Risk, Reputation and Efficiency in Purchasing

 

In August 2007, Mattel, the world's largest toy manufacturer, announced a recall of 19 million units of a toy line due to the use of lead-based paint in its manufacture. In addition to a fine of US$ 2.3 million, a logistical cost of US$ 24 million and advertising and clarification costs of more than US$ 70 million, the company's biggest loss with this crisis was undoubtedly in the market, losing ¼ of its total value (or about US$ 2.75 billion) in four months.

When investigating what led to this major crisis, Mattel discovered that the paint used in the toys came from a secondary supplier, located in China. Analyzing the governance of its supply chain, the company concluded that its risk analysis would be far below what is necessary for its size and scale of operations. Over the last seven years, the company managed to recover its market value and had exceptional management of that crisis due to the transparency and speed with which it dealt with the situation.

In retrospect, it is easy to point out the company's major failure in this case: even though its crisis management was exceptional, Mattel lacked greater risk management in its chain, to prevent the fact from happening. Whether due to a lack of structure, a wrong calculation or even philosophy, the fact is that after what happened, the toy company is one of the leaders in controlling and operating its supply chain, delimiting advanced sustainability principles in purchasing.

But why sustainability in a case of clear regulatory and human health risk? Because sustainability in purchasing is risk management and purchasing efficiency. A study by Insead, Ecovadis and PwC shows that, if a company adopts a sustainable purchasing structure in its operations, it will spend, on average, 85 times less than what would be spent on crisis management resulting from not adopting this structure. Not to mention the reduction in operational costs and greater efficiency (due to energy costs, incorrect specifications, legal costs, etc.) and the growth in revenue (due to improved reputation).

Of course, the decision to implement a sustainable purchasing policy in a company is complex and not cheap, but the study and the Mattel case demonstrate that it is not a cost, but an investment. More than that, it is a perfect case of the internalization of sustainability in the business, demonstrating a clear causality between what I buy and the potential risk/gain associated.

How to be more efficient in purchasing?

A rationale that offers greater knowledge of potential operational risk and that indicates gains in efficiency and reputation, as does “Sustainable Purchasing Manual”, is a tool capable of changing the logic from “lowest price” to “best price”. For the company, consumers and the planet.

Manual de Compras Sustentáveis

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