Procurement 101The Top 6 Warnings Signs of Unethical Suppliers
“Dearest Wolf Fur Coat SuppliesTM, what high prices you have!”
“All the better to deliver you a quality product, my sweet CPO.“
“But My Dear WFCS, what a lack of documentation you have!”
“All the better to draft a customized contract just for you, my lil’ darling.“
“BUT WFCS, look at how you’ve failed to operate with transparent business practices!! I’m looking right now and I still can’t even see your ethics behind all the fur cloaks!! No no noooo!!”
The end of this fairy tale can be left to the imagination, but it’s safe to say that professionals in the procurement industry have been seeing red due to increasing encounters with unethical suppliers from all sides of the goody basket (so to speak).
The reasons for this are varied, situation-specific, and sometimes simply a matter of perception – what can appear to be suspicious may be entirely innocent in reality. Fluctuating amounts of authority, capability, incentives, sanctions, and more all come into play. But it can’t be denied that supplier corruption in the procurement process is difficult to detect, and complicated further when a high volume of purchases is involved. Without an organized system for ordering supplies, the risk of potentially unethical transactions reaches a level of danger that even Red would find frightening.
Keep an eye out for The 6 Big Bad Signs of Unethical Suppliers when negotiating and your odds of staying alive increase greatly.
- The price of the product/service is significantly lower than the competition.
Competition should be encouraged for the innovation and options it can provide, but be wary of prices that have recently decreased, as this is likely a supplier’s attempt to undercut other businesses. If you’re not paying attention, these suppliers will devour your specifications in the pursuit of a profit.
- Documentation is absent (or questionable).
This indicates an unorganized supplier, or even worse, one that has something to hide. If a supplier can’t provide you with standard documentation in regard to their financial history or security, then they’re not worth the risk. Buyers should be able to offer the same for their suppliers.
- There are complaints or controversies over the quality of the product/service.
For example: in Nigeria in the 1980’s fake and substandard drugs dominated the pharmaceutical industry, resulting in many unwarranted deaths. The government’s decision to procure these drugs caused turmoil that could have been avoided with methods for supplier assessment.
- The environmental impact of the item is overlooked or minimized.
Illegal logging in Indonesia and illegal harvesting of caviar in Azerbaijani both occurred with government permission. In these cases, it could have been the role of individual organizations to decline engagement in these environmentally destructive activities. If these companies had more supplier options (and methods for comparison) they may not have made such poor choices due to a lack of alternatives.
- Gifts are offered as a “token of appreciation”.
Corporate gift-giving can be a touchy issue, in particular determining if it’s appropriate or a flat-out bribe. Your company’s reputation is at risk when accepting gifts from suppliers that are intended to alter or influence the business relationship. Ensure that policies concerning corporate gift-giving are updated so your procurement team knows how to respond if confronted with a goody basket.
- Any conflicts of interest.
If your supplier also happens to be your grandmother, run away. Not only does this have the potential to result in personal consequences from professional actions, but grandma may also start growing fur at the slightest provocation.
If any of these 6 signs of unethical suppliers seemed uncomfortably familiar to you, remember that you’re not alone in the woods. There are many organizations that can rescue companies from supplier corruption, and education is the first step to prevention: the OECD, Transparency International, the UN, the World Bank, and many others have resources to address these challenges. There’s no need to be afraid of the Big Bad Wolf…as long as you know it’s there.
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