QUESTION 1 A
“The best and most successful organisations recognise that they will only prosper in the long term if they satisfy the aspirations of their stakeholders; including customers, suppliers, employees, local communities, investors, governments, public interest and environment groups. To satisfy this intense scrutiny and the demands for greater accountability in society, businesses and other organisations are increasingly recognising the need to measure, track and report on their social and ethical performance.” ‘Ethics’ in purchasing and supply management can relate to a wide range of issues from doubts about suppliers’ business procedures and practices to corruption.
Decisions on ethics and corporate social responsibility are at the heart of corporate strategy. They particularly influence the purpose of the organisation. By ethics and corporate social responsibility is meant the standards and conduct that an organisation sets itself in its dealings within the organisation and outside with its environment. Ethics is particularly concerned with the basic standards for the conduct of business affairs for example, policy with regard to honesty, health and safety and corrupt practice.
Corporate social responsibility has a wider remit to include the organisation’s responsibility beyond the minimum to its employees and those outside the organisation. Topics will vary with each organisation but may include environmental ‘green’ issues, treatment of employees and suppliers, charitable work and other matters related to the local or national community not conforming to approved standards of social or professional behavior; “unethical business practices”
QUESTION 1 B
The Chartered Institute of Management defines codes of ethics as a set of principles or values, used by organizations to steer the conduct of both the organization itself and its employees, in all their business activities, both internal and in relation to the outside world. Ethical codes go further than most policy statements in that they are focused on matters of right and wrong rather than just on standards of behavior and applies individually as well as collectively to the organsation’s members, and affects its internal affairs as well as those with its external stakeholders.
Code of Ethics in Relation to Internal Issue
This is a code that applies to all employees involved in the purchasing process within Kyerico. In addition to full compliance with the Kyerico’s General Business Principles, all affected employees shall:
1. ACT HONESTLY AND ETHICALLY
* Carry out their duties in an honest and ethical way by ensuring that business policies and practices are aligned with ethical principles. * Maintain the confidentiality of privileged information acquired in the course of their work, except when disclosure has been authorized or is legally obliged. * Act in good faith, responsible, with due care, competence and diligence, without allowing one’s independent judgment to be subordinated. Provide information that is true and not designed to mislead.
* Clearly communicate ethical expectations to those with whom they work. * Refrain from using or appearing to use confidential information acquired in the course of one’s work for unethical or illegal advantage either personally or through third parties. * Ensure the integrity of records; including documenting obtained discounts in a proper form.
2. AVOID CONFLICTS OF INTEREST
* Avoid actual or apparent conflicts of interest between personal and professional relationships. No actions should be taken and interests outside Kyerico should be avoided that may make it difficult to perform his or her company work objectively and effectively. No direct or indirect financial interest in a supplier or competing company is allowed.
* The acceptance of gifts or personal favors of commercial value is not acceptable, which includes invitations to sporting or social events. It is to be made clear to third parties that personal favors can only influence the business relationship negatively and that business decisions are based solely on benefits to Kyerico and not on considerations of past or future personal gain.
3. FOLLOW A FAIR PROCESS TO SELECT SUPPLIERS AND AWARD BUSINESS TO SUPPLIERS * Support the principle of fair competition as a basis for selecting suppliers and awarding business to suppliers. * While considering the advantages to Kyerico of maintaining a continuing relationship with a supplier, avoid any arrangement that could, in the long term, prevent the effective cooperation of fair competition.
* Fully comply with the internal purchasing process of purchase requests and purchase orders when awarding business to a supplier. No purchase will be done without a purchase order. * Not share information related to quotes from suppliers with any other supplier at any time.
4. SELECT SUPPLIERS THAT COMPLY WITH HIGH ETHICAL STANDARDS * Select suppliers and award business to suppliers that are committed to act fairly and with integrity towards their stakeholders and that duly observe the applicable rules of the law of the countries they operate in. * Terminate the relationship with suppliers that do not adhere to general Kyerico’s policies for suppliers, like the child labor and forced labor policies.
Code of Ethics in Relation to External Issues
This is a code that applies to all suppliers dealing with Kyerico. In addition to full compliance with the Kyerico’s General Business Principles, all affected suppliers shall:
5. CHILD LABOUR SHALL NOT BE USED
* There shall be no new recruitment of child labour. * Suppliers shall develop or participate in and contribute to policies and programmes which provide for the transition of any child found to be performing child labour to enable her or him to attend and remain in quality education until no longer a child. * Children and young persons under 18 shall not be employed at night or in hazardous conditions. * These policies and procedures shall conform to the provisions of the relevant ILO standards.
6. NO DISCRIMINATION IS PRACTICED
* There is no discrimination in hiring, compensation, access to training, promotion, termination or retirement based on race, caste, national origin, religion, age, disability, gender, marital status, sexual orientation, union membership or political affiliation.
7. LIVING WAGES ARE PAID
* Wages and benefits paid for a standard working week meet, at a minimum, national legal standards or industry benchmark standards, whichever is higher. In any event wages should always be enough to meet basic needs and to provide some discretionary income. * All workers shall be provided with written and understandable Information about their employment conditions in respect to wages before they enter employment and about the particulars of their wages for the pay period concerned each time that they are paid.
* Deductions from wages as a disciplinary measure shall not be permitted nor shall any deductions from wages not provided for by national law be permitted without the expressed permission of the worker concerned. All disciplinary measures should be recorded. * Employment practices such as training or apprenticeship wages, pre-employment fees, deposits, or other practices that effectively lower an employee’s pay below the legal minimum wage are not permitted.
8. SUPPLIERS’ TREATMENT OF EMPLOYEES
* Under no circumstances should suppliers abuse or intimidate, in any fashion, employees * Any disciplinary measures should be recorded. * Suppliers should have a grievance/appeal procedure that is clear, easy to understand and should be given to the employee in writing. * In the event that suppliers’ employees are unable to read, the grievance/appeal procedure should be read and explained to them by a union representative or another appropriate third party
9. WORKING CONDITIONS ARE SAFE AND HYGIENIC
* Suppliers shall provide a safe and hygienic working environment, bearing in mind the prevailing knowledge of the industry and of any specific hazards. Adequate steps shall be taken to prevent accidents and injury to health arising out of, associated with, or occurring in the course of work, by minimising, so far as is reasonably practicable, the causes of hazards inherent in the working environment.
* Workers shall receive regular and recorded health and safety training, and such training shall be repeated for new or reassigned workers. * Suppliers shall ensure access to clean toilet facilities and to potable water, and, if appropriate, sanitary facilities for food storage shall be provided. * Accommodation, where provided, shall be clean, safe, and meet the basic needs of the workers. * The supplier observing the code shall assign responsibility for health and safety to a senior management representative.
10. HEALTH AND SAFETY
* Suppliers shall ensure a safe and healthy workplace and provide a written safety and health policies and procedures that minimize negative impacts on the workplace environment, reduce work-related injury and illness, and promote the general health of employees. * Suppliers must provide training and adequate equipment to ensure workplace safety practices. * Suppliers should assign responsibility for health and safety to a senior management representative * Suppliers should have appropriate health and safety policies and procedures and these should be demonstrable in the workplace
Purchase management is the maintenance of an efficient supply chain (from raw materials to manufacturing to customers). It also involves several functions including: finding suppliers, estimating the cost of materials, contracting with suppliers, purchasing materials, negotiating, handling purchasing problems and maintaining purchase records.
It is also responsible for controlling the cost of the goods ordered, controlling inventory levels and building strong relationships with suppliers. Employees who serve in this function are known as buyers, purchasing agents, or supply managers There are two major types of purchasing: purchasing for resale (retail and wholesale businesses) and purchasing for consumption (industrial businesses).
Effective purchase management is essential to keeping the costs of developing products low and ensuring the development process is fast and productive. Because the process of developing products is so expensive, purchasing must be carefully managed and constantly improved. Several factors are key to effective purchasing management. Among these are: skilled purchasers, cost-effective, quality materials and reliable suppliers.