We don’t like thinking about it, let alone talk about it. The reality is that buyers on the take happen every day under our noses. Sometimes management know about it and turn a blind eye. Regrettably buyers learn from our leaders. Hardly a week passes when we do not hear of a prominent politician or union leader involved in some rort or another. We have recently seen the premier of NSW, Barry O’Farrell, resign over a gift that he denied receiving. Then there is the Craig Thomson affai
r. Michael Williamson is in jail following the Health Services fraud, and we will see what results from the Eddie Obeid and Ian Macdonald saga. It seems that fraud is acceptable these days. Just don’t get caught.
Some years ago I worked for a retailer whose import buyer/manager decided to seek employment elsewhere after a management shake up. It was getting too hot in the kitchen. The incoming merchants knew their stuff and they could import merchandise to sell at the cost price the previous import manager had negotiated. Nothing was ever proven partly because the problem had resolved itself when he left.
It was very interesting to witness the extent to which the import manager covered his tracks. He would send abusive faxes to the suppliers in China regarding late delivery or poor quality merchandise and these faxes were copied to management. We all thought he was being harsh. With the benefit of hindsight, the new management team had little doubt it was a ploy and there was a healthy cash flow in US notes when the import manager visited China.
Some industries such as agribusiness (or the pastoral sector) are built on kickbacks and gifts. Prices here are tight and it is the supplier who can offer the most perks who gets the deal. Have a look at the private boxes at sports stadiums owned by the suppliers to agribusiness companies and see who the invited guests are. This is the tip of the iceberg, and yet management knows about the rorts and does nothing about it partly because it is endemic in the industry, and partly because they are also willing recipients.
So what can be done about it?
The obvious answers include advising all suppliers if they are caught giving kickbacks they will be ex-suppliers. Likewise, advising buyers that not only will they be ex-buyers, but they may risk prosecution. ‘
Do not allow new suppliers to be added to the ‘supplier list’ or old suppliers to be removed without a thorough investigation. Prescribe that all meetings with suppliers must be attended by two people. Have an independent team check on retail prices at competitors. Put in place a system whereby buyers must declare their gifts. Put a limit on the value of gifts. Insist suppliers provide details of who they have given what. Look at the lifestyle of your buyers. New cars, TVs, holidays overseas – can they afford their lifestyle?
I know of one retailer that has outlawed receiving even a ball point pen or lunch. Nothing whatsoever can be received by a buyer or anyone else in the organisation.
There is another interesting approach that I have heard of but not seen in action – pay your buyers a modest salary and set them GP percentages. Everything over and above the agreed margin is theirs to keep. In other words legalise corruption.
This is very successfully achieved in Indonesia, for example. Traffic police are paid a meagre salary and given a bag of rice. The rest they must make on the street. They even have booklets to show you how much the ‘legal’ fine would be and you can negotiate from there.
Stuart Bennie is a retail consultant at Impact Retailing and can be contacted at stuart@impactretailing.com.au or 0414 631 702.