The concept of Compliance, already known in the corporate scenario, aims to adapt companies to legal and ethical rules that guarantee values such as transparency in business relations and procedures. It is also very effective to detect and treat possible frauds, deviations or non-conformities that may happen in the company.
But what about compliance in the purchasing department? What are its benefits? That is the subject of this article
Fraud in the purchasing sector
Among other responsibilities, it is up to the industry to judge the best proposals for the supply of materials, as well as to choose which suppliers will be hired.
By moving varying amounts of money, these negotiations can open up gaps for unofficial agreements – where the choice falls on the supplier that offers some kind of benefit. To investigate this scenario, Price Waterhouse Coopers (PWC) conducted a Global Survey on Economic Crimes – Brazil.
According to the study by the consulting and auditing services company, 44% of the companies that were victims of economic crimes in Brazil suffered fraud in the purchasing process. The survey also found that 69% of the victims detected fraud during the selection of the supplier, 63% in their hiring and 56% in the invitation to participate in bidding processes.
In addition, the survey pointed out the “opportunity” as the main factor to contribute to the criminal practice, since people who commit fraud usually know very well the existing regulations and know how to cheat them, which makes essential the existence of clear policies and training programs focused on ethics.
Continuing with the data, 64% of criminal attacks are committed by people who work in the company’s purchasing department. “When the fraudster is inside the company, his profile is balanced between middle management and team members, both slices with 39%. Members of the executive management account for only 17% of cases,” the survey found.
These data are ratified by Cláudio Marcelo Rodrigues Cordeiro, in his work “Internal and operational auditing: fundamentals, concepts and practical applications”, published in 2013. According to Cordeiro, fraud can occur when basic conditions such as intention, opportunity, insufficient internal control, weakness of an ethical policy associated with a weak code of conduct and risk inherent to the activity coexist.
Importance of Compliance in the Purchasing Department
The lack of compliance of the company’s performance both with the legislation and with its internal policies of good practices, regulations and codes of conduct may result in serious damages such as damage to the image of the company and its reputation in the market, compromise of the company’s results and, in more serious cases, criminal proceedings.
According to the author of the book “Compliance in Brazil: Consolidation and Perspectives (2008)”, Vanessa Alessi Manzi, four fundamental preventive and detective controls are required in a Compliance program:
- Establish a code of ethics for the organization;
- Develop professionals in the capacity to deal with ethical dilemmas;
- Create channels for identifying unethical conduct;
- Enabling the discussion of ethical dilemmas.
The author emphasizes that Compliance programs are not able to fully prevent illicit acts from occurring. However, risk management allows identifying, assessing, monitoring, recommending and reporting risks and combating them quickly.
Compliance in the purchasing department
Below are some practices that will help maintain compliance in the purchasing industry.
1- Creating a Compliance Program
The study by Price Waterhouse Coopers (PWC) pointed out that the most effective means of combating fraud is the prevention and mitigation of in-process risks and methods. In other words, the existence of a Compliance program in the purchasing department, establishing a code of conduct, training programs that involve ethical values and disseminate the established standards is essential. In addition to a channel for employees to report what they are seeing wrong, without having to identify themselves.
The main topics for creating a Compliance program in procurement are:
- Comply with existing laws, regulations and standards;
- Create a set of standards of conduct and ethical principles that are known to employees;
- Have clear and precise internal procedures and rules – to be obeyed by the entire team;
- Create reports that generate information and make the purchasing process transparent throughout the organization;
- Assist external and internal auditors offering all the items requested in an agile manner.
2- Frequent Audits
In addition to preventive controls and fraud detection, periodic audits are also a good tool within the Compliance culture in the purchasing department. These audits can:
- Avoid exchanging inappropriate favors or gifts between purchasing professionals and suppliers;
- Ensure proper control by preventing laws from being circumvented – even unconsciously;
- Verify that what is established in the contract is being duly fulfilled by the supplier;
- Observe if the business partners also follow compliance principles.
During the audit the entire acquisition process is evaluated. The user’s request (requirement, quantity and urgency), vendor selection, quotation, negotiation, order closing, physical receipt, storage. In addition to greater transparency, the audit allows improvement in the work of the sector.
3- Process standardization
This is a way to reduce loopholes for illicit acts that harm the company. Standardization will also allow the analysis of the strengths and weaknesses of the procurement process, identifying actions that lead to the continuous improvement of the Compliance process in the purchasing department – thus, the company will always be up to date with the changes that have occurred in the current legal norms.
The standardization of processes requires the structuring and documentation of activities in an archive that will be made available to the procurement team, who will be able to consult it in case they have any doubts or questions.
4- Partnership with suppliers who practice compliance
Make sure your suppliers meet specific ethical and transparency requirements and are qualified to maintain a business relationship with your organization. This verification process should be constant, also evaluating performance, and the supplier companies that prove more reliable should have priority in future negotiations.
This verification can be done with the monitoring of each of the suppliers in meetings, via social networks or verifying the mission and values of the company, for example.
The implementation of a Compliance program minimizes the possibility of illicit acts in the purchasing department and, in case of such occurrences, fights them more quickly.
In this process, good supplier management is essential. And the most practical way is to have a company specialized in spare parts.
Experienced in purchasing industrial materials – and with offices in Brazil, Germany, Portugal, Hong Kong and the United States – Soluparts has access to thousands of international products and suppliers.
Experience the advantages of having a team specialized in indirect purchases, by requesting a quotation right now!
What could be better than watching a good movie? Watching the movie and, on top of that, improving our performance at work!
With that in mind we made a list of 5 unmissable movies for the shopping professional’s routine – and that can be seen in good company, making better use of your time at home.
Prepare your popcorn, have fun and expand your knowledge!
1. 12 Angry Men (1957)
A classic movie with Henry Fonda as the lead character. It tells the story of a young Puerto Rican who goes on trial accused of killing his own father. After the evidence is presented, twelve jurors meet to decide the sentence, which must be unanimous.
In the first round to reach the decision, eleven jurors – each based on their own convictions – decide on charging him as guilty. But the 12th, Mr. Davis (Fonda), is not convinced of the boy’s guilt and starts a process where he will try to get the other members of the jury to review their decision.
Reflections provoked by the film
Even though he is a minority, Mr. Davis persists in presenting his point of view to the other participants in the group.
Controlling his emotions even when harassed by other people participating in the “negotiation” and using arguments to guide his point of view, he does not try to impose his opinion. His tactic is to get other people to consider other options in addition to the idea originally conceived.
Another point that deserves to be highlighted is that the protagonist is open to consider other opinions, as long as they are accompanied by good arguments. In other words, he has no intention of making his own prevail, but defends it in a respectful and intelligent way.
To have more details of the negotiation techniques used by the character and, mainly, to know the verdict, check out the film – it is certainly an excellent tool for the purchasing professional to evaluate his way of negotiating and even improve it to get better results.
2. Up in the Air (2009)
It tells the story of an executive, lived by George Clooney, who travels around the United States with the task of firing employees of multinational companies.
Ryan Bingham, Clooney’s character name, loves his work. However, his professional routine is put on the spot when his company hires the young Natalie Keener (played by Anna Kendrick), who has developed a dismissal process through videoconference, without the need for expensive travel.
Reflections provoked by the film
The clash between traditional and new management is represented very well by the protagonist’s struggle to defend his way of working, in some aspects already outdated, from the changes provided by technological transformation.
As the procurement sector is often guided by more traditional work models, the procurement professional has the opportunity to reflect on the importance of remaining open to change, reaping the benefits that transformation provides.
The difficulty of teamwork and communication are also explored in the film, where both characters wish to impose their point of view. Only when one starts to try to see the situation from the other’s perspective, do they start to respect each other and learn from each other’s experience.
3. Bridge of Spies (2015)
Based on a true story, the film features Tom Hanks and English actor Mark Rylance (Oscar-winning supporting actor for this role).
In 1957, in the midst of the Cold War between the United States and the Soviet Union, lawyer James Donovan (Hanks) is in charge of defending Russian spy Rudolf Abel (Rylance) in an American court and convinces the judge to leave him alive to serve as a bargaining chip, should any American be arrested in Soviet territory.
A few years later, the lawyer is invited to negotiate the exchange between the Russian spy and an American and to top it off, try to free an American student, imprisoned in East Berlin.
Reflections provoked by the film
When the lawyer was invited to defend the spy from the enemy country, everyone believed he would make a symbolic defense. However, he prepared himself for the clash and was able to identify an argument strong enough to have a turn at the “negotiating table”.
Not only did he surprise the others involved, who were so confident in winning they didn’t prepare themselves to negotiate, but he also demonstrated his negotiating value to the point of being called to an even more important and complex negotiation (because of the conflicts involved) in the future.
The movie portairs the perfect negotiation planning class, including listening to other people in the team to outline the ideal strategy and to have a “plan B”, always aiming for the best possible result.
4. Invictus (2009)
Another film based on facts. It touches on the power of leadership to solve conflicts and unite a team.
After the end of Apartheid, newly elected President Nelson Mandela (Morgan Freeman) needs to find ways to lead a South Africa that remains racially and economically divided.
To do this, he chooses the universal language of sports and joins forces with Rugby Captain Francois Pienaar (Matt Damon) to unite all South Africans in favor of the national team at the 1995 Rugby World Cup.
Reflections provoked by the film
After successive governments in which the rights of the black population have been repressed, the great leader Mandela does not think about revenge. Even under pressure from some members of his team, he opts for the path of pacification.
Often it is necessary to coexist, within the team itself, with individuals who have different ideas and even different behaviors. A leader is not afraid to keep at his side people with opposing points of view, he takes the best from each one, always aiming at a greater and collective good.
The film reinforces the importance of loyalty and commitment, revealing that in order for you to create a good team, including professionals in the purchasing sector, good leadership is needed.
Another very interesting aspect is the presence of two types of leaders: the born leader (Mandela) and one who is being molded to face a complex situation – in this case, the rugby captain.
5. The Social Network (2010)
It reveals what happened behind-the-scenes of the creation of Facebook, in 2003, by computer genius Mark Zuckerberg (Jesse Eisenberg), with the help of Brazilian Eduardo Saverin – making the American the world’s youngest billionaire.
The film also shows the personal and legal complications that occurred during the process that transformed the social network into one of the largest on the planet.
Reflections provoked by the film
The new media, which emerged with the digital transformation, has changed the way people interact, communicate and even work – working from home has proven to be a good option for many companies.
It’s a good way to understand the impact of powerful social networks today and how they can be used to benefit business – such as researching a supplier’s reputation and improving internal communication, for example.
So, did you like the suggested stories? Did you miss any movies you’ve watched and that have contributed to your training as a procurement professional? Send us your suggestion and we’ll expand our list!
For some time now, companies have been investing in creating a purchasing industry that uses resources such as automation technology and cloud computing for greater efficiency.
But has this area reached the level of maturity necessary to benefit from the transformation that is within the reach of purchasing in Industry 4.0? That’s what we’ll see next.
Digital maturity of the purchasing sector
In a recent study, Forrester Consult interviewed 417 purchasing leaders from North America and Europe to identify the degree of digital maturity in the area, noting that 65% of organizations said they were at an advanced stage in this regard.
However, the same survey showed that they are further away from a 4.0 Purchasing sector than they had imagined, with only 16% of companies at an advanced level of maturity – meaning they make intelligent use of the technological innovation available and are programmed to keep up with all the evolution that technological resources will bring in the coming years.
Another highlight of this study concerns the poor technological choices that companies have made. The result is that 82% of them have changed (or are thinking of changing) their digital provider, mainly due to the lack of integration between the implemented solutions (30%) and the difficulty of use of the tools by users (27%).
The conclusion of the researchers is that the vast majority of the companies interviewed still adopt a digital approach that simplifies processes and improves the efficiency of the purchasing sector, but this is not close to the transformation provided by Purchasing 4.0.
And the first step in this direction is up to the purchasing manager: to realistically assess the digital maturity in which the sector currently finds itself and, together with the Information Technology department, to outline the best strategy towards a planned and continuous transformation journey that will provide real competitive advantage for the company.
Organizations that do not adopt a smart approach to purchasing will risk losing space to the competition with digital knowledge, since the current business environment is one of extremely rapid change.
The Purchasing Team in Industry 4.0
Purchasing managers are still reticent about implementing new technologies, such as Artificial Intelligence, Robotic Automation or Blockchain in the industry routine.
This is the conclusion of a survey conducted by Deloitte – an American business consulting firm based in several countries around the world, including Brazil – pointing out that 51% of the managers interviewed are hesitant because they understand that their teams do not yet have enough resources to execute a digital purchasing strategy.
It is clear, therefore, that Purchasing 4.0 managers need to find new talent and also prepare the employees already hired, forming a multifunctional team with training to face the digital transformation.
Another essential factor to obtain the best possible performance from the purchasing team is to establish metrics that make it possible to evaluate all the collective and individual work. This analysis will allow us to know the team’s weak and strong points, investing in improvement actions.
And, of course, we must not forget that the purchasing manager himself must adapt to the new times, acquiring fundamental skills for the digital era.
Using modern tools correctly, the area will be able to capture, analyze and act from updated data in real time, creating agile connections with the entire organization, optimizing processes and increasing purchasing efficiency.
Purchasing 4.0 raises the sector’s value proposition
According to the German Henrik von Scheel, creator of the expression and fundamentals of Industry 4.0, we entered the second wave of Industry 4.0, characterized by the connection between advanced technologies and the use that humans can make of them, aiming at the improvement of organizational processes.
The purchasing sector has the opportunity to take advantage of this phase to increase its value proposition within the company, uniting its strategic knowledge about the market and its wide experience in purchasing with the opportunities brought by technological transformation.
This is the case, for example, with the use of bots. Considered a kind of assistant with Artificial Intelligence, it can provide updated information on purchasing processes and also generate automated demand. Through sensors placed in the stocked materials (making use of systems based on intelligence of things, IoT), the bot can identify the decrease in the stock of products and issue, autonomously, the purchase order before the item finishes and interferes in the organizational routine.
One of the great advantages of bots is that they can be implemented quickly, with little change in the process already used. That doesn’t eliminate the need for constant monitoring, by a properly trained professional, to ensure control over the resource – IT specialists recommend that the monitoring takes place on a daily basis, to ensure that the bots are running, and that there is a deeper performance assessment, on a monthly basis and whenever system changes occur.
Bots are already a reality in organizations, providing vendor management, purchase order creation, order and payment processing. But there is much to explore in this resource, and it is important that organizations reflect on operational details and impacts before the bots are deployed in the area.
In our blog, we’ve already covered other technologies that are influencing purchasing in Industry 4.0. Therefore, to complement your knowledge on the subject, we recommend reading from:
Soluparts can also collaborate for greater efficiency in the purchasing area, offering benefits such as better prices and agility to its customers. Get to know Soluparts differentials and values and take the opportunity to quote with our experts.
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