Whether business ethics are improving or declining is a question that is highly debatable. Whether conduct is getting better or worse, warehousing is an activity in which ethics are particularly critical.

Exploration of the ethical process in warehousing has value for these reasons:

  • The warehousing manager is responsible for property that belongs to others.
  • A failure to keep promises made with respect to warehousing can have serious consequences.
  • Warehousing requires skilled and experienced workers. High employee turnover is nearly always accompanied by low skills and low trust.
  • Margin pressure among competitive third-party warehouses may tempt some to engage in unethical behavior in buying or selling services.

Management's ethical responsibility

The ethics of each executive can be measured by the question of whether a worker can respect and trust the boss. There are three traits which instill someone's trust in another:

  • The ability to get results: All restructuring is designed to get results, but when workers cannot detect any improvement in what they are doing, they lose confidence in management.
  • Integrity: Integrity is doing what you say you will do. Those who handle layoffs or shutdowns in a devious or secretive manner lose the confidence of their employees.
  • Concern for people: This seems to be rare today. People are still talking about the New England businessman who kept all of his workers on the payroll when his textile plant was destroyed by fire a few years ago. He explained that he needed to repay the loyalty that his workers had always shown to him. The best of warehouse managers will show that it is possible to cut costs without cutting concern for others.

At the line management level, workers will provide their best performance for a management team that has earned their respect. The manager who preaches about improving productivity while failing to set a personal example is soon exposed as a phony. The manager who preaches the need for austerity while receiving a large bonus or salary increase should not be surprised if workers react negatively.

Ethical conduct in warehousing begins with management. Ask yourself if you have considered any action that would erode the confidence of your workers or customers. This is more than a human resources issue. High trust can be a competitive advantage in warehousing. Trust is not awarded, it must be earned.

Keeping your promises

In today's world of supply chain management, just-in-time deliveries and vendor managed inventory, a failure to keep an operational promise can do enormous damage. Some warehouses supply assembly lines, and failure to make a timely delivery can cause the shutdown of a production plant. Similar damage can be done by shipping the wrong items.

Promise-keeping involves a relationship between workers and management. If a significant percentage of workers are absent on the first day of hunting season, the warehouse manager may be unable to keep commitments made to customers. People who are absent or who arrive late to work contribute to the inability to maintain an operational schedule.

The warehouse manager must also rely on other companies to keep service promises. Most operations utilize the services of truckers who are not part of their own workforce. When the trucker fails to maintain the promised schedule, the reputation of the warehouse suffers as well.

The ability to keep operational promises is critical to the maintenance of reputation and trust for the warehouse operator. Keeping those promises requires the cooperation of workers, suppliers and other managers.

Trust the hourly worker

Unlike manufacturing, warehousing work does not lend itself to tight inspection and control. It is obviously impossible to follow the route of a warehouse order-picker as he travels around the building selecting merchandise for outbound shipment. This provides ample opportunity for the careless or unscrupulous warehouse worker to select the wrong item, to ship damaged merchandise, or engage in collusion theft in either inbound or outbound movement of goods.

The collusion usually involves a partnership between a warehouse worker and a truck driver, and obviously such teamwork will not take place when all workers are honest people. When workers no longer care about the future of their employer, they lose the incentive to be honest.

How does management maintain the trust of workers? Clearly part of the process is to treat them with compassion and respect, and the manager who shows that he cares usually receives quality work from those who report to him.

A second means of generating trust is through frequent contact. Most of us have trouble trusting people we do not know, and at the same time it is hard to mistrust someone with whom you are well acquainted.

Management by wandering around (MBWA) has long been praised for its utility in a warehousing environment. One of the many benefits of MBWA is the ability to get to know the people who report to you.

We once visited the third shift of a large private warehouse and found that nearly all of the workers on that late shift appeared to be under the influence of mood-altering substances. Strangely enough, no management or supervision was observed in the warehouse during that difficult time.

While a shift foreman was on duty, that individual made a habit of remaining in his office most of the time. Would this kind of behavior have been found in a warehouse where MBWA is regularly practiced? We doubt it!

Margin pressure

Third-party warehousing has always been notably competitive, and similar competitive pressures can even influence the private warehouse.

Consider the case of the third-party warehouse operator who entered into a multicity contract on a time and material basis. Each local manager was responsible for reporting the time spent and the square feet utilized in serving the customer each month.

The arrangement broke down when a manager in one city needed more revenue and decided to "pad" the amount of space and labor billed to that account. Senior management had every intention of running an honest operation, but unethical behavior from one field manager wrecked the relationship.

The "low-ball" proposal is an old practice in third-party warehousing, and unfortunately it has not disappeared. The hungry warehouse operator submits an extremely low price for new business, hoping that the price can be adjusted once the customer has moved to his warehouse.

Ethical lapses don't always happen on the vendor's side of the table. Consider the buyer who has minimal knowledge of warehouse operations or of his internal costs. Rather than submit a precise request for a quotation, this buyer submits a broad brush request for proposal in which each logistics service provider is asked to prepare a scenario for handling the warehouse operation.

The buyer collects a group of proposals, and from those a more specific request for quote is constructed by utilizing the ideas from the vendor proposals. The buyer receives free consulting from vendors who are eager to demonstrate their skill. In the worst of such cases, none of the proposals are accepted, but the ideas are utilized to improve the internal warehousing operation.

This purchasing tactic obviously wastes the time and money of vendors who put ample time into a proposal which will never receive serious consideration. Some buyers even use LSP prices as a means of setting production standards in their own operations. If the operator quotes a price of 90 cents per unit, the budget for the private warehouse matches this figure.

An ancient ethical lapse is the buyer who is "on the take," receiving kickbacks from a vendor of warehousing services. This activity is less common today than it was in the days when logistics prices were controlled by printed tariffs. Fierce price competition leaves little room for bribery, but occasionally it still takes place.

Maintaining truth and trust

The procurement of warehousing has moved from a transactional relationship to the concept of partnership. Not all partnerships are faithful ones, but there has been an effort to move away from the adversarial, numbers-driven practices that governed the buying and selling of warehousing services a few years ago. When you claim to be a partner, there is at least the presumption of ethical conduct.

As we move from a transactional relationship in warehousing to one of partnership, there is a growing realization that such relationships begin with the presumption that each party must play fair.