Mattel Case

07 learn Case Study Hazardous make for Rec whatsoevers at Mattel, Inc. Key words Chinese manufacturing, out(p)sourcing, harvest-tide rec anys, global supply stove risk Type of submission education faux pas study Hazardous con Rec in all(a)s at Mattel, Inc. ? Abstract In 2006 and 2007 Mattel, Inc. was even off about with massive recalls of Chinese-made plays due to potentially unreliable levels of strike in various gyp model fold blushing mushrooms and small magnets in toys which could fall off and be swallowed.This case describes the events be consecrateing up to the recalls, the response by Mattel, the reasoned, wellness, record and financial implications of the recalls, and the impacts of the recalls on Mattels global supply strand. aimers atomic number 18 asked to value the situation and to decide what should adopt been do differently, if anything. The case is usurp for under have and graduate business students analyzing various purchasing, risk, a nd supply chain design issues. The 2006/2007 Mattel wreak reverberatesIn some respects, the menses from providedt on 2006 to October 2007 was a very difficult time for Mattel and their Chinese trifle suppliers. On a number of occasions during this period, Mattel recalled a total of about 14 one thousand thousand Chinese-made toys in the U. S. and Canada for the same two serious-minded problems. Millions much(prenominal) were recalled in other strange markets. These two problems were indeed signifi chamberpott non b arly for Mattel, but for their distributors, retailers, Chinese suppliers and finally the families around the world buying their toys.Over 2 million of the recalled toys had either been sprayed with steer-tainted blusher or contained potentially raging levels of sound inside the materials, era the remaining toys contained small magnets which could come up off and be swallowed. hedge I summarizes these recalls. Table IMattels Chinese-Made roleplay Rec alls in the US and Canada, 2006 2007* Date Toy and problem Description No.Units Recalled 03/30/2006 American female child jewelry containing postgraduate levels of lead 180,000 11/21/2006 Polly sack toys with small baseless magnets 2,400,000 08/02/2007 Various Fisher Price toys with lead in surface winder 1,000,000 08/14/2007 Batman, One Piece, Barbie, Tanner, Doggie Day C be, and Polly Pocket toy 9,350,000 sets with small well-situated magnets 08/14/2007 Sarge toy cars with lead in surface keystone 250,000 09/04/2007 Geo Trax, Barbie, and Fisher-Price Bongo Band toys with lead in surface 750,000 paint 10/25/2007 Fisher Price Go Diego Go toy with lead in surface paint 40,000 Total 13,970,000 * ejacu late U. S. Consumer harvest Safety accusation, www. cpsc. gov On March 30, 2006 approximately 180,000 of Mattels American daughter jewelry pieces in the U. S. were recalled because the Chinese-made jewelry contained high levels of lead. On November 2 1, 2006, undermentioned 170 reports of loose magnets on Polly PocketTM play sets, Mattel recalled bothwhere 2. 4 million Polly Pocket play sets in the U. S. and Canada and other 2 million world(a).In at least three of the cases, children who had swallowed magnets suffered serious intestinal perforations requiring surgery and hospitalization. Then nine months subsequently on disdainful 2, 2007, Mattel recalled almost 1 million Fisher-Price toys for using paint prodigious the lead content limit set by the U. S. Consumer Product Safety Commission (CPSC). Two weeks later, the CPSC proclaimed five interrupt recalls of hundreds of thousands of Mattel die cast toy cars for potentially godforsaken levels of lead paint and over 9 million play sets in the U. S. and Canada, following hundreds of reports of small magnets falling out of the toys. In early family, Mattel announced a nonher major recallover 700,000 units of 11 different toy models for having paint containing supernume rary lead.Finally, on October 25, 2007, another recall was announced by the CPSC for yet more Chinese- manufactured toys containing paint with lead. In late August 2007, Mattel announced that some of the lead-tainted toys had been painted by a third-party subcontractor working for one of Mattels indigenous Asian toy suppliers, Hong Kong- ground Early unmortg be ond industrial Co. , a toy cleric for many of the worlds biggest toy companies. Hong Li Da, the Chinese subcontractor apply by Early sluttish, was supposed to use Mattel-approved paint, stock-still it instead used less pricey paint from an unapproved supplier. Today, Mattel continues to use the Early Light Co. , a trusted supplier of theirs for more than 15 years.Another Chinese subcontractor, lowwind Der Industrial Co. , overly used an unauthorized paint supplier when making many of the toys include in the August 2 recall. ? Mattel typically coiffes monthly inspects of manufacturers toys, which sometimes include s scrutiny hit-or-miss units and other times involves reviewing manufacturers exam records. Mr. Jim Walter, Mattels senior vice president of worldwide quality assurance explained, They didnt perform the testing they should have, and the audit we performed didnt mystify it. ? Mattels Response In late August 2007, Mattel CEO Robert Eckert filmed a video apology to p atomic number 18nts which was rolld on the companys website and on rubes website. I cant change what has happened in the past, but I can change how we work in the future, he said, adding that he had four children of his own. Mattel also pledged to increase the frequency of its paint inspections, testing every batch delivered to every supplier. The firm also purchased full-page ads in the New York Times and rampart highroad Journal. ? Following the third quarter 2007 recalls, Mattel slowed guttle the shipments coming out of Asia to conduct result testing and arctic reviews. Similarly, Mattels shipments to global markets were curtailed while various regulatory political science reviewed Mattels adeptty procedures. Ultimately, Mattel was able to keep open more than two-thirds of the recalled toys from reaching consumers by contacting dispersal centers and retailers. ? Most of the export/import issues were settle by the end of 2007. Today, Mattels first-tier suppliers essentialiness conduct quality tests on all incoming materials as well as finished toys made by subcontractors. alike as a result of the recalls, Mattel created a Corporate Responsibility organization, which has accountability indwellingly and externally for estimation to company safety and residence procedures. ? On kinsfolk 5, 2007, Mattel representatives told an American congressional committee that the problem with toys containing grievous magnets was the result of a flawed toy design, and not due to poor adherence to manufacturing requirements in china.According to Chairman and CEO Robert Ekert, more than 50,0 00 hours had been spent investigating the issues surrounding the toy recalls. We apologise again to everyone affected and send for that we entrust continue to focus on ensuring the safety and quality of our toys, he said. ? Finally, on September 21 in a meeting in Beijing with Mr. Li Changjiang, the chief Chinese quality prescribed along with a group of reporters, Mr. doubting Thomas Debrowski, a senior Mattel executive, offered an apology to the Chinese peopleMattel takes full responsibility for these recalls and rationalizes personally to you, the Chinese people, and all of our customers who received the toys. ? Li also told reporters that the Chinese government come together down operations and revoked the business clear of Lee Der Industrial, one of the subcontractors producing the defective Mattel toys (a co-owner of Lee Der Industrial committed suicide before long after the August recall announcement). ? With ascertain to the unsafe magnet problem, Mattel made some (prenominal) manufacturing changes to punter retain magnets in their toys, including all-night cure times for adhesives, the use of superfluous adhesive, and the use of injection molding to better encapsulate magnets inside toys. The Chinese Manufacturing and regulatory Environments Companies operating in China be subjected to very few regulations, and have elflike legal recourse.Foreign firms operating in China try to cover themselves by securing guarantees from their Chinese suppliers that they result follow specific procedures, but they are almost impossible to enforce. In September 2007 Mr. Yan Jiangying of the Chinese State feed and Drug Association admitted that supervisory set outations are still very weak. The worry of food safety for instance, is split amidst five ministries resulting in unclear responsibilities. thither also tends to be no recital of regulatory accordance for Chinese businesses, do many safety and quality shortcuts to be taken when suppliers are pressured by their customers to bowdlerize prices. With regards to lead paint use, China has laws forbidding lead paint from consumer products, but loose regulatory enforcement means these laws are routinely ignored.In a test conducted by the University of Cincinnati from 2004-2007 for example, 38 paint samples from China representing 11 brands were tested and more than 25 percent were found to contain lead levels exceeding the U. S. safe limit of 0. 06 percent. McDonalds, one of the worlds largest toy buyers, says the problem of lead paint in China is so widespread that their company moldiness monitor paint quality all the management bear to the original paint suppliers. Their toy makers moldiness agree to use only McDonalds approved paint. ? Ironically, Chinese cultural norms are often at odds with the way companies are managed, as described prior with regards to the suicide of Lee Der Industrials co-owner.For a number of years, Mattel has used the supranational Cen ter for Corporate Accountability (ICCA), a non-profit research organization, to conduct audits of its company-managed and third-party Chinese manufacturers to cut finished compliance with Mattels ball-shaped Manufacturing Principles (GMP). Mattels GMP is shown in Table II. Chinese plant managers are required to complete compliance reports prior to actual field audits. Audits exist of the firms accounting practices, secluded one-on-one interviews with employees, an examination of the plants policies, procedures and practices with regard to environment, health and safety issues, and inspections of the frequent maintenance of the manufacturing facilities, storage, give-and-take and disposal of hazardous waste materials, hygiene issues, and dormitories and recreational facilities.The ICCA provides the audit reports to Mattel, whereby corrective actions are determined in response to the findings. ? Mattels Ethical and wakeless Considerations The Consumer Product Safety Commissio n (CPSC) can exclude from the U. S. market, products failing to combine with applicable regulations or that otherwise create a substantial risk of injury, including articles containing excessive amounts of hazardous substances. The CPSC may also require the recall, repurchase, re turn outment, or repair of articles. ? Additionally, U. S. Customs & Border bulwark (CBP) ensures that goods entering the U. S. are safe for consumers. The CBP has say-so detain and exclude any products based on instructions from the CPSC.On August 20, 2007, a class-action lawsuit was filed in Los Angeles County Superior address against Mattel with regards to the toys with excessive lead paint. This lawsuit sought-after(a) to have Mattel establish a gillyflower so that parents could be reimbursed for testing their children for lead poisoning (the cost to test for lead poisoning is about $50 per person). A second class-action lawsuit was filed against Mattel on September 27, 2007 in California seeking redress for injuries suffered from swallowing magnets improperly attached to Mattel toy sets. On September 4, 2007, the CPSC began investigating whether Mattel knowingly withheld randomness regarding any safety risks posed by the millions of toys recalled in August.Mattel could be substantially fined if they are found in violation of the Consumer Product Safety Act of 1972, which stipulates that companies mustiness assure the CPSC within 24 hours when they obtain product defect information which could create a health hazard. ? The Chinese Toy patience Today By the end of 2007, the Chinese toy industry was struggling. In Foshan, a major Chinese toy manufacturing hub in Guangdong province, some companies were tightening standards and increasing testing to reassure Western buyers. Others were closing down or looking for less correct markets. Its very difficult to do business now, says Ms. Deng Xiling, sales manager at a factory making charge card components for toys.Her compan y closed its painted-toy division following the Mattel toy recalls and laid-off almost one-third of its workforce, because they couldnt afford the types of product testing Western buyers started requiring. Table IIMattels Global Manufacturing Principles? Mattels Global Manufacturing Principles (GMP) apply to all parties that manufacture, assemble, license or distribute any product or package military capability any of the Mattel logos. GMP provides guidance and minimum standards for all manufacturing plants, assembly operations and distribution centers that manufacture or distribute Mattel products. GMP requires safe and honest treatment of employees and that facilities protect the environment while respecting the cultural, ethnic and philosophical differences of the countries where Mattel operates.GMP also requires internal and periodic independent monitoring of our achievement and our partners performance to the standards. Mattel is committed to executing GMP in all areas of its business and will only engage business partners who share our lading to GMP. Mattel expects all its business partners to adhere to GMP, and will assist them in meeting GMP requirements. However, Mattel is prompt to end partnerships with those who do not comply. Mattel and its partners will operate their facilities in compliance with applicable laws and regulations. Mattel has defined the following overarching principles to which all facilities and partners are required to comply.These principles are dynamic and evolving to continually improve our efforts to ensure on-going protection of employees and the environment. In addition, Mattel has developed a comprehensive and critical set of underlying procedures and standards that enable us to apply and administer our GMP in the countries where we operate. The procedures and standards are updated and refined on an ongoing basis. 1. direction Systems Facilities must have systems in place to address grind, social, environmental, health and safety issues. 2. struggle and Working Hours Employees must be paying for all hours worked. Wages for regular and overtime work must be even out at the legally mandated rates. Wages must be paid in legal tender and at least monthly.Working hours must be in compliance with rude and Mattel requirements. Regular and overtime working hours must be documented, verifiable and accurately confer all hours worked by employees. Overtime work must be voluntary. Employees must be provided with rest days in compliance with country and Mattel Requirements. Payroll deductions must comply with applicable country and Mattel requirements. 3. Age Requirements all in all employees must meet the minimum age for employment as specified by country and Mattel requirements. 4. Forced Labor Employees must be employed of their own free will. Forced or prison labor must not be used to manufacture, assemble or distribute any Mattel products. 5.Discrimination The facility must have policies on hiring, promotion, employee rights and disciplinary practices that address discrimination. 6. Freedom of verbalism and Association The facility must cope all employees rights to choose to engage in, or refrain from, lawful union body process and lawful collective bargaining through representatives selected according to applicable law. Management must create formal channels to advocate communications among all levels of management and employees on issues that impact their working and living conditions. 7. supporting Conditions Dormitories must be separated from fruit and warehouse constructions.Dormitories and canteens must be safe, sound and meet the basic needs of employees. 8. body of work Safety The facility must have programs in place to address health and safety issues that exist in the workplace. 9. health First aid and medical treatment must be available to all employees. Monitoring programs must be in place to ensure employees are not exposed to harmful worki ng conditions. 10. unavoidableness Planning The facility must have programs and systems in place for dealing with emergencies such as fires, spills and natural disasters. Emergency get by doors must be kept unlocked at all times when the building is occupied. Emergency exits must be intelligibly marked and free of obstructions. 11.Environmental Protection Facilities must have environmental programs in place to minimize their impact on the environment. word Questions 1. Was Mattels response to the toy recalls appropriate? Why or why not? How could the company have responded differently? 2. What should Mattels responsibility be to their Chinese supplier-partners? 3. Read Mattels Global Manufacturing Principles (GMP) shown in Table II. Should anything else be added to their GMP? 4. What are the ethical, legal and reputation issues that need to be addressed by Mattel? Was Mattel acting correctly to publicly apologize and take responsibility for the design errors and omit of ove rsight? 1 This case was prepared just to provide material for student sermon and does not intend to illustrate either effective or ineffective manipulation of a managerial situation. The author may have disguised certain label and other information to protect confidentiality. i Zamiska, N. and N. Casey, Toy Makers Face Dilemma Over Supplier, Wall way Journal, August 17, 2007, p. A10. ii Spencer, J. and N. Casey, Toy Recall Shows Challenge China Poses to Partners, Wall lane Journal, August 3, 2007, p. A1. iii Casey, N. and N. Zamiska, Mattel Does Damage Control aft(prenominal) New Recall, Wall Street Journal, August 15, 2007, p. B1. iv Schuman, J. , The Morning Brief Lead key + Elmo = Bad News for China, Wall Street Journal Online, August 3, 2007. v 2007 Mattel, Inc. Annual Report. vi Steverman, B. Mattel more than Tribulations in Toyland, Business Week Online, September 6, 2007, p. 12. vii Business Plenty of Blame to Go Around Chinese Manufacturing, The Economist, V. 382, No. 8548, 2007, pp. 78. viii Lindner, M. , Mattel Takes Its Lumps for noxious Toys, Forbes. com, September 21, 2007. ix Spencer, J. and N. Casey. x 2007 Mattel, Inc. website www. mattel. com/about us/ corporal responsibility. xi 2007 Mattel, Inc. Annual Report. xii Luk, S. and E. Wong, Risks Faced by China-based Toy Manufacturers, China Law & Practice, November 2007, p. 1. xiii 2007 Mattel, Inc. website www. mattel. com/about us/corporate responsibility.