Ethics & Supplier Ideas
PurchTips edition #248
By Charles Dominick, SPSM, SPSM2, SPSM3
Do You Solicit Supplier Ideas & Exercise Ethics?
Soliciting and implementing suppliers' innovative ideas for improved corporate performance will be one of the most important functions of procurement in the years ahead. However, how you acquire and use those ideas can cause ethical problems if you're not careful.
For example, if a supplier (Supplier A) suggested a cost savings idea and you took that idea to another supplier (Supplier B) and awarded the business to Supplier B, Supplier A can claim that you stole their idea and gave it to a competitor, which is clearly unethical.
However, if you have several suppliers bid on the same specification and end up awarding the business to a supplier whose bid is based on a specification that differs from what other suppliers were required to base their bids on, then that is unethical as well.
There are at least two solutions that I'd recommend:
- When a bidding supplier suggests a cost savings idea, you can say "Thank you for that idea. However, to have a fair and ethical bidding process, I cannot accept a bid whose specification does not follow the same rules as everyone else. Therefore, we have two options: (a) we can stick with our original specifications, or (b) we can amend the request for proposal and give all suppliers a fair and equal opportunity to bid on the revised specifications. However, because the specification revision is your idea, I will not share it with other suppliers without your permission. Which option can we agree upon?" This is somewhat of an old approach that doesn't reap the benefits of modern supplier collaboration, but at least it is ethically proper.
- Structure all RFP's such that suppliers are encouraged to submit cost savings ideas and alternate proposals and include a disclaimer that reserves your right to accept a proposal that contains a beneficial suggestion, even if that suggestion involves a change to the specifications or other requirements. Technology from vendors like CombineNet allows for "expressive bidding," which gives suppliers the flexibility to submit proposals that might be more beneficial to you, rather than just bidding on inflexible requirements. This is a modern approach that you can expect to see more of in the future.
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Other Editions of PurchTips:
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