Ethics and Procurement Management

Demonstratedly, sound ethics are needed in all vocations, but procurement is a hotbed of ethical challenges because the decisions and choices made in procurement affect the entire corporation. Cooper affirms that “[ethics] are usually applicable to all purchases, and so are often elaborated in procurement specifications and contracting procedures, often with specific additional approval and other requirements to be applied for large projects.” (Cooper, 2005)

Kerzner further emphasises this with a broader viewpoint, by saying that “Project Managers, in the pursuit of their profession, affect the quality of life for all people in our society. Therefore, it is vital that Project Managers conduct their work in an ethical manner to earn and maintain the confidence of team members, colleagues, employees, clients and the public.” (Kerzner, 2001)

Implementation Of Ethics Into Procurement Management Practices

In Singapore, clear and comprehensive regulations for the conduct of public procurement have been seen as the fundamental prerequisite for curbing corruption in public procurement. Procurement agency staff are subject to a code of conduct, under which they are obliged, among others, to disclose to the relevant department attempts to unduly influence procurement decisions.

Similarly in the private sector, companies can implement ethics into their workplaces by establishing an ethics management program. Brian Schrag, Executive Secretary of the Association for Practical and Professional Ethics, elaborates that "ethics programs convey corporate values, often using codes and policies to guide decisions and behavior, and can include extensive training and evaluating, depending on the organization. They provide guidance in ethical dilemmas."

(http://www.indiana.edu/~appe/index.html Accessed: 2007, October 16)

Interestingly, there are also contrasting viewpoints on such initiatives. Some business ethicists feel that too much focus is put on the codes themselves. And perhaps rightfully so. Would signing a piece of paper make those employees with questionable morals magically ethical? Perhaps it's the developing and continuing dialogue around the code's values that is more important.

Various Reasons Why Unethical Behaviour Perpetuates

In spite of such ethical initiatives in both the private and public sectors, it is not uncommon for employees to breach ethical boundaries because of expediency, undue pressure or just because they don't know better. They may not know where they can go to obtain direction. They may be fearful of the ramifications of even asking whether the situation is ethical because they may be seen as challenging the authority of senior staff. Some other reasons employees make poor ethical decisions are when their pride or reputation is at stake, they fear a potential lawsuit, or they are afraid to fail.

To be fair, it's easy to make the "right call" when the facts are clear and the choices are unambiguous. Unfortunately, that is not where most of the ethical dilemmas reside. Many situations are clouded with uncertainty, incomplete information, multiple points of view, contradictory responsibilities and pressure — external or self imposed.

PRACTICAL APPLICATION

This section on the application of ethics into procurement practices serves to give an unique insight into the multi-faceted issues faced in the fashion retail industry, when undertaking a product development project.

Industry in Context

I work in the fashion retail industry, specifically for a multi-brand fashion retail and marketing company that has sourcing and manufacturing operations based overseas.

Almost all our goods are produced on a cut-and-make basis by contract manufacturers, leaving us to handle the brand management practices of merchandising, marketing, etc.

At any one time, we have eight project teams (categorised by brand) independently handling their unique value chains of a wide array of branded as well as private label apparel for men, women and children.

Exports are nearly all made for regional markets, and consist mainly of fashion items where proximity to the market, technical expertise, the low cost of labour and quality are determinant factors.

One of our latest projects is to develop a new ‘eco-friendly’ innerwear range for an American fashion brand that we license from.

Market Reality

As the often repeated adage goes –

"You can have it good, fast and cheap. Pick two.

You can have it good and fast, but you can't have it cheap.

You can have it fast and cheap, but you can't have it good.

You can have it cheap and good, but you can't have it fast."

It must be said that while the company has learned hard lessons over the years about the procurement of goods and services, these lessons are continually updated in the face of technological advancements. We cannot afford to overlook these new lessons, as even a single misstep can be enough to derail our entire supply chain.

Even in the fashion retail industry which belongs to the secondary sector of economic activity, it would not be far-fetched to say that the lack of ethics in procurement management sets a high-risk scenario where dangers, uncertainties and challenges abound. If ignored, these issues of ethical transgressions will resurface and cause significant damage to the business on a national, regional or even international scale.

Quality/Safety Issues

While it is ideal to create a win/win situation for manufacturers and marketers, every company is fighting to make a profit in order to stay in business. If that's not a possibility, given the scope of the project, some companies will submit a bid with the intent to cut corners on the project, often with disastrous consequences. Take China’s manufacturing industry for example.

“[Chinese shipments] have all caused big safety scares. The defective goods that have long bedevilled Chinese consumers are beginning to spread to the outside world—a trend that is exacerbating concern about China's burgeoning exports.…And this week a report from the General Administration of Quality Supervision, Inspection and Quarantine, China's standards watchdog, said that 20% of domestic products tested had failed to meet safety standards.”

“The Diddle Kingdom - Tainted Chinese Goods Prompt Safety Scares Around The World” , (2007, July 5), (The Economist.com)

Available: http://www.economist.com/business/displaystory.cfm?story_id=9443105

(Accessed: 2007, October 12)

Labour Issues

In general, most blue-collar workers in the garment manufacturing industry are poor, unskilled, and have few alternative employment opportunities. It will be women and their dependents who bear the brunt of lost employment and income in terms of poorer health, lost education opportunities for their children and poverty.

The term "ethical fashion"--which encompasses but goes beyond the more familiar "eco" or "green" fashion catchphrases--is still not on the radar screen of most Singaporeans.

In addition to using eco-friendly or organic materials, ethical fashion denotes the end-product marketer's commitment to ensuring humane labour standards and fair-trade wages for garment workers. That means wages that afford workers "a relatively comfortable quality of life within the context of their local area”, as reported by Marketing Daily.

“Seeds Of 'Ethical Fashion' Are Being Sown In U.S.”, (2001, August 1), (Marketing Daily) Available:

http://publications.mediapost.com/index.cfm?fuseaction=Articles.showArticleHomePage&art_aid=64927 (Accessed: 2007, October 12)

‘Conflict of Interests’  Issues

For the specialised product range that my company is developing, there are few factories with the equipment and staff training able to produce such a quality value-added product for niche markets. The majority are high volume/standard-cut production lines. This would not be a problem if not for the fact that most of these factories have significant stakes in regional fashion retail operations, ie. my competitors!

Highly proprietary information on stock-selection, technical specifications and product timelines have to be protected from inadvertent release. Other trade secrets may range from a list of key suppliers and/or buyers, to use of software tools for fashion design, to logistics management of the entire value chain. Such privileged information, if used to the sharpest advantage, could result in a well-timed early release of a similar product range, a disastrous blow for my company.

Intellectual Property Issues

Copying remains ubiquitous in the fashion industry. Fashion-forward but low-priced retailers like H&M and Zara have flourished, thanks to their ability to take designs from Milan to the mass market. Private-label designers for major department stores trumpet the fidelity of their imitations. And almost as soon as hot new designs appear on the runway, photographs and drawings of them are on their way to Chinese factories that can produce reasonable replicas at a fraction of the cost.

“…Congress now finds itself considering a bill, pushed by the Council of Fashion Designers of America, that would give original designs a legal protection similar to copyright.”

Sadly, “the fashion industry is not alone in its surprising mixture of weak intellectual-property laws and strong innovation…where innovators produce new  work without being able to copyright it.”

 “The Piracy Paradox”, (2007, September 27), (The New Yorker) Available:

http://www.newyorker.com/talk/financial/2007/09/24/070924ta_talk_surowiecki?printable=true (Accessed: 2007, September 27)

Limitations

As project managers in a global environment, it is crucial that we bring our skills in project management with us, but we must also know the way to implement them that acknowledges and honors the host country's culture. Kerzner gives many examples of limitations to enforcing a company’s ethical principles. Some more relevant ones to the reality that my product development project is facing are –

“Contracts are awarded, in some cultures, on the basis of business relationships, gratuities, or kickbacks”, “Language will cause problems in developing accurate Statements of Work.” and “Limited contractor availability may restrict quality and timeliness of deliverables.” (Kerzner, 2001)

Conclusion

In conclusion, it is up to the company to set its ethical ‘thermostat’ for its employees, but as more players compete in this global climate, companies have to stay ‘ethically relevant’. Thankfully, this does not require a certain ‘moral flexibility’ but instead, a heightened awareness of cultural influences and customary practices of the country where one is operating in - don’t expect others to conform to your way of doing things, especially when you’re in their country.

Ultimately when faced with an ethical situation that involves personal profit or reputation versus the trust and safety of the public, a project manager should always have his ‘internal ethical thermostat’ set right, and make his decision based on what is best for the public. Without this as a standard for operation, the public would lose faith in every garment that is made, every automobile that is purchased, and every building that is constructed.

BIBLIOGRAPHY / REFERENCES

Australian Government, Department of Finance and Administration

(http://www.finance.gov.au/procurement/ep_background.html Accessed: 2007, October 10)

Cooper, D. et al. (2005) Project Risk Management Guidelines: Managing Risk In Large Projects And Complex Procurements England:Wiley

Heldman, K. (2002) PMP: Project Management Professional Study Guide San Francisco:SYBEX

Kerzner, H. (2001) Project Management - A Systems Approach to Planning, Scheduling, and Controlling New York:Wiley

Martin, Mike W. & Roland Schinzinger (1996) Ethics in Engineering (Third Edition) New York:McGraw-Hill

PMI. (2000). The project management body of knowledge (PMBOK). Newton Square:PA

“Seeds Of 'Ethical Fashion' Are Being Sown In U.S.”, (2001, August 1), (Marketing Daily) Available:

http://publications.mediapost.com/index.cfm?fuseaction=Articles.showArticleHomePage&art_aid=64927 (Accessed: 2007, October 12)

Singapore Government, Ministry of Finance

(http://internet-stg.mof.gov.sg/policies/index.html Accessed: 2007, October 12)

The Association for Practical and Professional Ethics

(http://www.indiana.edu/~appe/index.html Accessed: 2007, October 16)

“The Diddle Kingdom - Tainted Chinese Goods Prompt Safety Scares Around The World” , (2007, July 5), (The Economist.com) Available:

http://www.economist.com/business/displaystory.cfm?story_id=9443105 (Accessed: 2007, October 12)

“The Piracy Paradox”, (2007, September 27), (The New Yorker) Available:

http://www.newyorker.com/talk/financial/2007/09/24/070924ta_talk_surowiecki?printable=true (Accessed: 2007, September 27)

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