Purchasers walking 'ethical tightrope'

14 February 2002
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14 February 2002 | David Arminas

Buyers at companies facing financial trouble must not mislead suppliers, a senior purchasing manager has warned.

Michael Ensor, who left US-based Global Crossing just three weeks before it went into receivership, said purchasers faced an "ethical tightrope" trying to balance the interests of their employer and suppliers.

The fibre-optics multinational has filed for protection under Chapter 11 of the US bankruptcy code, which means it can continue trading but is under no obligation to pay suppliers' invoices dated before the protection came into force.

In the UK, the firm is not subject to Chapter 11 conditions and must pay all its invoices, although a spokesperson confirmed it has been scrutinising its cash flow for several months.

The warning comes amid massive recriminations in the US over the financial collapse of energy supplier Enron, once the country's seventh largest firm.

Ensor, who was interim European procurement director at Global Crossing in London, told SM he knew the company was in difficulty and was having to cut back on awarding new contracts and adjusting payment schedules without alarming suppliers.

Part of a purchaser's job is to advise financial people when the company might be in breach of a contract if it withholds payment, he said.

"Procurement professionals cannot bury their heads and absolve themselves from responsibility for good vendor relationship management when financial crisis appears."

SMfeb2002

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