Why do firms contract overseas for production of products they sell? Answer: The firms contract overseas for production of the products they sell to gain certain advantages from the different countries. One of the biggest advantages is cheap labor that cut down the cost of the products. To get the advantage of the cheap fuel prices and raw materials to make the products at effective cost. The companies can get the tax benefits and other government policy advantages by producing their products at overseas. The companies can also get the lower cost suppliers from different countries. The company can get the advantage of currency fluctuation to produce the products at lower currency rate.
What were the primary causes of Mattel’s recall problems?
Answer: There were several causes for Mattel’s toy recall. But the primary causes are problems in manufacturing, design and usage. Manufacturing Problems: One primary problem is the use of excessive lead paint in toys. Lead was commonly used in paint. However, it is a neurotoxin and is harmful to developing brains in children. Repeated exposure can cause serious brain damage. Design problems: A second cause for recall was defect in product design. That was the result of increasing use of small powerful magnets in children’s toys. If the designs of these toys were deficient and did not adequately encase the magnets, they could become dislodged and swallowed by the children. When a child ingested more than one magnet, the ingested magnet could be bind together across intestinal folds, eventually perforating the intestine and causing serious injury or death. Product misuse: Some recalls were due to the potential for misuse. Some features of the toys generally were not a cause for concern if children used the toy in intended way, but children often found creative ways to play that were not anticipated by designers.
So, if potential danger was brought to the company’s attention, the toy might be subject to recall. What actions taken by whom to deal with the recall problems? Do you think these actions were the right one? Why or why not? Answer: In early July 2007, one of the Mattel’s European retailer discovered excessive lead on some of the company’s toys. Mattel stopped production and launched investigation of the problem. The company received data that convinced that recall is necessary. In August Mattel announced voluntary recall of 83 Fisher-Price products sold from May 1 to August 1, 2007. The recall involved about 1.5 million toys worldwide. Two-third of the toys were pulled from inventory before they reached retail customers. After first recall Mattel announced second voluntary recall for toys with excessive lead content. The recall involved 436,000 toys worldwide. After the second recall Mattel announced to recall the Sarge toy cars, an expansion of earlier recall due to small magnets.
It recalled 18.2 million toys worldwide. All of the toys recalled had been manufactured in China. Two weeks after the August 2nd recall, the owner of the Chinese factory that used the lead paint committed suicide. According to my opinion, the actions taken by Mattel were absolutely right. Mattel has been criticized heavily for having to recall not once but twice in as many weeks 20 million toys manufactured in China with lead paint and/or loose, potentially dangerous magnets. Clearly Mattel did not have sufficiently tight quality control procedures in its supply chain to compensate for the extra risks of outsourcing to relatively new Chinese subcontractors.
Clearly there were design flaws in the toys with the magnets that could come loose. Though the recall of the products had created serious problems for Mattel and for manufacturers of China, the products were highly dangerous for the children which needed serious concern. But the positive point was both the Governments of China and U.S. tightened the rules regarding product safety. They also raised the product quality standards and product testing. The CEO of the Mattel had taken personal charge of the situation. He has apologized publicly and taken immediate steps to tighten quality assurance requirements on Mattel’s suppliers.
What should Mattel do now? What should China do now?
Answer: Mattel has faced a series of difficult and potentially crippling challenges, including the lawsuits. Mattel should attempt to rectify its mistakes and to prevent future mistakes as well. Mattel should work hard for restoring goodwill and faith in its brands, even as it continues to be plagued with residual distrust over the lead paint scandal. Mattel should upgrade its safety standards and quality control. Mattel should be careful for approaching international supply chain management strategies. Mattel should make sure its Chinese suppliers operate ethically, including treating their workers fairly. Whereas Mattel can do randomly test finished toys, as it should now test every single batch of toys produced. Safety checks should also get beefed up at the supplier and subcontractor level prior to the finishing of the product. Reputations are hard won and easily lost, but Mattel should appear to be steadfast in its commitment to restoring its reputation. After the recall by Mattel, China’s export manufacturing sector, an important factor driving country’s economic growth, had been stung by suffering highly visible problems.
The “made in china” brand was in real danger. At that point China needed to prove that they could produce products to the quality and safety standards expected by the rest of the world. China should ask companies to hire full time inspection staff and allow their customers to inspect their plants. China should enforce quality licensing system for product exports. Chinese agency should increase efforts to certify exporters and should severely punish and blacklist the companies that fail to meet performance requirements. Though Mattel had taken full responsibility for these recalls and apologizes personally to the Chinese people and all of their customers who received the toys, China was fighting with the brand image in the international market. How can accountability be increased and better managed when production is moved overseas to other firms in the supply chain?
Answer: There are many criticisms levelled at multinational organizations for choosing to relocate their manufacturing operations from domestic markets in developed countries to developing countries many thousands of miles away. Suspicion is often focused on cheap labor and possibly lower or less enforced health, safety and environmental legislation all contributing to lower production costs. But to increase accountability and better production management at overseas the company needs to have law inventories, flexible manufacturing and close relationship with suppliers and customers. Better managed supply chain requires close coordination with suppliers to achieve the desire level of quality and delivery. It also needs to have frequent communications with the suppliers and customers.
It entails to have close coordination among product design, engineering, the manufacturing plant, and suppliers. Ultimately, it is the responsibility of the manufacturer to ensure that its products are produced to the highest safety standards that its workers are not exploited and that health and safety and environmental standards not compromised in the search for lower prices. In this case the stakes are very high since the safety of all our children is at stake as well as the acceptance of the ‘Made in China’ designation in world markets.