Category Archives: Miscellaneous

Do You Know the Rules for Ethical Supplier Interaction?

You might think you do, because ethics are just doing the right thing, and doing the right thing is just using common sense to apply your morality to the situation at hand. But do you? For the most part, you probably do but I’d bet there are situations where you don’t. Because ethics aren’t hard and fast like regulations and laws. There are no well-defined lines to push or cross. And if there is no well defined ethics policy at your company, it can be trickier than you think.

This is made clear in Next Level’s Purchasing great express course on 15 Rules For Ethical Supplier Interaction, which is free as part of a premium Next Level Purchasing Association Premium Membership (which is $99.99/year) or $14.99 as a standalone purchase. (SI would strongly suggest the annual membership as you then get access to over 18 express courses, over 100 articles, dozens of archived webinars [and transcripts], white papers, and the salary guide.)

The NLP express course covers bribes, which are usually (but not always) obvious, (personal) relationships, stock ownership, donations, and gifts. Bribes are usually obvious since, under laws like the FCPA (Foreign Corrupt Practices Act) and the Modern UK Bribery Act, they are illegal, but sometimes bribes can be hidden in (seemingly) legal transactions and not even appear as a bribe to anyone investigating a purchase decision because the briber and the bribed might have hidden information. For example, instead of offering you $10K or an all-expense paid trip to Hawaii for awarding the business, the supplier might make a large purchase from a business you are the majority shareholder in (and, from which, you would get a large dividend or bonus) at above market rate. From a third party perspective, the supplier made an unrelated business decision to buy its new office equipment from an unrelated company, that just happened to occur before it was awarded the (much) larger contract from your organization. But even though there might not even be a perceived conflict of interest in this situation, there is, because it’s hard to not see a supplier favourably who awards business to a company you control, even if you are making an conscious effort to try and be unbiased. But this is just one example where ethics can get tricky. The short course does a great job of outlining others.

Donations for charitable organizations are less obvious because everyone just wants to help a good cause, and what does it hurt if a supplier makes a decision to support your favourite charity? Well, it depends. How much? Does the supplier expect favouritism for the donation? Will the donation unconsciously bias you toward the supplier? Will there be a perception of bias? It’s tough.

But toughest as all is the question of accepting supplier gifts or meals. A meal is just a meal and a gift with nominal value is just a polite introduction, right? Well, maybe. Is it just lunch to discuss a proposal, or is it a fancy dinner at the up-scale private club at the local sports stadium that just happens to overlook the big game? And what is nominal value? It’s shaky ground, which is made even shakier by the fact that refusing a gift could be considered rude and damage the relationship. What do you do then? It’s a much tougher subject than you first think it is, and the more you examine it, the harder it is to define ethical versus non-ethical behaviour and good business rules vs. bad. This is a subject the course spends a considerable amount of time on and a subject you as a Procurement professional need to spend a considerable amount of time on to really understand the intricacies. At the end of the course, you will have a much better understanding of the, sometimes hidden, ethical dilemmas that you will face on a daily basis and, as a bonus, get a starting list of 15 rules that you can use to jump start the creation of a Procurement ethics policy that will help you and your team to always get it right.

Next Level’s Purchasing course on 15 Rules For Ethical Supplier Interaction is a great course on the subject matter and SI recommends that you check it out if you can get access to it.

101 Procurement Damnations – We’re Almost There!

Our upcoming post chronicles our 80th Procurement Damnation that you, as a Procurement professional, have to deal with on a regular, if not daily, basis. That’s a very large number of damnations and we’re still not done! As per our halfway post, the damnations we’ve chronicled to date aren’t the only pervasive damnations that get in your way and pester you on a daily basis! We still have 21 damnations to go!

However, before we start the final stretch, we thought it would be a good idea to summarize the list to date so that you could go back and review any posts in the series that you might have missed during your hectic conference season as this is SI’s biggest and most aggressive series to date, much longer than both the 15-part “Future” of Procurement series and the 33-part “Future” Trends Expose series (that followed) combined and double the length of the maverick‘s 50 Shades of Pay series (assuming it gets completed) which, to date, only has 14 parts up and available for your reading pleasure.

There’s more that could be said, but as we’ve already said so much and still have so much more to say, without further ado, here are the links to the first 80 for your reviewing pleasure.

Introductory Posts

Economic Damnations

Infrastructure Damnations

Environmental Damnations

Geopolitical Damnations

Regulatory Damnations

Societal Damnations

Organizational Damnations

Authoritative Damnations

Provider Damnations

Consumer Damnations

Technological Damnations

Influential Damnations

Bonus Posts!

There’s No Return on Customization.

the doctor does not attend many events, but hen he does one thing he regularly hears is Company B saying that there is no platform that meets there needs so they are buying Solution S from Company X and customizing it through the vendor or a third party.

Before one more organization does this, the doctor needs to scream DON’T! In this day of age there is no return on enterprise software customization … no matter what the vendor or 3rd party may tell you.

Why?

1) Time to Delivery

If the functionality is truly valuable, by the time it is delivered, another vendor is sure to have equivalent functionality on the market ready and waiting for your implementation.

2) Up Front Cost

Custom development is a huge cost — which may never be realized given the average IT project failure rate and the average return.

3) Maintenance Cost

Out of the box functionality is covered under standard warranty and standard maintenance agreements — custom modifications usually require high hourly rates to contract scarce development talent for as long as is needed to fix any bugs or do any required upgrades.

4) Delayed Upgrades

While everyone else gets upgrades and new, free, features on the provider’s schedule, you get to wait and wait and wait until the talent has the time to address, and complete, the necessary upgrades to the custom modifications you made to allow the base system to be upgraded — this can be months (or years) and efficiency losses will add up on a daily basis!

When you put it all together, the costs will typically outweigh the benefits. So put the effort in to finding the right vendor with the right system and when it comes to customization, just do NOT do it! The only company that profits off of customizations is the vendor doing the customizations, because they are the company at the bottom of the money pit while their clients keep shovelling the money in.

Seventy Five Years Ago Today

Disney released Fantasia, which contains The Sorcerer’s Apprentice, Mickey Mouse’s designated comeback role at the time. (Yes, even the great Mickey Mouse once needed to make a comeback.)

A modern classic, which is the American Film Institute’s 58th greatest American film, it contains a classic story line that is very important to modern enterprise professionals, and procurement professionals in particular, everywhere.

Simply put:

You cannot successfully employ the tricks of the master until you gain mastery yourself.

And, furthermore:

Trying to automate a process you cannot control will simply flood you.

For those of you who haven’t seen The Sorcerer’s Apprentice, Mickey decides that the best way to accomplish his chores is by animating, and then replicating, a broomstick to gather the water from the pool, carry it to the castle, and clean the floors. He does the classic set-it-and-forget-it, takes a nap, and the unintelligent automatons keep going and going until the castle literally floods, putting Mickey in quite a pickle of a situation until the Sorcerer comes home to undo the mess Mickey created.

In the modern enterprise, even if you are overwhelmed by a task, you can’t simply install the first piece of technology that comes your way to automate the task and expect the situation to improve if you don’t first understand what is required, define the right process, and make sure the right process is implemented, a bad situation will quickly become worse, much worse. For example, instead of having ten thousand invoices that can’t be adequately processed, a poorly implemented e-Invoicing solution will give you ten thousand invoices that are queued waiting for manual review and validation before they can be exported to the payment system. Instead of not having time to process the invoices between payment, and overpaying by about 1.5% on average (due to duplicate invoices, overcharges, and payments for goods not delivered), the organization can’t pay the majority of suppliers at all, and supplier sentiment goes from amicable to full fledged animosity in just a few months. (And your SRM efforts go down the toilet.)

If you haven’t watched The Sorcerer’s Apprentice, the only segment of the original Film that was included in Fantasia 2000, find 8 minutes and do so. The power of today’s technology is terrific, but never let technology replace wisdom.