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Corruption could be why you lose

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Checks and balances are critical to the sourcing and procurement side of a business. When I first started in this business I sat in the office of a buyer and explained the value of adding competition into his sourcing process. After a few minutes of explanation I noticed the buyer wasn't listening to me anymore. I stopped talking and waited for his glazed expression to refocus. Finally, he focused on me again.

I said, "Would this conversation have gone better if I put $500 on the table before I started talking?"

He looked at me for a long minute, leaned forward and put his hands flat on his desk and said, "$1000, but now we are speaking the same language," then leaned back with a look that could only be termed smug.

He controlled the spend.

He controlled the supplier list.

No one was getting work from that company unless you paid the toll.

If you own a manufacturing business or are responsible for the sourcing and procurement think about this story as it applies to your business. Who controls your spend? Are your supplier relationships based on quality, delivery and price, or are they based on something else?

Unfortunately graft is rampant in the manufacturing world.  Is your firm's reputation being damaged because of it?  Are you losing business because of corruption?

Industry Week's article on The Business Case for Avoiding Bribes says:

...according to a Deloitte Financial Advisory Services survey.

The firm's "Look Before You Leap" survey  published in February of more than 500 investors and executives shows 63% of respondents said they renegotiated or pulled out of planned business relationships, mergers or acquisitions over a three-year period because of Foreign Corrupt Practices Act, or FCPA, issues.

and

Ben Heineman, senior fellow at Harvard's schools of law and government and former General Electric senior vice president and general counsel, points to Siemens AG as a prime example of how noncompliance can backfire. The company paid a record $1.6 billion FCPA fine in 2008 for paying off foreign officials.

Siemens is one of the largest companies in the world and they paid a huge fine for shady business practice.  What's going on in your company? Is there transparency in your spend?  Are private agendas and profiteering costing your company business or damaging your bottom line in other ways?  Do you know?

.

David Landsman

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