Purchasing Ethics or Ethics in Purchasing goes a long way to decide the fate of any organisation. This article explains it raw and goes straight to the point to explain what Ethics in Purchasing means, the ethical practices, the relationship between purchasing department and other departments and Purchasing as the bedrock of an organisation.
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Ethical Practices Between Purchasing Departments.
What is “Ethics” in purchasing?
The word ‘ethics’ refers to norms for conduct that distinguish between acceptable and unacceptable behaviour. It also means abiding by the principles governing the practices of one’s profession, while dealing with colleagues, organizations and society at large. Therefore, purchasing professionals must have a highly developed sense of professional ethics to protect their own and the organization’s reputation for fair dealing.
Ethical Practices Governing Behaviour of Purchasing Professionals.
The ethical practices governing the behaviour of purchasing professionals are briefly explained as follows:
- Purchasing professionals should abstain from any form of corrupt activity.
- Purchasing professionals must carry out all business practices in an ethical manner by making sure that the business policies conform to the highest ethical standards.
- Purchasing professionals must adhere to all applicable laws governing their departments and the organization.
- Purchasing professionals must be loyal to the organisation at all when dealing with suppliers, organizations and the general public.
- Purchasing professionals must ensure that their personal interest does not conflict with the organization interest.
- Purchasing professionals should develop and promote positive supplier and customer relationship.
- Purchasing professionals should drive sustainability and social responsibility when dealing with suppliers and other individuals on daily business activities.
- Purchasing professionals must know and obey the regulations, laws and trade agreement applicable to supply management.
- Purchasing professionals must develop skills, knowledge and conduct business that demonstrates competence and promotes the supply management.
- Purchasing professionals must subscribe to truth in all activities.
Relationship Between Purchasing Departments And Other Business Functions.
Purchasing departments cannot be independent or in isolation. It needs the support of other departments such as marketing, finance, personnel, production, etc. in order to carry out its function effectively. Due to this reason, purchasing departments within the organization. The purpose of this relationship is to achieve the overall objectives of the organisation.
- Purchasing and Personnel: This department deals with recruitment, selection, training and development, remuneration, etc. of workers at the workplace. Here, purchasing department interacts with personnel department on the numbers of workers that are needed to perform their daily activities regarding procurement of materials and other function.
- Purchasing and Finance: The finance/accounts department deals with the monetary and financial records of the organisation. They also ensure that the funds approved by the management are being properly spent by each department. It is also the function of this department to deal with budget planning and control. Thus, purchasing department interacts with finance department to ensure the release of the fund, in order to procure the required goods and equipment to meet the operational needs.
- Purchasing and Production: The production/operation department deals with the conversion of raw materials obtained by the purchasing department into finished goods. Therefore, purchasing department relies on this department on the number of raw materials to be procured in order to avoid the uninterrupted flow of materials.
- Purchasing and Marketing: The marketing/sales department handles everything concerning the advertising and selling of finished goods. Here, the purchasing department interacts with this department about the available goods in stock to be sold.
- Purchasing and Stores: The stores’ department is responsible for the custodian of the materials and equipment procured by the purchasing department. They also keep proper records of materials that each department received to carry out their daily operation within the organisation. Thus, purchasing department liaises with stores department to know the level of materials that are available in order to avoid shortage and stock-outs of materials resources.
- Purchasing and Engineering: The engineering/design department is responsible for the design, development and maintenance of machinery to prevent total breakdown which could lead to a production halt. Therefore, purchasing department relates to this department for the procurement of necessary tools, machines and equipment required to perform their daily operation.
- Purchasing and Quality Control: The quality control department ensures that the material procured by the purchasing department conform to the required standards and specifications to meet the manufacturing requirements. Here, the purchasing department liaises with this department on the required quality of material to be procured in the market.
Purchasing As The Bedrock of An Organisation.
Purchasing departments focus on sourcing, pricing, and buying the right thing, at the right price and at the right time in order to deliver a service or product. It is called the bedrock of an organization due to this reasons:
- They are responsible for everything related to ordering materials.
- They check invoices when they arrive for accuracy before passing them to management for approval and payment.
- They negotiate with suppliers to get the business the best price possible on necessary goods.
- They receive quotations and tenders from prospective suppliers.
- They help an organization to reduce cost, maintain quality and manage the levels of risk to the purchase orders.
- They assess the demand and description of materials required by every functional unit.
- They also supply the necessary information to all functional units on the availability of materials.
- They play a key role in maximizing the business profits.
- They help the business to operate by ensuring that there is no uninterrupted flow of materials.
- They also help the business to maintain optimum utilization of resources thereby no excess or stock out of materials.