Ethics - Responsibility to the Employer

When accepting a Supply Management position with a company the relationship between the company and staff member are different than most other staff members within the organization. The position that is closest in nature to the Supply Management position is the sales representatives. Supply Management and Sales create an agent relationship with the employer because each position represents the interest of the company to other companies or individuals. Both positions are given parameters within which they must operate.


The Institute for Supply Management (ISM) lists several guidelines that a Supply Management Professional should adhere to. They include understanding the authority granted, obtain maximum value, avoid activities that compromise the interests of the employer, look-out for unethical and unlawful activities and notify the employer, do not use the employer's name without authorization, and avoid using the employer's purchasing power to benefit individuals.


Let's look at granted authority to act for the employer. For example, the Supply Management staff member may be assigned capital equipment responsibility in which purchases can be made up to $5,000.00 with the requisitioning department director's signature. If an order was placed for MRO items, or over the $5,000.00, or without the proper authorizing signatures, they have exceeded their authority. This is one of those ethical standards that are supported by a legal statute, "The Law of Agency." This law establishes the agent relationship between the employer and the Supply Management Professional to allow him/her to act of the employer's behalf as an employed third party. The law establishes three levels of Agency; Universal, General, and Special.

1. Universal Agent: This agent holds a broad range of authority to represent and act on the principals behalf. The individual my hold the power of attorney or be a professional (i.e. lawyer).


2. General Agent: This agent had limited or defined authority to perform a series of transactions over a continuous time period.


3. Special Agent: This agent has authority to act for the principal for either a single transaction or for specified related transactions defined by a period of time.

The Supply Management Professional is normally classified as a "General Agent" that covers the length of employment and the duties and responsibilities assigned to them upon hire or any changes that are made during employment.

As in the example above there are normally parameters assigned these staff members. Their actions can impact how they and the company are viewed by others. I discussed perception in a previous writing and here is one area that perception may impact the Supply Management Professional directly. There are three areas of authority that is recognized; Actual, Apparent, and Implied.

1. Actual Authority is established by the employer by either their words or actions. This can be created and changed either verbally or in written format (i.e. policy, contract, letter, or e-mail). This authority is clear and allows the agent to act within the scope provided and to bind the employer based on the actions performed by the agent.


2. Apparent Authority is based on words or actions that lead a reasonable person to believe that they have received authority to act on behalf of the principal. The assignment of an individual to a position that there is an assumption that certain authorities are attached.


3. Implied Authority are those acts that are necessary to carry out the expressed authority to act.

It is best that the Supply Management Professional has actual authority granted so that the actions that they take are specifically laid out and not open to interpretation. However, individuals outside the organization may make assumptions based on the company's representative based on how they act or even by the title they hold. A company should be careful with the creation and assignment of job titles because authority may be erronerously assumed by both the employee and/or outside individuals.

The main resposibility to the employer is fiduciary. This is where the Supply Management Professional should be excelling by producing the best value for the dollars that they commit on behalf of their employer. It does not matter whether this is hard or soft dollars or even the difference between cost savings and cost avoidance. We should strive to manage the dollars efficiently so that there are more dollars available for use within the organization. This starts with basic education of how the organization functions, it's accounting practices (i.e. paying invoices within terms, etc.), understanding the function of materials purchased and their alternatives, value analysis, etc. Based on these and other financial items the Supply Chain Professional should always keep the best interests of the company first. For example, years ago there was an ISM ethical standard about using the company's purchasing power to get price concessions for staff. This was later changed because many companies offer any of their customer's employees discounts off of purchases. What has to be watched for is that the company is not receiving additional discounts based on the dollars the employees spend with the supplier.

I mentioned education and I need to expand on this. It is our responsibility to maintain our own education on new theories and practices, so that we will be able to continue to maintain the best interests of our employer. Many feel that it is the responsibility of the company to pay for ISM Chapter meetings, seminars, etc. It is a benefit many companies have provided and with many it has become an expectation. But it is something that you agreed to upon hire - to do the best you can for the company hiring you, so make sure the salary you agree to will allow you to continue your education. If you do not maintain your education you are not providing what is expected as a part of your job performance. Over time, doing just your job will impact your company and ultimately you. The Supply Management Professional should always strive to provide value added performance and functions because anyone can place a purchase order.

Remember, whether you look at hard or soft dollars, or cost savings and/or cost avoidance, or other financial criteria for a Supply Chain Professional a dollar saved is a true dollar earned and seen on the bottom line. We need to use every ethical and legal tool possible to assist a company in their efforts for a good bottom line.