David Collins gives tips to reduce the likelihood of corruption in purchasing departments. The response is a mix of staff rotation, data transparency, and random auditing.
So maybe you’ve heard that in China having honest purchasing agents or buyers is very, very difficult. And it’s true, sadly, that there is a culture here of making deals behind the backs of the purchasing people, and that some of their agents can get money from suppliers or even customers.
There’s really strong ways to change that. A couple of them are to set up a very simple buying system that it’s simple for the boss to be able to see. This can be done with an Excel spreadsheet, and it also can be done with some very, very simple software that’s available in China now. One thing is for sure, many of these Chinese programmers are doing an excellent job putting together software programs for purchasing and buying – even it can affect logistics. And they’re not very expensive, they’re pretty cheap.
The other thing is to rotate your purchasing people. Don’t let them buy the same product for three months, six months, eight months. Purchasing should be done as needed for the products as they are needed by the factory. By putting in a good lean manufacturing system, some Just In Time inventory controls and maybe some kanban, you can very, very simply start to control what comes in to the factory.
One of the most common things that happens here is somebody buys enough product for six months because the other factory wants to sell, get rid of things. So the purchasing person buys a lot of product for six months. You’re stuck with six months of product on your factory floor and your purchasing agent gets a little kickback for that.
You can also get financial people to do random audits to change how the purchasing agent’s behavior starts to become, and secondly you can also start to take your purchasing people and rotate them into other departments. There’s no reason a purchasing person has to always stay in purchasing. They can maybe go over and do some work in finance. Maybe they can go over and do some work in production, sales, other things.
But there is an issue in China with purchasing agents getting bribes and taking money, and really doing rotation, using an ERP system, doing some auditing, and making sure that the person isn’t always buying the same product from the same person, a very strong ways for you to be able to change and get people to no longer be taking money from your company.