Design flaws and regulatory failure in Mattel's 2007 toy recalls

Mattel Toy Recall

In 2007, Mattel was dealing with a number of challenges surrounding the quality of toys that were manufactured at their plants China. This is because lead paint was found in a number of toys which were produced in the country. These problems raised concerns about if enough was being done to test merchandise and the kinds of procedures that were place. However, after an extensive investigation, is when it was uncovered that design flaws are contributing to 90% of the toy recalls. While only 10% are directly liked to issues from the materials used to create the final product (such as the paint). ("Mattel and the Toy Recalls," 2008)

Then, a series of problems occurred associated with the dolls and two magnets that could become loose. If this was ingested by children, there might be an intestinal blockage that develops (which is fatal). This is a design flaw that is directly linked to the company, not the manufacturers. These new developments resulted in the industry improving their quality assurance procedures. At the same time, many retailers and other firms began to independently test the products they were selling. This increased monitoring for quality control and safety. ("Mattel and the Toy Recalls," 2008)

Issue Identification

There are a number of issues that were highlighted from this case. The most notable include: the lack of effective oversight / regulation, the scope of the problem within the industry and how executives were willing to ignore these challenges for as long as possible. The combination of these factors created an atmosphere that enabled many products of poor quality to be sold to unsuspecting consumers. ("Mattel and the Toy Recalls," 2008)

The lack of oversight and regulation has been taking place over the course of 25 years. What happened was, the federal and state governments allowed the industry to regulate itself. This occurred by reducing the number of inspectors and relying on firms to conduct their own tests. The problem is that inspectors became overloaded with an increase in the total amounts of toys that are imported and not enough staff to properly check every shipment. At the same time, most firms placed a limited number of their resources in these areas. This created a situation where quality was not focused on. It at this point that, these conditions allowed for defective toys to be sold to consumers. ("Mattel and the Toy Recalls," 2008)

The scope of the problems within the industry occurred when executives ignored these issues for many years. This is because they were focused on increasing their profit margins and reducing costs as much as possible. The best way that they could achieve these objectives is to outsource the manufacturing of different products to China. The problem is that no one was actively monitoring quality control (as this will increase expenses). ("Mattel and the Toy Recalls," 2008)

When these issues were identified, managers often kept quiet. This is because they did not want to do anything that will hurt the firm's profit margins. Over the course of time, this created a situation where the underlying amounts of quality control decreased. This set the stage for a series of defective products to go through the supply chain without being properly tested. When this happened, Mattel was forced to deal with a number of recalls that were embarrassing for the firm. Management's inability to address these issues early, are what helped to make the underlying problems worse. ("Mattel and the Toy Recalls," 2008)

The way that executives are willing to ignore these challenges is by passing the blame onto others after the problems were discovered. In this particular case, Mattel and the toy industry accused Chinese manufacturers of producing inferior merchandise. This resulted in a consumer backlash against anything that was made in China. ("Mattel and the Toy Recalls," 2008)

In some cases, Chinese officials had a lack of oversight that helped contribute to the problem. The issues with the lead-based paint in toys are directly liked to manufacturers. However, the other design flaws with the magnets were not tied to them. Instead, they were shown to be internal problems within the company. Executives maintained that they were not the causes of these problems, until a report was released by the Canadian Consumer Product Safety Commission. They found that the majority of recalls were linked to the firms themselves, not the manufacturers. This is when the industry began to accept responsibility for their lack of testing and quality control. ("Mattel and the Toy Recalls," 2008)

These issues are showing impact of global supply chain development and the challenges from having organizations operating in different regions. For sourcing, this meant that there were added checks in place to monitor for quality and safety. However, the process of making these changes required that Mattel and the industry had to face the truth about these challenges. ("Mattel and the Toy Recalls," 2008)

This is when they began to implement positive transformations to address these issues. Until this happened, the underlying problems only became worse. This is when executives refused to accept responsibility and passed blame onto others. It is at this point that they were forced to accept their part, based upon the number cases and irrefutable evidence highlighting their role. ("Mattel and the Toy Recalls," 2008)

Environmental and Root Cause Analysis

The environmental and root cause analysis are revealing that there were several sources of the problem. Like what was stated previously, Mattel is directly responsible for the quality of toys that were produced. The fact that select amounts of toys with lead-based paint were allowed to go through is a sign of how the company had much larger issues. This was occurring with the management creating an environment that ignored quality and safety guidelines. ("Mattel and the Toy Recalls," 2008)

The way that this was accomplished is executives began to engage in practices that were designed to increase the firm's competitive margins. On the surface, this was helping the company to become more efficient and it made the organization more responsive to needs of customers. At first, these reductions were taking place internally, by eliminating any unnecessary positions. ("Mattel and the Toy Recalls," 2008)

However, after a series of decreases in the total number of staff, managers began to look for other ways to cut expenses even further. This is when Mattel began to outsource production to third party providers in China. The basic strategy is they could pay employees a fraction of the labor costs in comparison with American workers. ("Mattel and the Toy Recalls," 2008)

For example, the average monthly compensation for workers in China is $150.00. If the firm employed someone at minimum wage in the U.S., these expenses would be $1,200.00 per month. This is with the individual working strictly 8 hours a day or 40 hours a week. In the event that they need to work extra, is when there will be overtime. Moreover, these employees will also require health and retirement benefits. This is illustrating how Mattel could dramatically reduce their labor costs by manufacturing these products in other locations and shipping them to retailers. ("Mattel and the Toy Recalls," 2008) ("Federal Minimum Wage Rates," 2012)

These attitudes created an environment that encouraged everyone to increase productivity and reduce expenses as much as possible. During this process, no one was thinking about quality or product safety. When this occurred, there were very little controls for monitoring and analyzing merchandise. Instead, everybody assumed that this was someone else's responsibility. This is what allowed for so many defects to go through their supply chain to retailers. ("Mattel and the Toy Recalls," 2008)

Once these problems were discovered, managers immediately began to blame the manufacturers. This is based upon a strategy that worked in the past, as they could claim that it was a third party provider. In the case of the lead-based paint from China, this was occurring from a lack of oversight. ("Mattel and the Toy Recalls," 2008)

However, the problem was not simply a matter of going after these manufacturers. Instead, it was the atmosphere that allowed sub-quality products to be sold to consumers. This took place in every aspect of the process ranging from design to safety controls. These factors are beyond the scope and responsibility of the manufacturer. They are reserved for Mattel to address. This is because they are purchasing these products from a third party provider. The company has a responsibility to test for quality. The fact that they did not, is a sign that executives wanted to maintain this focus at all times. ("Mattel and the Toy Recalls," 2008)

Once it was clear, that the company was dealing with a major problem is when executives failed to live up to their responsibilities. It was not until additional recalls were announced, that it became obvious of these issues being related to Mattel. This is when managers were forced to admit that there were problems with the company's supply chain, quality control and logistics. In order for executives to become this forthright, required an independent report being released which admonished third party manufacturers from responsibility. Instead, the majority of the blame rests with the management and their inability to address these issues. ("Mattel and the Toy Recalls," 2008)

This is illustrating how the root causes of this problem became worse over the course of time. As the management wanted to increase their bottom line results at any costs and ignored critical issues. During this process, is when they did not pay attention to quality or safety. At the same time, the outsourcing of manufacturing to third party providers in China increased these risks. The scandal involving the tainted lead paint is illustrating how this focus became so extreme that it allowed for these conditions to exist. This is when it became only a matter of time, until the company would have a number of product recalls (from not concentrating on these areas). ("Mattel and the Toy Recalls," 2008)

To avoid any kind of negative publicity, the management denied responsibility. However, after it became clear that they played a role, is when they admitted their mistakes. As a result, one could argue that Mattel learned about the challenges of outsourcing and how this effects product recalls from their experiences. This forced managers to deal with the fact that their quality control and supply chains were weak. If these issues were not addressed, there is a realistic possibility that brand image of the company could suffer further damage from customers and retailers. ("Mattel and the Toy Recalls," 2008)

At the same time, managers learned that they must evaluate the quality of the products which are being purchased from third party providers. This is because these firms do not follow the same kind of safety practices as American-based producers. Over the course of time, this increases the chances that there will be these kinds of issues. To deal with these challenges, executives learned that they must have effective quality and safety assurance practices in place. This will prevent these problems from becoming worse, which have resulted in negative publicity for Mattel. ("Mattel and the Toy Recalls," 2008)

Alternatives or Options

The alternatives that company has available are to take a different course of action. This is when management will admit that they immediately have a problem and begin conducting an internal investigation. As this taking place, executives have improved the quality assurance and supply chain management procedures. This occurred initially, after the lead-based toys were discovered. ("Mattel and the Toy Recalls," 2008)

However, managers must then take a different course of action. Instead, of denying any kind of liability, they should be focused on admitting the company's role in the process and how they are addressing the issue. This takes place, by conducting an honest assessment as to what happened and how the problem can be rectified. Then, telling consumers and other stakeholders where the problems exist and how it will be fixed. ("Mattel and the Toy Recalls," 2008)

If this kind of approach was taken, Mattel could have shown that they made mistakes and were doing everything to make up for these oversights. This would have prevented the damage that the company suffered to its reputation. Moreover, it will make the claims against quality with third party providers more legitimate. This is because the firm is searching for the truth in order to prevent these challenges in the future. When this happens, responsibility will be assessed fairly instead of trying to find a scape goat. ("Mattel and the Toy Recalls," 2008)

Monitor and Control

In spite of the criticisms, Mattel did implement changes to improve monitoring and controls. This was achieved when the CEO Bob Eckert implemented a three stage process that evaluated the products which were being purchased from third party providers. At the same time, he immediately imposed a voluntary recall for the merchandise that was tainted with lead-based paint or had defective magnets. This is showing how he transformed the existing process to improve quality and delivery. ("Mattel and the Toy Recalls," 2008)

In the future, this is helping the firm to avoid these kinds of challenges by having effective procedures in place. This is creating a change in the focus of executives with many now looking at quality control. Moreover, they learned how to respond to recalls and what steps must be taken to mitigate these problems. ("Mattel and the Toy Recalls," 2008)

As a result, the case study is showing: the conditions that allowed for Mattel face a series of recalls in 2007, the way the management reacted and how this affected the outcome. At the same time, it is illustrating those individuals who were able to create lasting changes in the supply chain and quality assurance management programs (most notably: Bob Eckert the CEO). In the future, these ideas are illustrating the possible dangers of outsourcing to third party providers. It is also underscoring the impact of global sourcing on supplier quality development and design. ("Mattel and the Toy Recalls," 2008)

All of these factors must be taken into account, in order to ensure that nothing is overlooked. These are the keys that firms must practice over the long-term. If this takes place, they can quickly respond to quality control issues and increase their bottom line results. When this happens, the organization is more flexible and can deal with a variety of challenges. In many ways, one could argue that this will help to make Mattel more competitive by changing the mindset of managers. ("Mattel and the Toy Recalls," 2008)