Mattel Incorporated is now the second largest global toy manufacturing company after being the largest toy manufacturer for years (Soloman). Mattel Inc., headquartered in El Segundo, California, produces well-known toys such as Barbie, Hot Wheels, and Fisher-Price toys for children. Mattel is not only a leader in the toy industry with over $6 Billion in sales in 2013 (Soloman), Mattel also leads the industry in corporate responsibility as it receives regular audits by the International Center for Corporate Accountability, an independent body, which the results of are made public. Mattel gives to charity through the Mattel children’s foundation, and has received many other accolades indicating its position as a socially responsible corporation.
Despite Mattel’s position as a top 100 corporate citizen in 2006, a year later Mattel had to issue massive recalls for children’s toys containing lead paint in addition to some recalls made in 2006 for lose magnets in toys that could be a swallowing hazard.The recalls were a result of Mattel’s operations strategy to manufacture its toys in China (Bapuji 5). In Mattel’s complex supply chain management failed to effectively monitor and ensure quality in each step of the supply chain especially at the lower level with its vendors. The 2007 recalls were a result of lead paint used in children’s toys and toys with magnetic parts that if swallowed could cause medical issues.
CHALLENGES IN OFFSHORING
In 2007, Mattel had to recall over 21 million toys due to lead pain and poorly designed magnets. Though this is only a portion of the 800 million toys Mattel produced in 2007, these recalls highlight existing supply chain issue and create new ones as Mattel must create a structure to collect the faulty toys, increase dependence on other suppliers to restock products, and provide increased customer service throughout the recall. In the specific case of the 2007 recall due to lead paint, the lower ranks of the supply chain was left unmonitored. Mattel sourced some of its toys by Lee Der Industrial Company in China. Lee Der purchases its paint from Dongxing New Energy Company. When Dongxing ran out of yellow pigment, it purchased the pigment from Dongguan Zhongxin Toner Powder Factory which was later found to be a fake, untraceable vendor.
Mattel attempted to avoid issues such as these by composing its contracts with vendors to require the vendors to purchase from a list of eight certified vendors in China or test for compliance each batch of paint purchased by a non-certified vendor. Mattel conducts audits of certified paint suppliers and vendors to ensure quality, however the frequency of audits depends on Mattel’s prior relationship with the supplier or vendor. This laxity in monitoring suppliers and vendors lead to the opportunity for substandard products to be made.
Overall, offshoring is used to take advantage of economies of scale and reducing infrastructure and labor costs, but there are many challenges to managing quality while offshoring. Organizational issues with offshoring include loss of control of projects and processes, the need for increased management attention to detail, security risks, concerns over proprietary info and legal issues. Market and supply issues include high competition for offshoring in some areas of the world like China, limited understanding of suppliers true reputation and track record, dependence on supplier provided information, increased travel costs, political issues, infrastructure issues, or the manufactures having little or no experience in toy making. Other issues may include language and cultural issues, timezone and holiday schedule conflicts (Palowitch).
MATTEL’S KEY STRENGTHS
Mattel began in 1944 with simple picture frames, doll house furniture and music boxes. In 1959, the ever popular toys, Barbie and Ken dolls, were released and soon after the Hot Wheels line began. Since going public in 1960, the brand has expanded and Mattel has even acquired Fisher-Price, Kransco, Tyco, Pleasant Company, Blue Bird Toys, and the Learning Company. Most of these acquisitions greatly increased the profitability of Mattel loving that accessions is one of Mattel’s strengths (Bapuji 6).
A second strength of Mattel is its ability to market cost-effectively. The toy industry is seasonal with sales focused around the holiday season in the year. Also, there is a lot of uncertainty involved with new product introduction since market research with children’s products is inconclusive. Mattel innovated marketing within the toy industry by partnering with ABC Television to sponsor a 15-minute segment of Walt Disney’s Mickey Mouse Club for a year which established Mattel in the minds of consumers. Mattel engaged in more partnerships with Disney, Warner Brothers, Viacom and more to create toys outs of popular characters. Mattel has also licensed it core brands to non-toy companies to make Barbie eyesore with REM eyewear and Hot Wheels apparel with Innovative Group (Bapuji 6).
MATTEL’S QUALITY PROBLEM AND ORGANIZATIONAL ISSUES
Mattel’s quality problem stems from outsourcing large amounts of the manufacturing of toys while focusing on advertising, product design, research and development and other high value activities in the U.S. in house. Mattel utilizes both of offshoring through outsourcing production in China and also owning factories in China. Mattel owns five factories in China, but outsources 50% of production to Chinese third-party manufactures. This accounts for about 65% of Mattel’s toys meaning majority of Mattel’s toys are at risk to the challenges of offshoring coupled with the challenges of outsourcing (www.awpagesociety.com/images/uploads/Mattel_CaseStudy.pdf).
Though Mattel has designed a strict multi-step process to monitor the manufacture of non-core brands and audits to measure the quality of core brand products, the reality is that not every product is monitored, and not every manufacturer and their supplier and vendors are monitored. With the amount of offshoring and outsourcing Mattel utilizes their supply chain needs to be extremely trusted or micro-managed for quality down to the raw materials used especially with Mattel being a leader in the toy industry for ethics.
In China alone, Mattel had contracts with approximately 37 principle vendors who then used smaller companies for the full or partial production of toys. The Mattel supply chain is long and complex with about 3,000 Chinese companies involved in making Mattel products. Mattel only maintain contact with the principle vendors leaving the smaller companies to be managed only by the principle vendors (Bapuji 7).
Mattel should voluntarily recall any products which contain over the .06% threshold the Consumer Product Safety Commission (CPSC) has set (Bapuji 3). This would require batch testing for all toys, not just toys made in China as there will be a need to reassure the public that all toys are safe. Also all products which contained magnets locked into the Polly Pocket play sets will need to be recalled.
( In the year 2007)
From the timeline above, it is clear that Mattel did not report the lead contamination in paint to the CPSC within the legal timeframe. Also it should be noted that from the time of the first notice of lead paint in toys on June 8, 2007 to stores being notified to take the faulty products off the shelves on August 2, 2007 was about two months which is far to long given the amount of consumption that can occur in two months, especially in the summer when children are out of school and may be playing with toys more (Bapuji 8). Mattel’s recall strategy was to work with the CPSC to launch a widespread recall within the media and stores. The CEO of Mattel issued an apology in a video posted on the website and compensation was given to all who had purchased the faulty products.
However, it could be argued the the compensation in the form of equivalent compensation to the product purchased was not enough. Another bad aspect of the recall was that Mattel placed a lot of blame of the Chinese government and Chinese manufacturers trying to displace responsibility . Also a new corporate responsibility organization (an organization of 500 employees to monitor domestic and international vendor and manufacturer adherence to Mattel’s toy safety standards) was created and a new three-point safety check system was initiated (Soloman). Mattel also enacted 15 “Fast Track” Tactics to unitize during the recall.
Mattel’s “Fast Track” Recall Tactics
1.Staffed its call center, created a CPSC-approved script
2.Created a recall portion of its website
3.Sent notifications and posters to retailers
4.Gave retailers advance notice of recall so they could remove products from shelves even before logistics of recall had been finalized
5.Sent news releases to media
6.Started a toll-free, multi-lingual interactive voice response phone line to assist callers to determine if their product is an affected one
7.Launched a web-based recall identification tool on its website in more than 20 languages.
8.CEO video posted on website
9.Allowed customers to register a product for recall online or over the phone
10.Mailed recall notification letters to customers who were in their customer relations database due to past recalls
11.Ran full page ads in newspapers on August 14 and September 5: USA Today, The New York Times, The Los Angeles Times, The Chicago Tribune, the Washington Post
12.Conducted print, online and television satellite interview
13.Posted ads on websites frequented by parents, such as Yahoo!, Disney, Nickelodeon, and The Cartoon Network
14.Offered customers prepaid postage labels so that they could return the products 15.Compensate customers with vouchers equal to or greater than the retail price plus tax (From www.awpagesociety.com/images/uploads/Mattel_CaseStudy.pdf.)
The toy industry, in general, experiences a large amount of recalls , but when it comes to the safety of children consumers are harsher critics. Also with Mattel’s brand reputation and reputation as a good corporate citizen the quality standards need to be high.
Soloman, Brian. “Everything Is Awesome: Lego Leaps Barbie For World’s Largest Toy Maker.” Forbes. Forbes Magazine, 04 Sept. 2014. Web. 18 Nov. 2014.
“Http://www.awpagesociety.com/images/uploads/Mattel_CaseStudy.pdf.” Arthur W. Page, n.d. Web. 18 Nov. 2014.
Bapuji, Hari, and Paul Beamish. “Mattel and the Toy Recalls (A).” Richard Ivey School of Business-The University of Western Ontario (2008): 1-15. Web. 18 Nov. ri.
Palowitch, Benard, Jr. “Benefits and Challenges of Offshoring.” Benefits and Challenges of Offshoring. N.p., n.d. Web. 18 Nov. 2014.