Purchasing Ethics

Scenario 1

Bryan Janz was just arriving back from lunch when his office phone rang. It was his

wife, Nina, calling from home. Nina told Bryan that FedEx had just delivered a package

addressed to her. The package contained a beautiful clock now sitting over the fireplace. In

fact, Nina said, “the clock looks absolutely beautiful on our living room fireplace”. Thinking the

clock was from a family member, Bryan asked who sent the present. She said she did not

recognize the name—the clock was from Mr. James McEnroe. Bryan immediately told Nina

that she had to repack the clock because it was from a supplier who has been trying to win

business from Bryan’s company. They definitely could not accept the clock. Nina was very

upset, and responded that the clock was perfect for the room and, besides, the clock came to

their home, not to Bryan’s office. Because of Nina’s attachment to the clock, Bryan was unsure

about what to do.

Assignment Questions

1. What should Bryan do about the clock?

2. What does the Institute of Supply Management (formerly the NAPM) code of ethics say

about accepting supplier favors and gifts?

3. Why do you think the supplier sent the clock to Bryan’s home and addressed it to his wife?

4. Does the mere act of sending the clock to Bryan mean that Mr. McEnroe is an unethical

salesperson?
Scenario 2

Lisa Jennings thought that at long last, her company, Assurance Technologies, was

about to win a major contract from Sealgood Instruments. Sealgood, a maker of precision

measuring instruments, was sourcing a large contract for component subassemblies. The

contract that Assurance Technologies was bidding was worth at least $2.5 million annually, a

significant amount given Assurance’s annual sales of $30 million. Her team had spent

hundreds of hours preparing the quotation and felt they could meet Sealgood’s requirements in

quality, cost, delivery, part standardization, and simplification. In fact, Lisa had never been

more confident about a quote meeting the demanding requirements of a potential customer.

Troy Smyrna, the buyer at Sealgood Instruments responsible for awarding this contract,

called Lisa and asked to meet with her at his office to discuss the specifics of the contract.

When she arrived, Lisa soon realized that the conversation was not going exactly as she had

expected. Troy informed Lisa that Assurance Technologies had indeed prepared a solid

quotation for the contract. However, when he visited Assurance’s facility earlier on a

prequalifying visit, he was disturbed to see a significant amount of a competitor’s product being

used by Assurance. Troy explained his uneasiness with releasing part plans and designs to a

company that clearly had involvement with a competitor. When Lisa asked what Assurance

could do to minimize his uneasiness, Troy replied that he would be more comfortable if

Assurance no longer used the competitor’s equipment and used Sealgood’s equipment instead.

Lisa responded that this would mean replacing several hundred thousand dollars worth of

equipment. Unfazed, Troy simply asked her whether or not she wanted the business. Lisa

responded that she needed some time to think and that she would get back to Troy in a day or

so.
Assignment Questions

1. The buyer at Sealgood Instruments, Troy Smyrna, is practicing a certain type of unethical

behavior. What is the term for this behavior? Why is it considered unethical?

2. What should Lisa do in this situation? Formulate a response.

Ben Gibson, the purchasing manager at Coastal Products, was reviewing purchasing

expenditures for packaging materials with Jeff Joyner. Ben was particularly disturbed about the

amount spent on corrugated boxes purchased from Southeastern Corrugated. Ben said, “I don’t

like the salesman from that company. He comes around here acting like he owns the place. He

loves to tell us about his fancy car, house, and vacations. It seems to me he must be making

too much money off of us!” Jeff responded that he heard Southeastern Corrugated was going to

ask for a price increase to cover the rising costs of raw material paper stock. Jeff further stated

that Southeastern would probably ask for more than what was justified simply from rising paper

stock costs.

After the meeting, Ben decided he had heard enough. After all, he prided himself on

being a man of action. There was no way he was going to allow that salesman to keep taking

advantage of Southeastern. Ben called Jeff and told him it was time to rebid the corrugated

contract before Southeastern came in with a price increase request. Who did Jeff know that

might be interested in the business? Jeff replied he had several companies in mind to include in

the bidding process. These companies would surely come in at a lower price, partly because

they use lower-grade boxes that would probably work well enough in Southeastern’s process.

Jeff also explained that these suppliers were not serious contenders for the business. Their

purpose was to create competition with the bids. Ben told Jeff to make sure that Southeastern

was well aware that these new suppliers were bidding on the contract. He also said to make

sure the suppliers knew that price was going to be the determining factor in this quote, since he

considered corrugated boxes to be a standard industry item.

1. Is Ben Gibson acting legally? Is he acting ethically? Why or why not?

2. What should Southeastern Corrugated do when they receive the request for quotation from

Coastal Products?
Scenario 4

Sharon Gillespie, a new buyer at Visionex, Inc., was reviewing quotations for a tooling

contract submitted by four suppliers. She was evaluating the quotes based on price, target

quality levels, and delivery lead time promises. As she was working, her manager, Dave Cox,

entered her office. He asked how everything was progressing and if she needed any help. She

mentioned she was reviewing quotations from suppliers for a tooling contract. Dave asked who

the interested suppliers were and if she had made a decision. Sharon indicated that one

supplier, Apex, appeared to fit exactly the requirements Visionex had specified in the proposal.

Dave told her to keep up the good work.

Later that day Dave again visited Sharon’s office. He stated that he had done some

research on the suppliers and felt that another supplier, Micron, appeared to have the best track

record with Visionex. He pointed out that Sharon’s first choice was a new supplier to Visionex

and there was some risk involved with that choice. Ben indicated that it would please him

greatly if she selected Micron for the contract.

The next day Sharon was having lunch with another buyer, Mark Smith. She mentioned

the conversation with Dave and said she honestly felt that Apex was the best choice. When

LUC asked Sharon who Dave preferred, she answered Micron. At that point Mark rolled his

eyes and shook his head. Sharon asked what the body language was all about. Mark replied,

“Look, I know you’re new but you should know this. I heard last week that Dave’s brother-in-law

is a new part owner of Micron. I was wondering how soon it would be before he started steering

business to that company. He is not the straightest character.” Sharon was shocked. After a

few moments, she announced that her original choice was still the best selection. At that point

Mark reminded Sharon that she was replacing a terminated buyer who did not go along with one

of Dave’s previous preferred suppliers.

1. What does the Institute of Supply Management (formerly the NAPM) code of ethics say

about financial conflicts of interest?

2. Ethical decisions that affect a buyer’s ethical perspective usually involve the organizational

environment, cultural environment, personal environment, and industry environment.

Analyze scenario 4 using these four variables.

3. What should Sharon do in this situation?