Mattel in Chine: Toy Crisis Essay

Mattel, the world’s leading toy and children’s good manufacturer has cultivated a strong portfolio of well known brands and products while being recognized as a highly responsible corporate citizen that makes ethics and safety a priority. However, Mattel has had to overcome a few hurdles in order to stay on top; the first major problem they ran into was the recall of millions of products in 2007. The recall of toys because of health concerns has hurt the company’s brand image with the consumer, making them lose faith in the safety of their products.

Part of this was due to the numerous leadership changes over the years. Each leader had a different idea of what would make them number one in their business. Also, children are leaving toys, which is Mattel core product, at a much earlier age than before and moving to more high tech play things. The company must build on its heritage, while defending itself from threats. At the same time faced with maintaining its market position in the face of many challenges.

Quality control and product safety are key challenges for companies that manufacture in third-world countries. In the event of a safety or quality control crisis, corporations must respond quickly and efficiently using clear crisis communication and image repair strategies. Q1 Mattel operates Global Management Practices. What are these, who is involved and how are they implemented? Prior to the problems being faced by Mattel, Mattel implemented their global manufacturing practices(GMP). This applied to all businesses that produced or distributed their products.

The GMP’s provided structure for both subcontractors and contractors to abide by. This also helped to maintain safety for employees as well as the consumers. Because of the company’s product and designs primarily for children, it must be sensitive to social concern about children’s right. By assuring parents that their children’s privacy will be respected, Mattel demonstrated that it takes its responsibility of marketing to children very seriously. In 2007, Mattel conduct entitled Global Manufacturing Principles.

In this principles, Mattel’s business patners must ensure high standard for product safety and quality, adhering to practices that meet Mattel’s safety and quality standards, make sure that the entire product will not be harmful to the children. Partners must also comply with all import and export regulations and they must strictly adhere to local and international customs law. Mattel’s Global Manufacturing principles reflect not only its aim to conduct manufacturing responsibility, but to respect the cultural, ethical, and philosophical differences of countries in which it operates.

These Principles set uniform standards across Mattel manufacturers and attempt to benefit both employees and consumers. Mattel’s Principles cover issues such as wages, work hours, child labour, and discrimination, freedom of association and working conditions. Workers must be paid at least minimum wage or a wage that meets local industry standards. No one under the age of 16 or the local age limit may be allowed to work for Mattel’s facilities. Mattel refuses to work with facilities that use forced or prison labour or to use these types of labour itself.

Additionally, Mattel does not tolerate discrimination. The company states that an individual should be hired and employed based on his/her ability not on individual characteristics or beliefs. Mattel recognises all employees’ right to choose to associate with organizations or associations without interference. Regarding working conditions, all Mattel facilities and its business partners must provide safe working environments for their employees. For supporting the GMP initiative it was also created the Mattel Independent Monitoring Council (MIMCO).

Both GMP and MIMCO were intended to provide consistency on Mattel’s own facilities and contractors’ manufacturing practices. MIMCO has been independently managed by Baruch College Distinguished Professor of Management Prakash Sethi. Since its inception a large number of audits have been conducted to both company owned and contractor’s facilities; much has been achieved in terms of improving the working conditions to factory workers (Dee, 2007). However, neither GMP nor MINCO were designed to keep track on product quality and specifications.

Q2. Why did the business have difficulty with their recalls of product? How could this have been avoided? Product recalls are common practice in many industries, the toy industry not being the exception. Even though some recalls may reach sizeable dimensions significantly stressing and sometimes breaking relationships between buyer and suppliers (Biggeman &Buttle, 2007) most recalls pass almost unnoticed. According to one of Mattel’s spokesperson, “if vendors and subcontractors had adhered to our procedures, we wouldn’t have this issue.

We had instituted changes to our required procedures to catch cases of our policies not being adhered to and to improve accountability”(Sun 2007). Mattel typically performed monthly audits of manufacturers’ toys which sometimes included testing random units and other times involved reviewing manufacturers’ testing records. “they didn’t perform the testing they should have and they audit Mattel performed didn’t catch it” (Spencer &Casey). Mattel failed to test and check its toys before releasing it to the market.

There are about 3000 companies as part of the supply chain in China and Mattel has connection with only the primary vendors. This poses a serious issue to Mattel concerning the audit process. How can Mattel audit all the vendors in the supply chain process? Well they cant and most companies cannot. Although they can work on eliminating some of the intermediary suppliers, this is the greatest challenge for Mattel because they don’t know who all the primary suppliers are receiving their materials from. Mattel’s response to the recall was a mix of denial, diminishing and rebuilding strategies.

For denial, whether done in good faith or maliciously, Mattel initially led consumers to believe its Chinese suppliers were responsible for the magnet recall. Influenced by recent pet food and toothpaste recalls, the American media accepted the claim. Mattel then attempted to diminish the recalls’ severity by highlighting its stringent safety inspection process and minimizing the quantity of toys recalled. It asserted that the 2. 2 million toys recalled because of lead paint constitute only 0. 3 percent of annual production. The 17. 4 million recalled because of design flaws make up only 0. percent of production between 2003 and 2006. In a media statement to concerned shareholders, Mattel shifted blame and diminished the issue by claiming that American media and government interest in lead paint over the decades had unduly magnified Mattel’s own lead paint problem. Mattel did not neglect rebuilding strategies. To rebuild its reputation amongst parents and consumers, Mattel implemented mortification and compensation tactics. It apologized through its website and the news media; it offered coupons to affected customers. Mattel also delayed reporting the issue to CPSC.

By waiting over a month to make a potential toy hazard public, Mattel evaded the truth. Even though the company launched an informational campaign after filing its first recall with the CPSC, for many the honesty came too late. Some investors suspect the reporting delay was meant to falsely bolster stock shares and sell as many faulty toys as possible, reducing the financial consequences. Experts claim it is practically impossible to monitor every supplier or test every layer of paint that goes onto a toy. But Mattel must still ensure that it is doing everything within its power.

For example, Mattel can allocate more monetary and human resources to the safety inspection process: it can build more testing sites, hire more staff to conduct more frequent tests, and hire more third-party organizations to conduct tests. Secondly, in order to improve communication between suppliers, manufacturers and home base, Mattel should assign teams of American communications representatives to its Chinese factories. Their main responsibilities should include meeting regularly with supplier heads, conducting surprise audits, and ensuring that American directives are carried out.

These representatives should speak the local language and have prior work experience in China. Third, Mattel should lobby for federal legislation that would subject importers to tighter standards and inspections conducted by a third-party organization like the CPSC. In the future, Mattel can improve by allocating more resources to the implementation of creative rebuilding tactics. Q3 how has operation management become more accountable in Mattel? What must be put in place to ensure effective operations management? Mattel’s toy recalls lead to an investigation.

Appearing before a US senate committee, Eckert acknowledged that the Chinese contractors had not been monitored closely enough. Mattel issued a new three point check system in response to the failure, including a mandate on approved paint suppliers worldwide revised testing procedures carried out on all vendors more frequently and at random and additional checks of selected batches and production runs. Mattel also took the unusual step of naming the suppliers at fault and several ties with many suppliers Chinese authorities revoked several firms’ export licenses.

Mattel also conducted audits of its subcontractor’s factories on a three year rotational basis. Unannounced visits were made for sites declared to be unacceptable. Mattel has continued to conduct audits of its subcontractors’ factories on an annual rotational basis, working since 2009 with the International council of toy industry care process. To ensure effective operations management Mattel should * Control its supply chain better to cope with design problems, product misuse, lead paint issues and usage of unapproved suppliers * Inspect subcontractors well Direct site visit to suppliers to be able to make evaluations on their performances * Increase expenditure on quality control ; tests * Accuracy ; Validity of the documentations should be ensured * Determine critical raw materials or processes strictly follow up all the operations related to those parts * Improve information flow through the chain * Understand the capability of the suppliers Q4. What are the issues of sub-contracting on such a large scale for Mattel? The problem surrounding Mattel Inc. , one of the world’s largest toy companies is their mismanagement of international sub-contractors.

Because Mattel has a powerful presence on the international scene, they “must be aware that the international environment often complicates business transactions” (Ferrell, et. all 463). However, it is clear that Mattel did not properly manage its global manufacturing process. In 2007, Mattel was forced to recall “1. 5 million Chinese-made toys” containing lead paint and powerful magnets that posed a choking hazard for children (http://www. nytimes. com/2007/08/28/business/worldbusiness/28iht-mattel. 4. 7289869. html).

These unsafe products are the result of overseas manufacturers not adhering to Mattel’s high ethical and safety standards, as well as Mattel’s negligence in investigating its international contractors and auditing the “entire supply chain, including subcontractors” (Ferrell, et. all 463). In fact, Mattel became “overconfident about its ability to operate in China without major problems” and failed to recognize that the toy recalls were “more of systemic problem” (http://www. nytimes. com/2007/08/28/business/worldbusiness/28iht-mattel. 4. 7289869. html). These oversights left room for certain violations to occur.

The violations and problems began when subcontractors used unauthorized third-party suppliers. Early Light Industrial Co. , “a subcontractor for Mattel, subcontracted the painting of parts of Cars toys to another China-based vendor” (Ferrell, et. all 462). This vendor, Hong Li Da, then decided to “source paint from a no authorized third-party supplier: a violation of Mattel’s requirement to use paint supplied directly by Early Light” (Ferrell, et. all 462). In order to save money and cut corners, this unauthorized supplier used paint that contained impermissible levels of lead.

As outsourcing and subcontracting increased, Mattel’s ability to monitor the manufacturing process and the material used to produce toys became harder. With the mounting number of subcontractors and suppliers in the supply chain, Mattel was found to be in use of illegal and harmful products, forced to recall some of its toys in the international market, and faced with a damaged reputation. Even though this incident occurred in China, and it was the Chinese government’s “failure to properly protect the public,” Mattel was still held liable for all the products produced under its name (Ferrell, et. ll 463). Essentially, ineffective “enforcement and market surveillance” on the part of Mattel led to the huge toy recalls. Through the mismanagement of overseas manufacturers, contractors, and the international supply chain, harmful raw materials were used in the production of Mattel toys. Codes, safety standards, and business ethics were ignored to begin with, and Mattel ended up neglecting its social and ethical responsibility to produce toys that are safe and fun for young children Experts claim it is practically impossible to monitor every supplier or test every layer of paint that goes onto a toy.

But Mattel must still ensure that it is doing everything within its power. For example, Mattel can allocate more monetary and human resources to the safety inspection process: it can build more testing sites, hire more staff to conduct more frequent tests, and hire more third-party organizations to conduct tests. Secondly, in order to improve communication between suppliers, manufacturers and home base, Mattel should assign teams of American communications representatives to its Chinese factories.

Their main responsibilities should include meeting regularly with supplier heads, conducting surprise audits, and ensuring that American directives are carried out. These representatives should speak the local language and have prior work experience in China. Third, Mattel should lobby for federal legislation that would subject importers to tighter standards and inspections conducted by a third-party organization like the CPSC. Q5 it takes years to create a positive and successful image. It takes days for a crisis to ruin reputations. Is this what happened to Mattel or were there other factors beyond their control?

For Mattel, maintaining tight quality control in its overseas factories remains a crucial issue that, if not properly addressed, could damage the bottom line, its reputation, and children’s health and safety. Environmental scanning would clearly identify this as a current issue for two reasons: recalls have existed as a toy company shortcoming for decades; as companies move manufacturing abroad, the media, lobbyists and consumer groups have focused increasing attention on quality control. In fact, 60 percent of the recalls in 2007 were of products manufactured in China. Product safety and quality control is not a new issue.

Mattel has had 36 recalls since 1998; one was the high profile Power Wheels recall. Lead paint contamination has attracted much attention over the years, with some watchdogs dedicated almost entirely to it. For managers at companies that rely on contract manufacturers and suppliers overseas, the situation is a call to action: A proactive corporate ethos on quality management—and supply chain traceability in particular—will not only save time and costs long term, it will ensure products exceed minimal regulatory requirements and avert potential public relations and brand image crises.

A comprehensive quality management system (QMS) that enables enhanced supply chain traceability is the hallmark of such an approach and will inevitably save costs in the long run. Having the flexibility to identify, contain, and adapt to foreseeable and unforeseeable issues is critical to a comprehensive response plan. Proactive, responsible companies that implement a comprehensive vendor/supplier/contract manufacturer-evaluation program and performance tracking system as components of their overall QMS will give companies the preparedness they need to ensure smooth responses to otherwise devastating product recall scenarios.

If mattel had a proper QMS in place and had prepared for unforeseen circumstances, they would not have had issues with the recall. Mattel failed in its quality control management. Basic adherence to minimal regulatory requirements does not always constitute the wisest public relations and quality assurance philosophy. One need look no further than Mattel’s lead imbroglio to realize even entrenched