The broad objective of Purchase Department is to meet the material
and service requirements of the internal customers of an enterprise
by maintaining regular flow of materials/ services by following the
principles of purchasing viz. to purchase at the right price, the
right quantity, of right quality, at a right time and from the right
source. In carrying out purchasing responsibilities, the enterprise
shall endeavor to adopt the most suitable Purchase Policy to achieve
the best results keeping in view departmental objectives and overall
needs of the business enterprise. In framing Purchase Policy, CODE
OF ETHICS needs to be defined.
Ethics (from Greek ???? meaning “custom”) sometimes also is referred
as moral philosophy, is the guiding principles of practicing norms.
Ethics is about fairness, virtues, duty, obligation, rights, justice
and a sense of honesty, exercising diligence judgment by making a
choice between right and wrong; good and evil.
obligations, Social norms, Company Policy and Practices govern
ethical issues. The specific operating
policies, which regulate acceptable and non-acceptable behavior
constitute the “Ethical Policy”.
Corporate Ethical Policy is needed by enterprises to define values &
behavior guide-lines, to establish framework for professional
practices and responsibilities, and to discipline and self evaluate the
Adherence to the ethical policy is essential to maintain,
protect and further the reputation of the enterprise for fair
and ethical practices among customers, shareholders,
suppliers, business associates, communities, fellow employees
and statutory bodies. Business ethics set the standard on how
the business shall be conducted. They define the value system
of how one operates in the marketplace and within her/his
The Code of Conduct or Code of Ethics is an organisation’s policy
statement and defines ethical standards for sound corporate
governance, that involves systematizing, defending, and recommending
concepts of right and wrong behavior. The Code of Conduct not only
establishes the organization’s values, but also spells out essential
practices, behavior, ethics, and business standards for all
individuals who are employed by and represent the organization. It
is a guide to legal and ethical conduct of an enterprise and to
deter wrongdoing and promotes ethical standards. This Code covers a
wide range of business practices and procedures and serves as a
guide to ethical decision-making. This Code does not cover every
issue that may arise, but it sets out basic policies to guide its
affiliates. Normally the principles described in the code are
general in nature. However, one should also review the enterprise’s
other applicable policies and procedures for more specific
The Purchase Policy is guided by ETHICS and accordingly Values are
defined. Keeping in view the purpose and mission, Objectives are
formulated, To institutionalize Purchase Policy, Guide Lines are
framed. The Purchase Policy shall be evolved so as to be fair to
both the purchaser and the seller. Good Ethical Practices foster
fruitful Relationships with the Suppliers, while indulgence in
Un-Ethical means for whatever short term gains may damage image of
the enterprise in long run.
CORE VALUES :
The key to ethical action is to behave with integrity that is
based on sound Core Values like :
HONESTY (be Principled, Straight –
Forward and Fair in all the dealings),
INTEGRITY (maintain the highest
standards of Professionalism and Organisational Integrity),
FLEXIBILITY (adapt to change)
RESPECT TO OTHER’S VIEWS (Recognise and
Appreciate the views of the suppliers and others by treating others
with dignity, respecting individual differences)
RESPECT FOR KNOWLEDGE (acquire and
apply leading edge expertise in all aspects of the business for
value creation and share with concerned stakeholders as required)
COLLABORATIVE RELATIONSHIP (recognize
mutual interests in a WIN-WIN situation)
OBSERVANCE OF STATUTES, RULES AND REGULATIONS
(abide by the letter and spirit of the provisions of the
Statutes, Rules and Regulations which may be applicable and
relevant to the activities carried on by the Enterprise)
DILIGENCE (in conducting the business
shall at all times
render high standards of service
exercise due diligence
exercise independent professional
GREEN BUYING (encourage the use of
products that minimize adverse environmental and health impacts)
The broader Policy objectives of the Purchase Department may be :
To align supply base’s capabilities with company’s strategic
initiatives by developing an integrated supply management with focus
on Strategic Sourcing that can optimize Total Cost of Ownership.
By seeing a business as a “Value System” for customers, the shift is
towards lean strategic priorities towards growth-oriented targets of
lowering cost per unit to gain a competitive edge in a holistic
manner instead of mere cost-cutting by whatever means.
To evaluate and improve the purchasing cycle process in the
organization by eliminating non-value added activities in the supply
management process through adoption of lean practices in supply
To adopt collaborative approach with the suppliers to develop new
processes, means of saving costs, increasing competitiveness and
continuously innovating strategies to ensure a productive
partnership between the enterprise and its vendors.
To optimize overall material cost including inventory carrying cost
& cost of stock out.
In an endeavour to achieve the above goals the enterprise shall
nurture and harness skills to develop core competency by adopting
right tools and techniques to derive competitive advantage. The
Prime Objective is adoption of right practices of APPROPRIATE
SELECTION AND SOURCING OF RESOURCES (Material/Services) that
leverage ENHANCEMENT IN VALUE CREATION. Waste of resources in any
form, in any activity is a “National Waste” and Value Created by
whatever incremental improvement adds up to “National Wealth”.
Therefore it should be the objective of every one to strive in a
“True National Spirit” to work towards “Elimination of Waste and
POLICY GUIDE LINES :
While transacting purchases the enterprise may observe the following
“10 COMMANDMENTS” as broader guidelines :
Conduct business with potential and
current suppliers openly, fairly, equitably, ethically,
honesty and in an atmosphere of good faith.
Encourage competition through open,
equitable and fair practices.
Avoid restrictive sharing of required
Avoid the intent and
appearance of unethical or compromising practices.
Know and observe fair, ethical, and
legal trade practices and remain alert to the legal
ramifications of purchasing decisions.
Strive to maintain/ comply with all
applicable environment, safety and health laws and
Promote positive supplier relationships
through courtesy and impartiality in all phases of the
Maintain secrecy & confidentiality
within the guiding principles of the company.
Strive to obtain the maximum value of
each rupee of expenditure while concluding deals with
the suppliers in a mutually agreeable win-win situation.
Remain committed and behest commitment
to promises. Acting ethically is everyone’s
Take individual & collective responsibility
in exhibiting Moral Courage, Transparency,
Accountability and Ethical Choices.
cultures create trust within and outside corporations. Trust
strengthens Relationships and encourages closure associations with suppliers – which propels
mutual progress – and ultimately a win-win environment”.
Corporate ethical reputations have a clear impact on the
business as business associates place a higher value on a
corporation’s ethical reputation that on its financial
performance, while ethical lapses in the workplace put those
reputations at risk. There are evidences that corporate
cultures that self govern based upon the highest standards of
ethical behavior help businesses outperform their peers.
Surveys, suggest organizations have a significant incentive to
safeguard ethical reputations and strengthen the ethical
health of their corporate cultures for business advantage.
Business enterprises now-a-days are committing substantial
resources to cultivating ethical cultures to foster and fortify
strong ethical practices as a foundation for winning in the marketplace. They are investing to inspire, educate and
empower each and every employee to do the right ethical things as
defined. “They are understanding the power of culture in