Ethics Guide
The Ethics of Supply Chain Information Sharing
Suppose that you work for a distributor that has developed information systems to read inventory data both up and down the supply chain. You can query the finished goods inventories of your manufacturers and the store inventories of your retailers. These systems were developed to increase supply chain efficiency and profitability. Consider the following situations:
Situation A: You notice that the store inventories of all retailers are running low on items in a particular product family. You know the retailers will soon send rush orders for some of those items, and, in anticipation, you accumulate an oversupply of those items. You query the manufacturers’ inventory data, and you find that the manufacturers’ finished goods inventories are low. Because you believe you have the only supply of those items, you increase their price by 15 percent. When the retailers ask why, you claim extra transportation costs. In fact, all of the increase is going straight to your bottom line.
Situation B: Unknown to you, one of your competitors has also accumulated a large inventory of those same items. Your competitor does not increase prices on hose items, and consequently you sell none at your increased price. You decide you need to keep better track of your competitors’ inventories in the future.
You have no direct way to read your competitors’ inventories, but you can infer their inventories by watching the decrease of inventory levels on the manufacturer side and comparing that decrease to the sales on the retail side. You know what’s been produced, and you know what’s been sold. You also know how much resides in your inventory. The difference must be held in your competitor’s inventories. Using that process, you now can estimate your competitors’ inventories
Situation C: Assume that the agreement that you have with the retailers is that you are able to query all of their current inventory levels but only the orders they have with you. You are not supposed to be able to query orders they have with your competitors. However, the information system contains a flaw, and by mistake you are able to query everyone’s orders, your own as well as your competitors’.
Situation D: Assume the same agreement with your retailers as in situation C. One of your developers, however, notices a hole in the retailer’s security system and writes a program to exploit that hole. You now have access to all of the retailer’s sales, inventory, and order data.
Is the price increase in situation A legal? Is it ethical? Is it smart? Why or why not? Is it ethical to claim transportation costs have caused the increase? What are some of the long-term consequences of this action?
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