Ethics in sourcing

August 14th, 2006 at 08:37am David Bush - Iasta

There is an article on the ISM website, penned by Ernest Gabbard, who is director of corporate strategic sourcing at Allegheny Technologies regarding ethics for supply managers. I remember sitting in on a presentation by Mr. Gabbard once where he described how mistakes made in the normal process will cause major damage and when you add e-procurement tools to that poor process, it is like pouring gasoline on the fire. At least it was something to that effect, the point being that poor standard process will become much poorer and more visible if e-tools are involved. Good advice.

This particular article is a very good manual for building the right steps in sourcing as it relates to supply management. It also reminded me of some things that happened to us at Iasta many years ago for various reasons, primarily due to our green early stages and the “Wild West” nature of e-Sourcing many years ago.

While not naming names (although multi-billion dollar companies) I can remember one particular example where spreadsheets had hidden columns that were sent out to suppliers to shield some of the important information on quantities - which we discovered by noticing the columns skipping letters. This mostly effected our invoice as those were the days of charging by savings. The auction worked but it was the last time we worked with the client as we found that we could trust the company even less than the bidders could. Another example was a client that went through the whole process, got almost 25% savings and then turned around and did not award the business! This would seem to be pretty amazing until it was discovered that the preferred supplier was never bidding and was given the bid details later to match the lowest prices and get the business. Result: client got the pricing they wanted from the supplier they wanted but potentially caused severe damage to their supply chain.

Fortunately, I do not have many examples like this and we can see problems far in advance now. These examples are from circa 2001 but the industry still pays the price of unethical behaviour that took place back then with rumors of phantom bidding and the like.

As Mr. Gabbard can attest, do it right in the beginning and consistently throughout every process. Subversive tactics will not always be discovered but it only takes once to start a problem that cannot be easily reversed.

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Entry Filed under: General, Reverse Auctions, Suppliers, Supply Management Best Practices, Technology, e-Sourcing Marketplace