This writeup explains what is the role of a purchase manager in an organization

1. ICFAI BUSINESS SCHOOL (IBS)
PROJECT
ON
Role of Purchase Manager and Ethical
Issues in Purchasing
Submitted by:
Ashish Baid (07BS0829)
Subject: Business Ethics & Corporate Governance
Semester: 4th
Submitted to:
Prof. Santanu Mitra

2. Purchasing refers to a business or organization attempting to acquire goods or
services to accomplish the goals of the enterprise. Though there are several
organizations that attempt to set standards in the purchasing process, processes
can vary greatly between organizations. Typically the word “purchasing” is not
used interchangeably with the word “procurement”, since procurement typically
includes Expediting, Supplier Quality, and Traffic and Logistics (T&L) in addition to
Purchasing.
The best and most successful organizations recognize that they will only prosper
in the long term if they satisfy the aspirations of their stakeholders; including
customers, suppliers, employees, local communities, investors, governments,
public interest and environment groups. The result is that some companies are
imposing codes of conduct on both their suppliers and customers to ensure to
ensure that other company’s policies or practices do not reflect unfavorably on
them.
A Purchasing Manager is an employee within a company, business or other
organization who is responsible at some level for buying or approving the
acquisition of goods and services needed by the company. It is he purchase
manager who interacts frequently with the suppliers and other channel members
and their behavior can and does affect how suppliers and others view the firm.
Approximately 60% of the firm`s sale is controlled by the purchasing function in
some of the industries. The position responsibilities may be the same as that of a
buyer or purchasing agent, or may include wider supervisory or managerial
responsibilities. A purchasing manager may oversee the acquisition of materials
needed for production, general supplies for offices and facilities, equipment, or
construction contracts. A purchasing manager often supervises purchasing agents
and buyers, but in small companies the purchasing manager may also be the
purchasing agent or buyer.
Role of purchase manager:
The purchase manager has a strategic business function to perform. Purchasing is
a window to the outside world and hence the prime function of purchasing is
remaining sensitive to the external market situation and also of giving feedback to

3. the other functional areas of the organization. The purchase manager plays a
major role in getting the right quality of material, in the right quantity at the right
time. The purchasing department is in direct contact with the suppliers. A long
term relationship with these suppliers is possible only if there is an open
communication and trust between the suppliers or buyers. By behaving ethically,
the purchasing department can built up a good image of the company and prove
the profitability of the firm. With greater importance to just-in-time purchasing
and total quality management in product manufacturing, the importance of
purchase manager has increased considerably. Some of the ethical issues that are
associated with the purchasing function are deception, bribery, price rigging, and
the sale of unsafe products. The role of purchasing department could be:
To ensure the availability of proper quantity and quality of material for
smooth functioning of the production department
To procure materials at reasonably low costs (without compromising on
quality) for the company
To ensure supply of quality materials
To be aware of various substitute materials available in the market, their
prices and utility to the organization
To pass on information regarding purchasing to other departments of
the company such as design, production, sales, finance etc
To study possible substitutes of raw material
To identify and develop new vendors and maintain a good relationship
with existing vendors. Vendor relations, vendor monitoring or
evaluation and development of new vendors is an integral part of the
purchasing executives job
To develop good procedures and systems for the purchasing
department

4. To Co-ordinate with other functional departments, to achieve continuity
of information flow and integration between different departments to
the extent possible
In their professional relationships, Buyers/ purchase manager must commit to
the following principles of Honesty, forthrightness and impartiality in their
relations with suppliers:
To provide suppliers accurate information
To provide the same degree of information to all suppliers involved in a
particular project
To obey all applicable national and international laws, particularly those
relating to the rules of fair competition
To issue clearly defined criteria for selecting candidates and awarding
contracts
To provide information to candidates who are not selected on why their
offer was not retained, without divulging confidential information
To honor the terms of contracts, promises, and agreements, particularly
with regard to payment deadlines
To respect the confidential nature of any information that might harm
the interests of a supplier, Group company or customer
To seek rapid, equitable solutions in case of disagreement
To maintain respectful, honest, courteous, and fair relations with all
parties
Purchase research is another important area of importance for purchase manager
as it involves studying the present trends regarding the cost of various input
materials and also that of general economic conditions, industrial conditions and
national and international developments that may be of importance to the
organization. With the development of just-in-time concept by Japanese whereby
the objective is ‘nothing will be produced until it is needed’ the traditional
relationship between buyers and sellers had changed, now emphasis is given on
product quality, delivery performance, schedules and price.

5. Ethical issues in purchasing:
A study conducted by Sibley (1979), compared the image held by purchasing
department had about itself with the image that the other departments in the
organization had of it. The study found that the other departments thought it was
okay for the purchasing department to accept gifts from the vendors. Another
survey conducted by Rudelius and Buchholz (1979) revealed that most purchase
managers were concerned about accept gifts. They wanted clear guidance from
top managements in these matters. Most purchasing personnel believed that it
was not wrong in accepting inexpensive gifts, but had reservations about
accepting expensive gifts. Although most studies revealed that by and large the
personnel maintain high ethical standards, there is also evidence of many
unethical practices. Most purchasing managers are charged for adopting the
following unethical practices.
Accepting free gifts: Buyers are reluctant to acknowledge that suppliers are
bribing them. Studies indicate that most buyers are honest and ethical in
working with suppliers. Gifts offered as a simple expression of courtesy and
of little value may only be accepted if they are infrequent and are in
relation to events which justify them, such as Christmas, and are
appropriate to the customs of the country.
Deceiving suppliers: Purchasing personnel often resort to deception
(making exaggerated questions about the quality of the suppliers) to
pressurize the suppliers to cut prices and to get orders. Managers defend
their purchasing personnel by arguing that such deception is necessary to
increase competition among suppliers and get the best terms possible. But
professional purchase managers feel that these kinds of tactics can destroy
the trust that is vital for maintaining vendor relations.
Discrimination & favoritism: Showing favoritism and discrimination
between suppliers is also considered unethical purchasing behavior.
Purchase managers often favor suppliers who are also good customers.
Thus developing a mutually beneficial relationship. In some cases purchase
managers discriminate in favor of suppliers who are close to the top

6. management so that they can gain the support and confidence of the top
officials. Such discrimination denies an opportunity to these suppliers who
can supply better quality products.
Disclosure of confidential information: Disclosure of confidential
information is a serious issue in purchasing. In exchange of confidential
price related information, suppliers promise to reward the purchase
manager. Purchase managers in turn operate a tendering system in which
the criteria for selection are revealed only for some suppliers, thus putting
other suppliers at a disadvantage. Sometimes companies leak the bid
amount so as to encourage other bidders to quote the lowest possible
prices. This selective leakage of information goes against the concept of
ethical purchasing.
Forward buying – Ethical or Not: In order to ensure the availability of raw
material buyers often resort to ‘forward buying’ or buying of stocks to meet
the future requirements. If the purpose of this kind of buying is to ensure
supplies to the production department, and not to make speculative profit
against inventory then it is justifiable, but if the main objective is to
produce goods and market them for high prices by taking advantage of its
shortage then it becomes un-ethical.

7. Bibliography:
1. ICMR Textbook on Business Ethics and Corporate Governance
2. Purchasing_Ethics__GDF_SUEZ_110708.pdf
3. ethical_bus_practices.pdf
4. Ethical_Business_Practices.pdf