Ethical Issues in Production and Operations Management

Ethical Issues in Production and Operations Management

An organisation has four main functional areas, namely, marketing, production, finance and human resource. Among all these functional areas, production is the basic activity to generate revenue and achieve various other goals and objectives.

Production refers to an activity of converting input into output. However, the entire process of combining and transforming the available resources of an organisation, such as men, machines and materials, into value-added products and services, and making them available to end consumers is known as Production and Operations Management (POM).

The POM function of an organisation aims at producing in the right quantity at the right time and cost, thereby fulfilling the needs of customers and increasing organisational efficiency and effectiveness. It encompasses a number of activities such as selection of plant location, plant layout and material handling, product design, production planning and control, quality control and materials management.

Ethics in POM is a subset of business ethics that aims to ensure that the production function follows ethical norms and values, which are set by the society. In other words, ethics in production is intended to guarantee that the production capacity or exercises are not harming the buyer or the general public. Thus, there needs to be a certain code of conduct or standards followed in the POM practices of an organisation.

Let us discuss the case of unethical practices followed by Coca-Cola in its production processes. Coca-Cola, in the year 2000, started its bottling operations in a village called Kala Dera, located near Jaipur. The village primarily depends on agriculture for the livelihood of people. However, within a year, the local people started noticing a rapid decline in groundwater levels. As agriculture was the major source of livelihood, loss of groundwater was definitely a big problem for the farmers. The people of Kala Dera blamed Coca-Cola Company for the declining level of groundwater. They accused the company for worsening the water situation through extraction and pollution and demanded the closure of the bottling plant.

The University of Michigan with the help of the Energy and Resources Institute (TERI) conducted an independent assessment and made Coca-Cola Company to be part of this assessment, which focussed on the ethical aspects of the company’s operations in India. As per the TERI assessment report, the plant’s operations in Kala Dera would continue to be one of the contributors to a worsening water situation and a source of stress to the communities around.

It was found that Coca-Cola Company runs its operations in India from a perspective of “business continuity” rather than worrying about the impact on the community. This was a big example of employing unethical production and operational practices by a multinational giant that affected the general public at large.

Measures Against Unethical POM Practices

In today’s competitive era, organisations try to reduce the overall cost involved in the production process. This is sometimes done at the cost of quality and encourages unethical practices. In order to bring down the cost, organisations incorporate poor processes and technologies.

This is unethical and ultimately affects the overall quality of the product. Let us now discuss some measures against unethical POM practices as follows:

Create a Code of Conduct

The production department of an organisation should follow a written code of conduct to provide its employees and managers an overview of the type of conduct expected from them. For example, an ethical code of conduct may include measures against child labour, forced labour and discrimination practices within the organisation.

Create Safe and Hygienic Working Conditions

Providing clean and safe working conditions is one of the most important ethical aspects in any production department. POM activities should be designed in a manner that they provide a safe and healthy workplace to employees.

The production department should ensure proper conditions of light, ventilation, hygiene, fire prevention, safety measures and access to clean drinking water within the production facility.

Focus on Environmental Sustainability

Production activities must comply with the standards and requirements of the local and international environmental laws and regulations. There should be well-written measures to reduce and compensate any ill effects of production activities over environmental sustainability.

Follow Specifications

It is the responsibility of a production department of any organisation to follow all specifications and guidelines regarding the production process. Specifications are important specifically in industries such as food and beverages and electronic appliances.

Any deviation from the specification may result into poor quality output. Therefore, ignoring specifications is not only unethical but may also affect the overall image of the organisation.

Follow Total Quality Practice

Quality can be an ethical issue as customers expect quality products and services from organisations. Any deviation in offering products from what was promised can be a serious ethical issue.

A slight error during the production process can damage the quality severely. Therefore, it is important to follow quality guidelines to produce what is promised.

Crosscheck Supplier’s Background

Suppliers are the major elements in the overall POM process. They provide organisations with raw materials to be used for producing the final output. Therefore, the quality of the final output depends largely on the quality of input provided by suppliers.

It is therefore a responsibility of an organisation to ensure that raw materials received are of good quality, and suppliers are abiding by the defined quality standards. For this, it is important for the organisation to crosscheck the background of suppliers to ensure that they have a good market image.

Tata Code of Conduct (TCOC)

The values and principles, that govern Tata Steel’s business come under the Tata Code of Conduct (TCOC), established in 1998. This code of conduct serves as a guideline to each employee and describes values, ethics and business principles that are expected from them to show in personal and professional conduct.

TCOC is designed to deal with diverse cultural and business-related issues across the group. It is deployed through a well-formulated structure called the Management of Business Ethics (MBE). This structure is based on four pillars, which are:

Leadership

The Managing Director is also Tata Steel’s chief ethics officer. A designated Ethics Counsellor supported by Departmental Ethics Coordinators, reports directly to the Managing Director and has access to the Board of Directors.

Communication and Awareness

Compliance to the Code is a condition of service for all employees and is also a pre-requisite for service for suppliers, contractors and vendors, who must agree to respect it. Employee seminars, compliance training and ethics awareness workshops are conducted at frequent intervals.

Evaluation of Effectiveness

The MBE Programme is evaluated and reviewed and new initiatives as required are introduced under the MBE Annual Business Plan.

Compliance Structure

A number of systems and processes based on zero tolerance have been put into place to ensure that governance standards are met. These include Gift Policy, Whistle Blower Policy, Vendors Whistle Blower Policy, Sexual Harassment Prevention and Redressal Guidelines.