Mattel Toy Recall in 2007 Mattel Was Case Study

Excerpt from Case Study :

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…

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