 |
|
May 25, 2012
Mark Clayton: Is Hillary's State Dept. hacking Al Qaeda? Not quite
Erika Bolstad: Temple cancels Wasserman Schultz speech
The Kosher Gourmet by Ethel G. Hofman: The former president of the International Association of Culinary Professionals, whose members included the likes of Julia Child, is back with contemporary Shavous cuisine: Ruby Fruit Soup, Sweet Noodle Kugel with Cheese, Key Lime Curd, Calsone Casserole Frittata with Wild Mushrooms, Sun-dried tomatoes and Olives, Baked Tilapia with Pepper Cheese Cream and Brown Sugar Shortbread
May 24, 2012
Jeff Jacoby: The peace process battered Israel's reputation
Michael Muskal: 'Pro-choice' position hits record low, according to poll
Chris Farrell: Are We in a Tech Bubble?
The Kosher Gourmet by Penelope Wall: PHILLY CHEESE STEAKS --- hold the steak!
May 23, 2012
Tony Pugh: More private colleges offering tuition discounts
Mary Beth Franklin: How to Choose the Right Annuity for You
Tina Susman: The wig wasn't enough: Man gets 13 years for posing as his dead mom
The Kosher Gourmet by Emma Christensen:A simple way to do fish right
May 22, 2012
Warren Richey: Can US group challenge overseas surveillance act? Supreme Court to decide
Thomas M. Anderson: Walking Away From a Mortgage
The Kosher Gourmet by Megan Gordon: Enjoy a celebration of the most rich and layered flavors: Black bean, sweet potato and quinoa chili
May 21, 2012
Mark Clayton: Cybersecurity: How US utilities passed up chance to protect their networks
Howard LaFranchi: NATO summit: Who will foot the bill for long-term Afghanistan security?
Chris Farrell : Earn Dividends in Emerging Markets with This WisdomTree ETF
Stephen Whiteside, Ph.D. : Mayo Clinic Medical Edge: Social anxiety disorder --- or just shy?
Guy Jackson : Victim's father regrets death of Lockerbie bomber
The Kosher Gourmet by Mario Batali: Famed chef's veal shoulder farsumagru: A festive meat course for late spring
May 18, 2012
Rabbi Berel Wein: Striving: The People of the Book's Book for (All of) the People
Steven Goldberg: 5 Great Stock Picks and the Exchange-Traded Fund that Owns Them
Mary Pickett, M.D.: Ask the Harvard Experts: Don't be forced into gluten-free lifestyle based merely on a doctor's false-positive test
The Kosher Gourmet by Carolyn Malcoun: DIY healthy lunchbox treats: HOMEMADE FRUIT BARS for kids and brown-bagging adults alike
May 17, 2012
Warren Richey: Teacher fired for being unwed and pregnant can sue religious school, court rules
Josh Mitnick: Netanyahu's 'centrist' coalition is already proving it's anything but
Steven Goldberg: Earn Dividends in Emerging Markets with This WisdomTree ETF
Amina Khan: Research links coffee to lower death rates
The Kosher Gourmet by Faith Duran : Cheesy Potato Breakfast Casserole with Cheddar and Sun-Dried Tomatoes
May 16, 2012
Carmen Terzic, M.D., Ph.D. : Mayo Clinic Medical Edge: A variety of exercises can help improve balance
Melissa Healy: National strategy on Alzheimer's disease aims to halt it by 2025
The Kosher Gourmet by Joyce White : GOODNESS GRACIOUS: GREENS! 4 winning recipes that are no longer just for down-home folks (Includes expert tips & techniques)
May 15, 2012
Kristen Chick: Obama administration resumes arms sales to Bahrain despite serious unresolved human rights issues. Activists feel abandoned
Pat Mertz Esswein: Homes are now affordable again and mortgage rates are low. What you need to know before you buy
Kathy Kristof: Our Practical Investor Fights Inflation with These 6 Investments
Sue Hubbard, M.D.: The Kid's Doctor: Lactose intolerant young child? Check again
The Kosher Gourmet by Kathy Hunt: Spread a Little Excitement with EXOTIC CONDIMENTS (4 RECIPES)
May 14, 2012
Lisa Gerstner: How to Protect Your Identity, Finances If You Lose Your Phone
Harvard Health Letters: Heart disease and dementia
The Kosher Gourmet by Megan Gordon: MANGO COCONUT OAT MORNING MUFFINS are a bright but hearty delight
May 11, 2012
Jessica L. Anderson: Get the Best Deal on a Used Car
Jett Stone: Forget face-lifts and fake knees. Scientists have seen the fountain of youth --- and it's broccoli
The Kosher Gourmet by Chef Mario Batali: The famed chef's vegetable dish that tastes true to the season: FAVAS AND SUGAR SNAP PEAS WITH POTATOES AND TARRAGON
May 10, 2012
Sergei L. Loiko: Putin sends warning to U.S., NATO in Victory Day speech at Red Square
Mary Rourke: How being a 'mentch' got Vidal Sasoon his start and fighting in Israel's War of Independence provided him with confidence and a strong sense of his own identity
Jeff Bertolucci: Get Home Phone Service for Less Than $10 a Month
The Kosher Gourmet by Betty Rosbottom: Gleaming with its golden, crimson, and snowy white hues, this silken smooth and creamy STRAWBERRY ORANGE TRIFLE looks impressive, but is easy to prepare
May 9, 2012
Sharon Palmer, R.D. How you can reduce your risk -- or delay -- chronic diseases associated with aging
|
| |
Jewish World Review
Oct. 31, 2005
/ 28 Tishrei, 5766
Supplier struggle
By
Rabbi Dr. Asher Meir
Is it unethical to play suppliers against each other to get the lowest bid possible?
http://www.JewishWorldReview.com |
Q. Recently a customer obtained a price quote, only to return a few days afterwards asking me to revise my quote to beat an even lower quote from a competitor. Is that ethical? How should I respond?
A. This game of playing suppliers off against each other is hardly new. The most famous exponent of this practice in recent generations was Jose Ignacio Lopez, purchasing czar for General Motors in the early 1990's. Lopez was famous -- or perhaps infamous -- for his multiple-round bidding process. GM would invite bids from a number of contractors, and then initiate further rounds of bidding on the basis of the lowest bids extant. Even after the bidding was done, Lopez would pressure suppliers for additional cost savings!
What were the results? On the down side, Lopez's policies alienated many long-term suppliers to GM, leading some to stop working with the company and others to adopt a more formal, arms-length relationship with the company in place of the previous cooperative relationship. On the other hand, he saved GE the astronomical sum of four billion dollars in only a year. Much of the saving resulted from actual improvements in production efficiency, rather than merely squeezing suppliers to GE's advantage.
Playing suppliers against each other in this way is not inherently unethical, but it does present many ethical challenges. Here are a few:
- Seeking bids must be in good faith. Jewish law forbids asking a price from a merchant if there is no intent whatsoever to buy from him, since this is an unjustified imposition. If the only purpose of the quote is to use it to browbeat another supplier, or to benchmark another round of bargaining, then this is taking advantage of the supplier. (1)
- It's forbidden to mislead the bidders. Most tenders are one-time encounters; if the purchaser doesn't have a firm intention to take advantage of the most advantageous bid, he should inform the bidders at the beginning of the process. Otherwise, he risks misleading them. (In Jewish law, this would be known as geneivat da'at, literally "stealing confidence".) (2)
- It goes without saying that it's forbidden to create pressure using bids which are fictitious or fabricated (shill bids). Of course the same applies when selling -- it's wrong to squeeze a higher price by inventing a non-existent new buyer. Outright lying is never an acceptable business practice.
- Another practice which some have attributed to Lopez is tearing up existing supply contracts in order to negotiate a better price. This would be considered a bad-faith practice. After negotiations have been concluded, and certainly after a contract is signed, seeking a new and more advantageous agreement can be condoned only if a truly material change in conditions occurred in the meantime. If a company simply can not make thrive under the existing agreement they may be compelled to revise it, but otherwise this is exploitative. (3)
Beyond the ethical considerations, there are also many practical considerations. GM did attain short-term cost savings, but there were also long-term costs due to alienation of suppliers. In GM's case cost savings were so huge that they probably gained in the long term, but this won't be the case for any firm which adopts this confrontational attitude.
Suppliers can take their own steps to protect themselves against this phenomenon. Many sellers take care to inform buyers that quotes should be considered final. A consistent policy can help forestall pressure from determined negotiators, even if it results in the loss of a few sales. It is worth pointing out that many suppliers themselves ultimately benefited from GM's pressure, as they ended up with remarkable productivity improvements and cost savings.
There's nothing wrong with being a tenacious negotiator and trying to obtain the best price from sellers. But buyers need to remember that there business is ultimately dependent on having a reliable relationship with suppliers, and take care to always deal with good faith and an eye to mutually beneficial long-term relationships.
SOURCES: (1) Mishnah, Bava Metzia 4:10. (2) Shulchan Aruch, Choshen Mishpat 228. (3) Shulchan Aruch, Choshen Mishpat 204
Every weekday JewishWorldReview.com publishes inspiring articles. Sign up for our daily update. It's free. Just click here.
THE JEWISH ETHICIST, NOW IN BOOK FORM
You've enjoyed his columns on JWR for years. Now the Jewish Ethicist has culled his most intriguing — and controversial — offerings in book form.
HARDCOVER
PAPERBACK
Sales help fund JWR.
|
JWR contributor Rabbi Dr. Asher Meir, formerly of the Council of Economic Advisers in the Reagan
administration, is Research Director of the Business Ethics Center of Jerusalem, Jerusalem College of Technology.
To comment or pose a question, please click here.
Previously:
Do family members have precedence in charity allotments?
What the world of business can teach us about our annual process of repentance and renewal
Are religious leaders subject to criticism?
Vindictive Vendor: How can I punish an abusive competitor?
Blogging Ethics: Is the blogger responsible for defamatory posts?
© 2005, The Jewish Ethicist is produced by the JCT Center for Business Ethics
|
