A code may take the form of a binding understanding or a contractual obligation. The nature of the code often reflects the relation between the buyer and the seller.

A flexible code

When a code is a document based on mutual trust, and not on a formal agreement, it is a confirmation of the partner-like nature of the buyer-supplier relation. In such a case, it forms the actual beginning of collaboration and gives an opportunity to know each other’s attitude towards shared activities. Assuming that the code is to be a non-binding set of rules, naturally, the main concern is whether it will be observed or not. The saying “nothing risked nothing gained” very well fits in this case. It is necessary to remember, that in today’s market, where non-price aspects such us trust and partnership in business become increasingly important, the supplier is best advertised by client’s references that may be used in the certification process to confirm the supplier’s credibility and repute. An example of a company that appreciates and practices partner-like relations is the Australian supermarket, Coles. The company not only agreed to, among others, act in good faith and have transparent relations with suppliers but also nominated an arbiter between the company and its suppliers who is a former secretary of Victoria State. Such a commitment is due to a radical approach towards partner-like relations with suppliers and the willingness to enter into long-term contracts that will facilitate the supplier’s planning and investment in future joint activities.

A binding code

In this case, the code is treated as any other agreement. In this kind of agreement, parties are able to maintain complete clarity of their arrangements. At the same time, a binding code of conduct does not exclude partner-like relations with a supplier, because it serves as a starting point for a relationship based on mutual respect of needs and requirements.

Does a supplier code limit innovation?

The answer is “yes” if it is treated as a kind of an official agreement. However, a flexible code may as well drive innovation. This is because both parties know exactly their mutual requirements and it is easier for them to predict the other party’s behaviour. They also know where to find the potential for building a shared value. This, in turn, creates the space for taking challenges with consideration of mutual benefits.