mattel crisis
DESCRIPTION
mattel crisis 2007TRANSCRIPT
- UNSAFE FOR CHILDREN -
MATTEL’S TOY RECALLSAND
SUPPLY CHAIN MANAGEMENT
ON AUGUST 2007 !!!
RECALLED 83 PRODUCTSDUE TO LEAD PAINT ISSUE…!!!
Dora The ExplorerBig Bird
Elmo characters from Sesame Streetetc
ON SEPTEMBER 2007 !!!
6 MORE RECALLS…!!!SAME REASON…!!!
+RECALLED SMALL MAGNETS…!!!DUE TO DESIGN PROBLEMS…!!!
ON OCTOBER 2007 !!!
ANOTHER RECALLDUE TO LEAD PAINT…!!!
???
ALL HAVE BEEN MANUFACTURED IN CHINA
OWNER OF THE FACTORY THAT HAVE USED LEAD PAINT
COMMITTED SUICIDE………………
………………
Brand has been Hammered
………………
BUT…
ONLY 15 % OF THE RECALLED TOYSDUE TO
MANUFACTURING ERRORS
MAIN REASONDEFECTIVE DESIGNS
(mostly carried outside of China)
SO…
MATTEL&
MANUFACTURING FACTORY&
GOVERNMENTAL AGENCIES OF CHINA
&TOY IMPORTING COUNTRIES
MATTEL
• 1945…began as a manufacturer of dollhouse furniture
• 1955…first toy company to sponsor a TV program
• 1959…introduced Barbie• 1960…went public• 2007…largest toy maker at the time
for RECALLS sales $ 6 billionAfter tax income $ 600 million
TOY PRODUCTION IN CHINA
• 2000…world’s leading toy producer
• 2007…80% of world’s toy production
…80% of toy coming to US were made in China …Toy Distribution was
evolving towards Mass Market Companies like WalMart
MATTEL SUPPLY CHAIN
First experience with manufaturing in Asia
Japan, 1959, Barbie Dolls…
2 types of Products:Core ProductsNon Core Products
MATTEL SUPPLY CHAIN
STRATEGY:
Produce Core Products in Owned Factories
Use Local Vendors to Produce Non Core Products
MATTEL SUPPLY CHAIN
• Inspect Materials coming in• Monitor Supplier closely (esp. for
Lead Based Paint)• Terminate some Vendors for
violation• Produce New Toys in Small
Batches before approval• Inspect Toys off the production
line periodically, when full scale production began
• Contract Manufacturers
MATTEL SUPPLY CHAIN
• Required Factories to work with Certified Suppliers
• Allowed its most Reliable Suppliers to do their own Routine Testing (Mattel’ll do quarterly Spot Tests)
• BUT, Vendors subcontracted…• Prohibited Subcontractors from
using multiple layers of Additional Suppliers
AT THE TIME OF RECALL … !!!
• NOT CLEAR HOW WELL THESE RULES HAVE BEEN FOLLOWED……
• MATTEL’S 200 EMPLOYEES RESPONSIBLE FOR TRAINING AND SUPERVISING CHINESE CONTRACTORS WERE BASED IN HONG KONG, NOT AT TOY PRODUCTION FACILITIES……
PRESSURES ON CHINESE TOY MANUFACTURERS
WAL-MART-EFFECT…!!!
Pressure on Suppliers to Cut their Costs Down
MATTEL’S 2007 RECALL CRISIS
PRIOR TO AUGUST 2007• Some Other Recalls for Chinese Made
Products• May 2007, 1.5 million Toys recalled by RC2
Corp. due to lead paint• Contaminated Pet Food, Toothpaste, Cough
Syrups, Defective Tires..etc
REASONSManufacturing Problems
Design ProblemsProduct Misuse
MATTEL’S 2007 RECALL CRISIS
AUGUST 2007
• Mattel Recalled 83 Fisher Price Products sold between May 1st-Aug 1st
• Due to Non Approved Paint Pigment containing Lead
• Supplier was a Long Term Contract Manufacturer
MATTEL’S 2007 RECALL CRISIS
AUGUST 2007
• Lee Der Industrial : Mattel’s Supplier of 1st Recalled Toys
• Early Light Industrial : Mattel’s Supplier of 2nd Recalled Toys
• More Other Recalls…
MATTEL’S 2007 RECALL CRISIS
MATTEL’S RESPONSE
• 3 POINT CHECK SYSTEM• REVIEWED COMPLIANCE WITH ITS RULES• PLANNED TO PURCHASE PORTABLE LEAD
DETECTORS• CEO APOLOGIZED• EMPHASIZED DESIGN PROBLEMS AS WELL
MATTEL’S 2007 RECALL CRISIS
CHINA’S RESPONSE
• CHINA CHAMBER OF COMMERCE’S ACTIONS• AQSIC WITHDRAWED LEE DER INDUSTRIAL• TOY MAKERS HAVE BEEN ASKED FOR APPLIANCE
FOR QUALITY LICENCING• CHINA OFFICIALS LAUNCHED A PUBLIC RELATIONS
OFFENSIVE• CHINA BLAMED MATTEL, NOT LOCAL
MANUFACTURERS• AGREEMENT BETWEEN US (CPSC) AND CHINA
(AQSIC) OFFICIALS
MATTEL’S 2007 RECALL CRISIS
CHINA’S RESPONSE
• AQSIC ASKED EXPORTERS TO PROVIDE TEST RESULTS WITH EACH EXPORT SHIPMENT
• AQSIC LAUNCHED A DATABASE SUMMARIZING THE INSPECTION AND QUARANTINE STANDARDS OF IMPORTING COUNTRIES
• SUPPORTED A HIGH LEVEL TEAM RESPONSIBLE FOR FOOD, DRUG, PRODUCT SAFETY
• GOVERNMENT HAS INITIATED A TRAINING PROGRAM
MATTEL’S 2007 RECALL CRISIS
POLITICAL AND REGULATORY RESPONSES
• US COMMITEES MADE HARD CRITISIZM FOR BOTH MATTEL AND CHINA
• “MADE IN CHINA” LABEL STARTED TO BE A WARNING LABEL
• HILLARY CLINTON CRITISIZED CHINA MANUFACTURERS
• BARRACK OBAMA PROMISED TO BAN CHINA TOYS UNLESS THEIR SAFETY COULD NOT BE UNSURED
• EUROPE ALSO THRETENED TO BAN TOY IMPORTS
MATTEL’S 2007 RECALL CRISIS
CONSUMER REACTION
• EMOTIONAL RESPONSE• “MADE IN CHINA” BRAND LOOSE CUSTOMER
CONFIDENCE• FOUND US GOVERNMENT AND CHINESE
MANUFACTURING FAULTY
MATTEL’S 2007 RECALL CRISIS
FINANCIAL COST TO MATTEL
• TOOK A CHARGE ON EARNINGS– $110 million in 2007
• DESPITE THESE COSTS, REPORTED NET INCOME AFTER TAX OF $600million for 2007
• MANY LAWSUITS• PRODUCT TESTING IN CHINA HAS BEEN INCREASED
MATTEL’S 2007 RECALL CRISIS
MATTEL’S 2007 RECALL CRISIS
CONCLUSION• Mattel should Control its Supply Chain better, to
cope with design problems, product misuse, lead paint issues and usage of Unapproved Suppliers– Mattel should inspect its subcontractors well– Direct Site Visits to Suppliers to be able to make
evaluations on their performances– Integrated Global Sourcing requires horizontal links
with other functional groups (esp engineering, operations, design, demand planning and marketing)
– Integration is also required with Tier 1, Tier 2 and also Tier 3 Suppliers
– Increase expenditures on quality controls and tests– Strictly follow up Tests to be held through the Supply
Chain and Increase Check Points (3 check point system)
– Total Cost of Ownership
MATTEL’S 2007 RECALL CRISIS
CONCLUSION• Awareness on commitment, scope of operations,
resources and capabilities that integrated global sourcing requires
• Transaction Cost Analysis Theory (Core & Non-Core) Outdated
• Accuracy and Validity of the documentations should be ensured– Personnel with knowledge, skills and abilities to
recognize the falsified documents• Determine critical raw materials or processess.
Strictly follow up, all the operations related to those parts, well
• Improve information flow through the chain– Geographical Proximity of the Employess responsible
for Training and Supervising Chinese Contractors is an Issue
• Understand the Capability of the Supplier’s (Wal-Mart-Effect)
MATTEL’S 2007 RECALL CRISIS
CONCLUSION
UNDERSTANDINTEGRATED GLOBAL
SOURCINGREQUIREMENTS
&SUCCESS FACTORS
MATTEL’S 2007 RECALL CRISIS
CONCLUSION
BE AWARE OF
INTEGRATED GLOBAL SOURCING
RISKS