or not the vendor has the ability to provide Tony Roma's with superior customer service and a competent business relationship.


Some ethical concerns that might arise from the vendor selection process in the restaurant industry include: (1) allowing personality or personal preferences to enter purchasing and vendor decisions, (2) giving preference to certain suppliers over others based on long-term business relationships, political connections or other non-business related manners, (3) obtaining proprietary information from one supplier than revealing that confidential information to another vendor in the hope of getting a better rate and (4) acceptance of bribes or other freebies associated with conducting business (NFSMI, 2004).

To prevent disputes and confusion during the vendor selection process management must work at developing a plan that discusses handling of disputes and vendor selection that includes bid submission process procedures (NFSMI, 2004).

Free lunches and other aspects of interactions with private vendors may present ethical problems for Tony Roma's. The bottom line is this ... every individual and manager must evaluate each situation with a potential vendor individually to determine whether or not an activity such as 'lunch' would be in the best interests of the company as a whole, or whether individuals might construe that the vendor or manager is receiving personal gain from the transaction at hand (ICCMA, 2001).

Generally it is in the best interests of the company to not accept free meals or other gifts from any vendor whether or not the potential exists for a future relationship or whether or not a relationship already exists (ICCMA, 2001). This will prevent any confusion related to the business relationship and promote an ethically sound business relationship at all times between vendors and company representatives.

Expenses can be split when necessary and the focus should remain on business. Even small gift exchanges open the door for potential ethical issues and abuse.

Any gift giving or exchange of events or tickets may be perceived as ethically unsound or a violation of moral standards. Though in most instances these types of events are harmless, this is not always the case (Wentink, 2001). Thus precautionary procedures should be developed to ensure that no quests arise as a result of vendor selection processes or interactions.

The vendor selection process should be carried out in a manner where the following steps are carried out: (1) evaluation and initial determination of corporate needs are established, (2) determination of business requirements with regard to vendor services are outlined, (3) vendors are invited to submit proposals and bids for business, (4) top bids are selected for additional review and finally (5) vendor is selected based on service quality, references, price and other objective criteria irrespective of any gifts, events, lunches, personal relationships or other factors that might skew results.

CADA has established a vendor evaluation process that can easily be adopted with few modifications by the Tony Roma management team that will ensure that the highest level of ethics is maintained during the vendor selection process. Their vendor evaluation procedures are considered best practice in many industries.

Key features of the vendor evaluation process include: (1) the individual selected to determine vendors must be trustworthy and reliable, and have a fiduciary responsibility to ensure process is carried out in a manner that is fair and equitable, (2) the performance of duties must be conducted in a professional manner, (3) there must be no actions which serve to discredit the vendor's credibility or integrity, (4) no favoritism must be displayed any vendor, (5) primary consideration must be given to those vendors that offer quality service at the lowest process, (6) all offers of personal gifts of any value whatsoever must be declined during the vendor selection process and lastly (7) all vendors selected must be approved by a committee of representatives that affirms the vendor selection representative's choice in vendor (CADA, 2002).


Based on the information provided it is vital that Tony Roma's establish a written code of ethics that specifically addresses ethical standards for conducting vendor relations. At this time there is not one set policy…

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