Ethical Aspects of Buyer-Supplier Relationship

The relationship between buyers and suppliers is increasingly important for business competitiveness. No company is self-sufficient, so the purchasing process is a basic function of any company. And it is essential that this relationship is based on trust and transparency in order to reach a win-win situation. So we are reviewing its ethical aspects and several well-known cases of companies that take advantage of their position.

A proper purchasing management ensures that every company has the best suppliers, in order to offer the best products and services, and achieve a competitive advantage. Therefore, mantaining a good and ethical relationship it is key to business success and the proper functioning of every company.

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What are the ethical limits that a buyer can impose to a supplier in terms of product design, packaging, brand, price, distribution, advertising and promotion?

In the first place, it is worth mentioning that before closing an agreement, the clauses of the contract between a buyer and a supplier are negotiated and both parties are able to sign or not sign according to their convenience. Therefore, once the contract is signed, it is understood that what the supplier undertakes to do is because he obtains some kind of benefit from it. Even so, an agreement can be accepted for various reasons such as not having other options and having no choice but to accept what they propose, even though this is almost denigrating for the company and its workers, you are forced to carry it out by some blackmail, or simply for being a newbie in the sector and wanting to earn a reputation by working for the best even if they are taking advantage of it (like an intern).

Therefore, as mentioned in the summary, the best relationship between a client and a supplier is that of collaboration between the two to achieve the best situation for both in the commercial aspect.

Therefore, a buyer should never impose anything on a supplier. There should be favorable conditions for both, ethically selected, and the relationship should also be beneficial for both not only on an economic level. Therefore, at all times both parties have to be aware of the strengths and weaknesses of both and thus reach the most satisfactory result possible together. Companies that grow together given the good relationship and the good work of both for each other create ties that are very difficult to break and through which both obtain greater benefits than from having tried to grow separately. So a customer should not put pressure on a supplier unless he knows for a fact that the supplier is trying to take advantage of him.

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Is there any recent case of public dispute between supplier and buyer due to pressure from the latter on the former in any of these aspects?

An example of the pressure of a customer towards a supplier is the case that has as protagonists Apple and Foxconn. The latter has suffered a significant amount of suicides among members of its staff under 25 years of age due to the high productivity demands it was being subjected to by the North American giant at the time when the latter was about to launch its novel Ipad.

As explained previously, a company must know the limitations of its supplier and under no circumstances, if it acted in an ethical manner, should it force it to carry out operations for which it knows in advance it is not qualified.

Therefore, the options available to you are, without neglecting this company, that of the best sales forecast and start manufacturing beforehand or hiring a third company to complement production.

As an example of perfect collaboration between suppliers and customers, we can take as an example the country of the rising sun, Japan. After its recent nuclear accident, the client companies of companies affected by the debacle, instead of looking for other suppliers and disassociating themselves from the tragedy, sent their own professionals to help them solve the problems to promote the quickest of recoveries. This way they worked hand in hand, growing up together.

Some large brands have had problems as a result of their suppliers’ actions to meet the prices or production standards that those brands demanded of them. It is famous, but already old, the case of Nike and the employment of children in the Far East. We are now explaining in detail a specific case.

There is no name of specific company to mention, since it is a group of several companies that is dedicated to the dismantling of ships on the beaches of Bangladesh, specifically in Chittagong. This is a business that was previously carried out in first world countries and due to both the high cost of labor and environmental laws, it was decided to move to countries such as Bangladesh, India and Pakistan. A business in which a profit of 1 million USD is obtained by making an investment of 5 million in Bangladesh, and yet they obtain “only” $200,000 if it were carried out in India, a country where workers protested at the time because of the terrible conditions labor and improvements were recognized.

This precarious situation leads to the poorest families in the country, who distribute their relatives from a very young age to work in the textile industry, in the brick-firing industry or in the scrapping of ships.

Such is the situation in the country, managed by the political-economic power of a few families, that its people have no choice but to work in these degrading tasks even seeing how their closest loved ones have lost their lives leading to perform these tasks.

Therefore, when it comes to analyzing the supplier’s form of action (shipping company that sells the ship), from my point of view it is more than clear. They are taking advantage of a country with few resources given its poor geographical position and its strong monsoons that has no choice but to settle for the leftovers of great world powers. They are treating today, the waste of the first world.

Let’s think about the need for large shipping companies to sell these ships at almost ridiculous prices compared to the outlay made for the purchase of the ships when they had just left the shipyard, when they could sell them for less money and thus leaving the possibility to carry out the task in more developed countries and with greater possibilities of carrying out this type of work with greater occupational safety and infinitely less polluting the environment.

Although, even these shipping companies maintained the price of the ships, the companies that acquire them could “only” earn $200,000 and carry out operations in countries better prepared for such purposes.

If we analyze the performance of the buyer (Bangladesh), in this case it can do little. The inhabitants who perform inhumane work for an inordinate amount of hours a day have no other way of earning their bread, so they cope with whatever is thrown at them. It is very sad to say, but they are more concerned with obtaining food than with the fact that they are putting their lives on the line every minute they spend inside a ship during its dismantling.

Finally, it should be noted that in situations like this, the only person responsible is the supplier since the only thing that interests him is to profit the more the better without caring the least what this may cause.

One Reply to “Ethical Aspects of Buyer-Supplier Relationship”

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