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Kyerico Company Limited is a relatively young company located in Ghana which has been in existence for the past 20 years, conducting its primary business with sourcing and supply of eye drops from suppliers from India, China and Germany. In line with Kyerico's cooperate social responsibilities and their drive to embark on sustainable procurement, the procurement manager of the company paid an unannounced call to their overseas suppliers. Nonetheless, the ethical issues spanned from both external and internal sources with some external companies such as Felico, Alexco and the internal issues arising from Kyerico itself.
According to Mullins (2005), ethics is concerned with the study of morality: practices and activities that are considered to be importantly right or wrong, together with the rules that govern those activities and values to which those activities relate.'
The following were some of the ethical issues or findings document on their audit sheet:
Demographics of Felico suppliers was not mentioned in the case study and for that matter, it can be deduced from the list of other suppliers locations that it is located in India.
Health and Safety Issues
The above mentioned supplier is located in India - a country where the health and safety issues of some employees are not taken to heart by employers. Health and safety issues comprises of the provision of safe and portable drinking water for staffs, provision of personal protective equipments like safety overalls, goggles, hand gloves, safety boots and the likes. As part of any factories act, the health and safety issues of any company by legislation should take into account the health and safety of every employee. Precondition for selection and regular unannounced visits.
During the unannounced audit carried on the suppliers overseas, the audit team from Kyerico uncovered the use of children or underage staffs in Felico suppliers. Using or engaging underage staffs for the production of eye drops or any form of work under the United Nations rules is highly prohibited and as such strict sanctions will be meted out employers who are found culpable. Further, the children who are found in the suppliers base are to be encouraged to take up schooling and should in case access to schools are difficult, Felico as part of their cooperate social responsibility should establish school in and around the community in which they operate. This will help eliminate the number of underage child working in the production line.
Frightening and punishing staffs as a measure for increasing performance or productivity when staffs are not able to complete their job. Instead, key performance indicators should be put in place for all staffs as bases for their performance. Should in case a staff does not met the set out KPI's over a number of attempted periods a letter should be served to the person to sit up and followed with dismissal.
Kyerico Company Limited
Further in house audit uncovered a whole lot of inconsistencies in Kyerico's stock both the automated and physical stock. The audit sheet recorded an employee pilfering some of the eye drops in Kyerico's warehouse and selling them on the market stall. Hence, a security check system should be put in place where at every stage, an authorising officer should approve of every stock as well as CCTV cameras should be installed.
At Kyerico, a Female buyer - Asantewaa complain to the Procurement Manager she was not remunerated as much as her male colleagues were receiving. Thus, the labour laws and the international trade laws do not encourage discrimination of gender. Equal work for equal pay for all staffs irrespective of one's gender should be applied to all employees.
Business Gifts and Hospitality
The aforementioned supplier is based in Germany sponsoring some of the senior managers of Kyerico have been lodging in exclusive hotels and attending other events such as banquets and premium sporting activities.
Although Alexco is gaining 40% of Kyerico's orders despite the cost of the eye drops against the backdrop of supplying quality product is not prudent businesswise for the senior managers of Kyerico to be seen in the books of Alexco. This can lead to corruptible practices were favours are most likely to be returned to Alexco by the said senior managers. Thus, the senior managers should maintain a professional working relationship with the supplier.
Mullins, JL (2005) management and Operational Behaviour, 7th edn. England: FT Prentice Hall
The Chartered Institute of Purchasing and Supply (2006), management in the purchasing function.
QUESTION ONE (1b)
Create a set of rules for ethical behaviour that will enable Kyerico to prevent these internal and external issues occurring in the future.
Organizations do not exist in isolation but rather exist on its moral principles and guidelines to which create a competitive advantage for them in their industry. For the organization again, its industry demands for greater accountability in society, businesses and other organizations are progressively more recognizing the need to measure, monitor and report on their social and ethical performance. Thus a set of ethical rules are created to fore fill the above needs: hence the code of conduct or ethics.
Code of ethics is 'a set of moral principles or values, used by organizations to steer the conduct both of the organisation itself and itself and its employees, in all their business activities, both internal and in relation to the outside world'. (Cole 1996)
In the past, many organizations resorted to the use of philosophical approaches in establishing their ethical rules. Some of these are: Deontological ethics, Utilitarianism, Teleology and Ethical egoism.
Deontological ethics is in keeping with Scripture, natural moral law, and intuitions from common sense. The word "deontological" comes from the Greek word 'deon' which means "binding duty."
According to Moreland 2009, a utilitarian approach to morality implies that no moral act or rule is intrinsically right or wrong. Rather, the rightness or wrongness of an act or rule is solely a matter of the overall non-moral good produced in the consequences of doing that act or following that rule. In sum, according to utilitarianism, morality is a matter of the non-moral good produced that results from moral actions and rules, and moral duty is instrumental, not intrinsic. Morality is a means to some other end; it is in no way an end in itself.
Kyerico Company Limited as part of their audit processes uncovered a lot of ethical issues that were not adhered to by both their internal and external customers. These ethical issues have been identified and as such the following set of rules below have been developed to help eliminate these issues. Ethical issues identified includes: Business Gifts and Hospitality, Discrimination, Pilfering, Intimidation, Child Labour and Health and Safety Issues.
Following a set of rules for ethical behaviour proposed below, Kyerico can prevent these internal and external issues from occurring in the future.
Business Gifts and Hospitality
Business gifts - Business gifts, other than items of very small intrinsic value such as business diaries or calendars, should not be accepted.
Hospitality - Kyerico employees when sponsored by a supplier (eg. Alexco suppliers in Germany) to attend an event, the said employee upon his or her return should write a report on the event attended explaining how the event will benefit the company's strategic relationship with the supplier in future. Also, how he or she will not be influenced in any way whatsoever to act corruptible to favour the supplier. Thus the frequency and scale of the hospitality should the influence the recipient to act in ways to favour the supplier.
Both Kyerico and their Suppliers should develop and implement a policy of equality for all in the workplace with no discrimination on the basis of race, social order, religion, nationality, age, gender, marital status, disability, union membership or political affiliation. As illustrated in the case study (Asantwaa's gender). This breeds apathy and nepotism at the work place which primarily affects production as well as negatively transferred to their relationship with clients.
Kyerico should seek to ensure that all their organisation's suppliers do not engage child at their work place and as such their suppliers should adhere to the following set of rules:
Suppliers as part of their cooperate social responsibility shall take it up upon themselves to eliminate all forms of child labour by providing to communities they operate in with schools or at least scholarships to underage children found to be performing child labour. This will facilitate their stay in schools whilst helping to eliminate child labour.
Suppliers shall not employ underage children in accordance with the provisions of ILO Convention 138 and the United Nation's Convention on the Rights of the Child.
In this context, 'child' according to the above conventions refers to any persons under 15 years of age, unless local legislation on the minimum age stipulates a higher age for work or mandatory schooling, in which case the higher age shall apply.
Suppliers found to be engaged in child labour for their production or services shall have their contracts terminated as stipulated in their contracts.
Suppliers should abuse or intimidate their employees under no condition whatsoever. The suppliers must develop a set of disciplinary measures and KPI's for all actions and performances and should be well documented as well as copies given to all employees together with their job descriptions.
Suppliers' employees who are not capable of reading the above disciplinary measures and their job description should ensure that it is well interpreted and well understood by the employee before they sign the document.
Health and Safety Issues
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
Suppliers' employees should be trained in health and safety policy and procedures
Suppliers should monitor compliance with health and safety policy
Suppliers should provide employees (at the supplier's expense) with any necessary health and
safety equipment, e.g. gloves, masks, helmets
Working conditions should be comfortable and hygienic
Suppliers should identify specific hazards, e.g. substances or equipment, and should implement
processes to minimise risk
Suppliers' employees should have access to clean toilets
Suppliers' employees should have regular breaks and have access to water suitable for drinking and washing as a minimum
After all the aforementioned, the commitment or management support for its implementation should be obtained to make it a success.
Should be monitored by top management
Consequences of these ethical issues should be backed by clearly stated
The rules must be well understood by all and easy to abide by
Cole, GA (1996) Management Theory and Practice, 5th edn. London: Continuum.
Kamm, F. M. (2007). Intricate Ethics: Rights, Responsibilities, and Permissible Harm. New York: Oxford University Press. ISBN 0-19-518969-8
Moreland J.P (2009). www.equip.org/articles/ethics-theories-utilitarianism-vs-deontological-ethics/. Online date 29/01/2013 14:20pm
Waller, Bruce N. 2005. Consider Ethics: Theory, Readings, and Contemporary Issues. New York: Pearson Longman
QUESTION TWO (2)
Critically evaluate how the procurement function can contribute to product development by the improvement of internal and external relationships
Objectives of Procurement Function
Ensure continuity of supply, maintaining sound cooperative relationships with other departments; develop staff policies, procedures and organization to ensure the achievement of the foregoing
Muhlemann et al (1992) throws more light on the procurement functions saying 'providing information on new products, processes, materials and services. This should also advise on probable prices, deliveries and performance of the products under consideration by the research, design and development functions.'
According to van Echtelt et al (2008), when engaging in product development as procurement function; three activities should be done parallel to each other in other to achieve the goal. These activites include:
Strategic management processes - it is focused on providing the infrastructure for future technological collaboration with suppliers. Here one can identify the most company to collaborate with.
Operational management process - this relate to management of individual development project which helps in the decision where suppliers are given the access to input into technological projects.
Collaborative processes - involves fostering and implementing technological collaboration with external partners.
Being involved in cross functional teams
Muhlemann, A. et al (1992) Production and operations management, 6th edn. London: Pitman Publishing.
Van Echtelt, et al.. (2008) Managing supplier involvement in new product development: a multiple case study, journal of product innovation management, (25): 180-201
QUESTION THREE (3)
Critically evaluate the benefits and risks to sustainable procurement policy of the following supplier relationships:
In this era of globalised and ever changing business trends, procurement managers are tasked with the procurement of goods and services in other for their organizations to remain competitive in their industry. It is on this backdrop that, issues of sustainability procurement have emerged whilst maintaining good supplier relations.
Sustainable procurement comprises of giving due consideration to the impact of the procurement on the environment, on the community, and on the social conditions of those delivering or receiving the product or service. It focuses on what your products are made of, where they come from, and who has made them as well as whether you need to make the purchase at all.
If you consider all these factors you can make better choices and achieve the best overall value for money on a whole-life and long-term basis. Mr. Akrofi 2013 (cited in Welsh Procurement Initiative - Sustainable Public Sector Procurement Guidance 2004)
Supplier relationships in this light can be group into three categories with their various benefits as well as their risk factors and these relationships are: Long-term supplier relationships, Preferred suppliers and Public Private Partnerships (PPPs)
Long-term supplier relationships
It is generally as the result of a strategic purchasing approach
Benefits: alignment of buyer/supplier strategies, sharing of innovation and better continuity of supply
Risks or disadvantages: complacency and financial overdependence by either party
results from pre-qualification against a specific set of sourcing criteria.
Benefits: fewer suppliers to manage and develop on the back drop of selection based on sustainable criteria
Risks or disadvantages: missing out on innovations from non-preferred supplier / buyer unresponsiveness to change
Public Private Partnerships (PPPs)
made between public and private sector organizations
Benefits: sharing financial risk and best practice,
Risks or disadvantages: inequalities in staff pay and conditions, lengthy and expensive payback terms