In 2007, Mattel a California based toy company shockingly recalled 19 million toys that had been manufactured in China. Mattel was founded in 1944, and has produced iconic toys such as Barbie and Hot Wheels. The company had a long established trust with their consumers that had been forged from decades of reliability. However, when the company recalled 19 million toys due to health and safety violations, consumer confusion and outrage soared. The public wanted to know how such an established company’s safety regulations could fail, how Mattel was addressing the issue, and whether consumers could trust Mattel to produce reliable toys in the future.
Mattel had been a long time leader in the toy industry. Mattel and its main competitor Hasbro held control of over a third of the toy market, even in an industry with over 900 manufactures. However, there had been shifting trends in the toy industry. New electronics and video games were becoming increasingly popular among older children. Since Mattel manufactured classic toys such as dolls, the shifting trend forced the company to focus on marketing towards young children under the age of 12. While this segment responds well to Mattel’s products, they also are the most at risk of endangering themselves. The younger the children, the more likely they are to put toys in their mouth. This behavior puts children at risk of choking or ingesting harmful chemicals.
Even with new adversities in the toy industry, Mattel remained a global leader. As seen in Exhibit A, a SWOT analysis of the company, Mattel had many different strengths that kept it a favorite among consumers. Some of its most significant strengths included its reputable brand name among consumers and its successful marketing of toys through children’s entertainment. Even with changing toy preferences, Mattel was growing internationally. In Exhibit B you can see Mattel’s global sales. While Asia only made up a quarter of Mattel’s sales, they were forecasted to grow 25% annually. Sales in Asia could help combat Mattel’s plateauing market in the United States. The company seemed like it was in a strong position.
As early as the 1970s Mattel was manufacturing products in China in order to take advantage of lower costs and enable corporate resources to focus on establishing the brand. By 2007, nearly 65% of Mattel products were produced in China. Mattel used a combination of company-run plants and a network of contract manufacturers. Exhibit C displays a simplified example of Mattel’s supply chain after moving production to China. Global production obviously had major benefits for Mattel, the country factors of China gave it a comparative cost advantage over producing in the U.S., and outsourcing enabled Mattel to remain profitable in an increasingly competitive toy industry. However, outsourcing does have disadvantages, a global supply chain increases the challenges to regulate and enforce quality. While Mattel had been a leader in safety standard and regulation, even collaborating with the American Society for Testing and Materials (ASTM) as well as establishing Global Manufacturing Principals (GMPs) the regulatory standards in place were not thorough enough.
In 2007, quality issues surfaced within Mattel as various products were found to contain levels way beyond U.S. federal toy safety regulations. During the year, other issues surfaced with Mattel products surrounding the safety hazard of magnetic pieces used in their toys. By the end of 2007 Mattel recalled over 19 million toys. The recall of such large quantities of product left consumers shocked and demanding to know how Mattel could be so unreliable. The reason for the safety hazards in Mattel’s products was do to their lack of direct oversight of contract manufactures in China. Mattel wanted to cut manufacturing costs and decrease lead time, which resulted in increasing pressure by their contracted manufactures to find inexpensive materials quickly. Under the same cost-saving initiatives, Mattel was increasing the amount of goods at distribution centers making it more difficult to preform thorough quality checks.
Had Mattel ensured their contracted manufactures were sourcing from proper suppliers, and preformed quality checks before products went to retailers, the recall most likely could have been avoided. Instead, Mattel set guidelines, and hoped on little more than good faith that they GMPs were followed. Hasbro, Mattel’s main competitor has a similar supply chain in place, but avoided the lead paint crisis due to their commitment to inspection. Hasbro set standards for lead paint that were higher than U.S. regulatory standards, and took proper measures to make sure their foreign contractors were also following the same standard. Hasbro placed their own quality assurance inspectors on factory floors, and inspects each product again before it went to retailers. Hasbro’s extra commitment to quality helps the company deliver a safe and reliable product to customers.
Due to the lack of quality management Mattel announced a voluntary recall of some products. While they did report the safety hazard, they reportedly took months to gather information and investigate the problem before publically announcing it. However, under regulatory rules, even potentially hazardous products are supposed to be reported within 24 hours. Mattel did explain to the customers that the lead paint was due to bad behavior by their contracted manufactures in China, easing many parents minds that Mattel would correct the issue. Then, Mattel actually apologized to regulatory officials in China, taking the blame for the quality management issue, especially since the dangerous magnetic toy component was Mattel’s design. This action left many customers wondering who was at fault and if they could trust Mattel again.
While Mattel’s contracted manufactures should have been following the GMPs regulations set by the company, it is ultimately the responsibility of the company to ensure their employees are preforming to the proper standard. Parents just want to be sure that their young children will be safe playing with Mattel toys, even if the child puts the toy in its mouth. Establishing quality checks similar to Hasbro will enable Mattel to deliver a better regulated, and ultimately safer product to their customers. Exhibit D shows how where Mattel should place quality checks in their supply chain. Quality check one will ensure that the materials being sourced meet U.S. regulatory standards, even abroad. These types of checks could have helped Mattel avoid the lead paint recall. Quality check 2 ensures the overall standard of the product; this type of check could have helped the company avoid the flawed magnetic design recall.
Having a global supply chain gives companies like Mattel many comparative advantages, such as lower production costs, but also comes with more responsibility to ensure product quality regulations. When Mattel failed to take the proper precautions to thoroughly inspect their products they put young children at risk of exposure to hazardous materials. While this significantly damaged Mattel’s public reputation, the company can still take measures to improve its process. By implementing more quality inspections throughout their supply chain Mattel can avoid future scandals like the 2007 recalls, and gain back the trust of their customers.
Mattel SWOT Analysis
Mattel’s Supply Chain
Mattel’s Improved Supply Chain
Vollmer, Sabine. “How to Become One of the World’s Most Ethical Companies.” How to Become One of the World’s Most Ethical Companies. CGMA Magazine, 27 Mar. 2014. Web. 03 Apr. 2014. “Toy Safety.” Safe Kids Worldwide RSS. Safe Kids Worldwide, n.d. Web. 03 Apr. 2014. Hill, Charles W. L. Global Business Today. Boston, MA: McGraw-Hill/Irwin, 2006. Print. Teagarden, Mary. “Mattel’s China Experience: A Crisis in Toyland.” Mattel’s China Experience: A Crisis in Toyland (2007): n. pag. Print.
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