News last week that Home Depot fired four purchasing managers for unethical purchasing tactics will certainly cause other companies to scrutinize their sourcing and supplier management methods. Discussions with supply management executives clearly indicate that automation can enforce standards, audit actions and decisions, and ensure integrity across all aspects of strategic sourcing, contract management, and supplier relationship management.

On the most simplistic level, supply or contract management software guides buyers and other stakeholders through a standard, company-approved process that requires detailed specifications, regimented tasks, and auditable decision-making frameworks. It also reinforces a level playing field so all suppliers equally understand the requirements and selection criteria, enabling fair and open competition.

In fact, integrity or ethics are intangible benefits of technology that never shows up on industry benchmarks but always comes up in conversations with supply or contract managers. On many occasions I have heard these execs say one of the things they like most about technology is that “it instills a new level of visibility and integrity into the process.”

Here’s just a few specific examples of how automation can aid initiatives to reinforce purchasing ethics:

• The grandfather of modern supply management, Dave Nelson, has on many occasions touted how supply management software solutions reinforce standards and discipline that were missing in the offline world. The former CPO of Honda, John Deere, and Delphi said: “Buyers do not like e-sourcing because it makes them do their work and it keeps them honest.”
• SpendMatters Jason Busch is a bit more blunt in his assessment: “e-Sourcing doesn’t allow buyers to select suppliers based on the size of their Morton’s [steakhouse] expense account.”
• At the Supply Management 2.0 Forum, ITT Industries e-Sourcing Program Manager Jessica Dunlop said technology has not only reinforced standard processes but it has also improved trust and relationships with suppliers. “[e-Sourcing] ensures clarity, integrity, and fairness in the sourcing process,” said Dunlop, noting that not only does ITT clearly communicate its award criteria and approach up front, it also meets with “losing” suppliers to provide guidance on why they lost and how to win future business. “Suppliers have been very excited about this process,” said Dunlop. “Based on these meetings one supplier went out and invested in 10 new machines not just to win our business but because they understood it was the right thing to make their business more competitive over the long run. Another supplier did a joint venture in China.” And, yes, each of these suppliers were awarded business from ITT in subsequent sourcing projects.

To be clear, technology will not instill purchasing ethics in an organization that lacks integrity. But it does provide guidance to encourage supply managers to follow standard and ethical procedures. It also gives executives the visibility to identify and correct questionable ethics before they get out of hand.

To learn more about how to instill ethics and integrity into your supply management processes — and to hear about strategic sourcing best practices — catch ITT’s Jessica Dunlop’s presentation at Empower 2007. To register or for more information on Jessica or the nearly 50 other supply management execs speaking at Empower 2007 click here.