Part 2: Aligning Vendors to Meet Your Company Purpose

**SPEAKER_2** (0:04)
The Bliss Business Podcast, the show about empathy, connection, and consciousness in business. Today's episode is brought to you by Zero Company, your paid search, social media, and programmatic ad experts.

**Stephen Sakach** (0:17)
Hello, and welcome back to the show. We're continuing our discussion on building partnerships with suppliers rather than treating them as just vendors. This is a huge part of helping grow and spread higher consciousness in business. I'm Stephen Sakach here once again with Tullio Siragusa and Ash Maher.
So last show, we got into some of the difficulties companies find themselves in when their purpose isn't aligned with their vendors. It's more aligned just solely on profits. And so when some are constantly pursuing profits and they start watering down quality, you know, you see some problems there. And then we also discussed wood pulp and shredded cheese.

**Tullio Siragusa** (1:00)
Thanks, Ash.

**Stephen Sakach** (1:03)
Good stuff. Guys, let's talk about the good and the bad and the ugly here. Let's start with some classic cases here.
Vendor situations gone sideways on companies because they're just pursuing that, you know, lowest bidder kind of approach. Let's talk about Nike, which hit the news in the 90s, late 90s in a bad way. Ash, do you want to recap this for everyone?

**Ash Maher** (1:31)
Yeah, yeah. So this was a time that was interesting. It was when manufacturing costs started going up for the Nike shoes. Demand was super high for Nike at the time.
And the way the vendors that Nike worked with tried to solve this problem was take their manufacturing into a little bit of the more underdeveloped sides of the country.
And it was connecting the dots at the time. I don't think Nike connected the dots at the time, but when this manufacturing change occurred, it was probably one of their more profitable years. I think either this was in the 90s when this was all happening, going down.
So then people started to discover, I think there was a picture of a Pakistani child in terrible conditions sewing a Nike football. And there was other images of horrible conditions where children were working in these environments to show that the wages were unlivable wages, and people started becoming more and more aware of this. So the next thing you know, there was protests and arguments occurring, and people started protesting the brand itself. And it got so loud that by 1998, Phil Knight made a statement. So I pulled some information on this, actually. It was funny enough, you'll find all of this on a Wiki article, but the quote from Phil Knight himself was, and this was in 1998 So you imagine when they were at the top of their game and then this all started happening, this was the statement made. I truly believe the American consumer doesn't want to buy products made under abusive conditions.
Really, Phil? You truly believe? What did it take for you to believe that? Was it the protests outside the door? What was it? But anyways, so that was one of, I think, the big eye-openers to a lot of companies ended up having that scope on them, right? Are they all treating their employees this way? What other manufacturing companies are taking advantage of people overseas and putting them through these conditions? I think it really brought tons of awareness during that time.

**Stephen Sakach** (3:21)
Yeah, kind of a huge issue for Nike and just the fashion industry in general. I think Nike, what they were outsourcing to a couple countries, right? And then they were just looking for the lowest bidder as those prices got a little higher. And so they were just shopping for the cheapest price and didn't care what that meant. What was the cost of that?
So, yeah, and obviously that just backfired spectacularly.
Tullio, what comes to mind for you? Give us a story on the supply chain. Go inside.

**Tullio Siragusa** (4:01)
Yeah, this is actually a great example for those who might be sort of on the fence about what's this empathetic thing about? Does it cost more? This is the financials driven conversation, right? So the reason why you want to apply empathy in your relationships with your partner. So here's an example of Mattel. They had a lead paint recall. So just a little background, in 2007, they recalled millions of toys due to lead paint, which is dangerous for anybody, but especially for children.
And the recall really highlighted Mattel's failure to ensure strict safety standards and really empathy towards the end consumer.
It also exposed poor oversight of their suppliers.
So the outcome was that Mattel had to pay millions of dollars and erode a consumer trust in order to fix this. But we're not talking about millions of dollars. I'm not talking about just a few million dollars. We're talking about possibly to the tune of a quarter of a billion dollars. So the direct recall costs break down like this. 21 million toys were recalled. So there was the cost associated with the logistics of having put all those toys out, then recalling them back, the disposing of the toys and refunding consumers, then testing and retesting the product, make sure that they were meeting the safety standards. So there's all these direct costs associated to that. Then there were indirect costs like their legal fees and settlement. They got fined by the US. Consumer Product Safety Commissioner, which went up to $2.3 million.