Mattel's Case Study answer

INTERNATIONAL OPERATIONS MANAGEMENT Mattel’s toy recall and supply chain management report Mao Monivann 2015722057 Yvette Uwineza 2015722100 thx Daniyar Kenzhekhanov 2015722045 谢吉 2015722052 Npol 2015722110 Mattel’s recall problems were caused by three primary issues: The first and most crucial factor leading to recall was designing problems. Analyzing the Mattel’s voluntary recall history in U.S and Canada from 2000 to 2007 in the Exhibit 3 (Source: Unsafe for Children: Mattel’s Toy Recalls and Supply Chain Management: GS-63), most of the recalls resulted from defective designing products that could cause injury to children. To take but one example, more than 80 percent of the voluntary recalls around the world made my Mattel in 2007 was due to designing problems of its toys using small magnets that could become loose and swallowed by kids. The second problem resulted from misuse of the products by the customers. This happened because Mattel could not spot the problem until their products sold to customers (children) who always find ways to play with their toys in the way that could result in jury. This requires Mattel to conduct testing studies on its products before making orders to its vendors. Third problem rooted from manufacturing error of Mattel’s vendors. This happened because those vendors used the materials from unapproved suppliers with falsified certification documents in order to cut cost to meet with low-cost requirements from those powerful retailers such as Wal-Mart. However outsourcing could not be a direct cause of these recalls problems. First, Martel has out sourced their productions outside United States since 1959. Outsourcing actually helped Mattel to stay completive and become a market leader for more than four decades before a serious recall problem happened in May 2007, especially with the problem of Lead paint. If outsourcing was the core problem of these recalls, it would have been a serious problem for so long. The model of sourcing productions to low cost countries is not the problem yet the problems were rooted from the supply chain management of Mattel itself. Mattel’s model of supply chain management on its outsourced manufacturer was post-production. Mattel inspected products from its vendors after production already took place. In supply chain management, post-production inspection system is ineffective. It usually comes too late and costly. Instead, Mattel should thoroughly inspect the materials that it outsourced vendors use before manufacturing take place to avoid any possible manufacturing errors, specifically with lead paint. In addition, the recalls problem caused by designing problems and product misuse had nothing to do with outsourcing, it happened because of Mattel’s negligence and lack of sample product testing before ordering procurements to its outsourced manufacturers

In order to address the recall problems, Mattel took actions by recalling its toys and also by issuing an apology to the end customers and in order to avoid future incidents like this to happen again and to rebuild their brand image they pointed out new and strict strategies to be applied by its manufacturers and suppliers. They pointed out that paint needs to be bought from certified suppliers and every single batch of paint needs to be tested from every single vendor. Which is going to be the right action as this would create more control on the raw materials being supplied and used to reduce any risks and would also make vendors and suppliers to adhere with Mattel’s norms for them have to be in business with Mattel. They also insisted on tightening control at the production facilities and doing randomly unannounced inspections. Which is a good move since it would create more control for Mattel on its end products from its manufactures and make sure that their standards are met beforehand rather than at the point of taking over the shipment which might cause a loss to both parties. They pointed out that every finished production of toys should be tested to ensure compliance before they reach out to customers. This would make sure that Mattel releases the right products to its end customers and regain its confidence in them also they can keep up the promise to make safer toys to children. This would also reduce recall costs in the future and ensure good quality products at the end. They also pointed out one of the major actions would be to always reaching out to its vendors to ensure that they understand tightened procedure and strict requirement adherence. This step would contribute in ensuring that all of Mattel’s vendors understand Mattel’s procedures, policies and requirements and adhere to them to make sure that there is no negligence or any compliance issues before hand making their suppliers more trustworthy. This would also encourage vendors to apply these rules on to their suppliers which could help to maintain a proper supply chain management all throughout. Moreover China chamber of commerce also contributed in taking strict actions by urging toy manufactures to sign a public pledge to improve product safety. This is a good movement suggested by the Chinese government to make awareness that manufactures don’t agree to orders which won’t be fulfilled with minimum requirements and safety concerns; China also enforced a product quality licensing system, requiring official inspection of toys being exported. This is a second layer of inspection which would endure that the brand name “Made in China” is not tampered as it would not only affect the toys segment but would affect the overall Chinese manufacturing segment as most of the products manufactured in China were exported and Chinese reputation was at stake. Mattel’s actions taken after the recall couldn’t be more right, especially the recall of the toys from the end users because it gained more trust from the customers and it made them feel safe because it showed the customers that the company cares for their safety more than anything. And also the apology felt right and needed because it’s a humble gesture towards the clients; And also the strategies taken were right, because if applied well it will be rare for any incident like that to happen again or any future accidents; as mentioned above regular supervisions and certified suppliers plus the testing of paint before it is applied will lower the number of any future incidents or recalls.

To sum up the above points, Mattel took actions by recalling its toys and also by issuing an apology to the end customers and introducing a 3 point check system for its manufacturers and suppliers gave some good results as mentioned earlier, but also they had some following points like they insisted on tightening control at the production facilities and doing randomly unannounced inspections that needs eye on it. Because this action would create more control for Mattel on its end products from its manufactures and make sure that their standards are met beforehand rather than at the point of taking over the shipment which might cause a loss to both parties. It is obvious that Mattel’s problems are closely tied in with its enormous global supply chain. One can’t be blame it for growing such a long distance operation, because it is something inevitable, once you start doing serious global business. What we (maybe) can blame Mattel for is its inability to keep this long distance operation in check, a company needs a degree of self-awareness, and the bigger (complex) you grow the more you need it. What adds fuel to the fire is that while Mattel did not exhibit any due diligence, or even attempts to hold its own sprawling operations in check, it also had some top-shelf demands for its suppliers. Then again, there is nothing wrong with having high standards, unless you are throwing them into a volatile and young market like China. One (if not the most important) trait of professionalism is to be objective, once you are objective you understand that the best way to make sure that goals are attained is to assume the worst outcomes. If we apply this logic to Mattel we can’t help but wonder how they could allow such complex sub-contracting jungle to appear inside their China operation. The steps and precautions that could be deducted from my aforementioned logic were only executed after Mattel’s crisis. Before the problem became apparent and started rampaging through the press, nobody at Mattel thought about establishing thorough control of their vendors in China. Talking about control, I read through other people’s opinions on this and must note the 3 most common and most noteworthy points are these: The case mentioned that Mattel had about 200 employees responsible for supervising Mattel’s Chinese contractors. 65% percent of the company’s production is in China, how come so few people are responsible for such a big share? Are they even responsible at all or are they just filling in due positions waiting on monthly income. At first glance the number of people responsible should be proportional to the size of the share in China. Of course one could go ahead and make more detailed calculations concerning the distribution of labor force responsible for supervision in China, nevertheless the case and the incident it describes can be taken at face value as evidence that 200 people are not enough (or maybe not qualified) to supervise Mattel’s 65% percent production share in China. Another thing we could scold Mattel for, is it’s alienation from the Chinese Market. Despite being so heavily dependent on it, their attitude towards it is at best described as colonialist dismissiveness. Why did they not come up with the decision to establish a team especially for the purpose of Chinese market research? Instead they just dumped their top-shelf demands and expected the Chinese vendors to be as adamant about quality as if the Mattel brand belonged to them. Of course people where going to cut back on costs and paint, of course they will ignore possible consequences, it is the year 2007, competition is growing by the year, the government (just like Mattel) isn’t looking too close on how they do things, so why not try and squeeze out some profit. If Mattel had established its team of Chinese market researchers (the earlier the better), it would have established a network of trust, which contained Chinese companies that would have never cut corners because of quick profits, or trust untrustworthy paint suppliers. Unfortunately Mattel went along the opposite direction of my pessimistic logic and thought that

just because a factory was supplying it from the day it established, that this fact could substitute trust or/and compliance. No Mattel, the best way to establish compliance to your own standards is to sign clauses and contracts, preventing your vendors from buying Junk and/or being not diligent with quality control. Talking about control, we come to the next point I’d like to mention, a thing called SRM. Supplier relationship management (SRM) is the discipline of strategically planning for, and managing, all interactions with third party organizations that supply goods and/or services to an organization in order to maximize the value of those interactions. In practice, SRM entails creating closer, more collaborative relationships with key suppliers in order to uncover and realize new value and reduce risk of failure. For example, let’s say a Car manufacturer outsources its tire production to China. The main clause of the contract between the car-company and the Chinese factory would be the condition that the factory can produce tires for the car company only from the rubber specifically provided by the car company. The same way, the above mentioned China-Team of Mattel, could be tasked with maintaining SRM and establishing such contracts with its vendors. The Chinese will be allowed to produce toys for Mattel, ONLY if they use the paint provided by Mattel, Mattel itself could let its SRM or procurement team be responsible for the search of reliable paint suppliers inside China. One more thing that we see as a sub-development (a step further) of SRM is, PDCA (plan–do– check–act). It is an interactive four-step management method used in business for the control and continuous improvement of processes and products. This tool could (and should) be extensively applied and emphasized by Mattel onto its Chinese vendors (and maybe on its self). The PDCA is a failsafe measure that, had it been applied in time, might have prevented the negligence of Mattel’s vendors when they were rampantly skipping through all the quality control measures of paint. To sum up my points, nothing of what I said is rocket science and can be found in any respectable Management study book, yet no one at Mattel seems to be fond of such books. Sometimes (if not all the time, the only way to learn from experience is to get burned, and what better way is there to burn than to burn through one’s profits). The case gives a premise to discourse of outsourcing and inventory network administration. The fundamental toy producing process is genuinely straightforward, giving a gathering to talking about these issues without the confusion of cutting edge fabricating innovation or an included inventory network. For this situation, production network surrenders, for example, the utilization of lead paint by sellers can have extreme outcomes. The inventory network should be intended to keep these absconds. The case empowers exchange of why organizations outsource, dealing with an inventory network, and the proper utilization of investigation and testing. It additionally gives the chance to inspect reaction to an emergency circumstance, and the relationship between an organization and government.