Executive Summary
Mattel is one of the largest toy manufacturers in the world. It has business operations all across the world. Mattel sources most of its toys from Asian subcontractors. China is the main source of Mattel toys. In 2007, a retailer found lead paint in Mattel toys. This started a huge investigation on the part of US government and Mattel. Mattel recalled millions of toys from the market. The CEO of Mattel apologized to the customers. Mattel also employed huge changes in its safety and quality check policies. It also acted in a very transparent way in the investigation and helped the government in all possible way. In fact, it took help from the regulators to improve the supply chain process. With the improvement in supply chain and quality audit process, Mattel never faced any quality issues after 2007.
Company Introduction
Founded in 1945, Mattel Inc. is one of the leading toy manufacturers in the world. Its toy lines include popular brands such as Barbie, Matchbox, Hot Wheels, American Girl, Fisher-Price, Radica and Tyco (Mattel #2, 2014). With headquarter located in El Segundo, California, Mattel has over 30,000 employees working in 43 countries and has sold products in over 150 countries. Ranked at 413rd position on the Fortune 500 in 2008, the company has a reputation of being a trustworthy and responsible company (Fortune 500, 2008). The company has been recognized as one of the most trustworthy US organizations by Forbes magazine. Ethisphere Magazine has recognized the company as 'the world's most ethical companies' in 2013 (Mattel #1, 2014).
The safety of the toys is of paramount importance in Mattel. The company tries hard to follow strict standards of quality from product design to manufacturing and distribution and has an internal operating procedure in place to ensure compliance with the laws and regulations enforced by the US CPSC or Consumer Product Safety Commission 2013 (Mattel #1, 2014). In order to be at cost-competitive advantage, the company has several production facilities spread across China, Hong Kong, Malaysia, Singapore, Indonesia and the Philippines. The cheap production cost in Asia keeps the company at an edge over its competitors. Mattel earns a lion’s share of its revenue from toys coming from the five factories, it owns, in China (Lawrence and Weber, 2013). Besides having the production units run in the company-owned plants, Mattel also contracts production to about 30 and 50 Chinese firms. Many of these Chinese firms work in collaboration with other subcontractors. In order to stay true to its ethical principles, Mattel has designed Global Manufacturing Principles to address an array of labor issues including minimum wages, minimum age of laborers to prevent child labor, compliance with health and safety standards as mandated by the American Conference of Government Industrial Hygienists (Lawrence and Weber, 2013). In order to ensure the quality and safety of its products, Mattel maintains specific standards with the use of lead in paint making sure to run frequent test of products in test labs and its own facilities. All the vendors working with Mattel need to ensure compliance with the safety standards enforced by the organization, and in case of failure, Mattel terminates contracts with its suppliers on the issue of non-compliance.
Problem Statement
Despite the efforts undertaken by the company to ensure the safety of its products, Mattel came across a problem in recent times when in 2007 it had to recall about 1.5 million Chinese-made Fisher-Price products on the ground that the products contained high amount of lead. Two weeks later, Mattel again recalled 436,000 toys because of the same reason of high amount of lead. The second recall also included 18.2 million toys which contained small but hazardous magnets that, if swallowed by young children, could put their lives at risk (Lawrence and Weber, 2013). Mattel issued a third recall, few weeks later, of 11 different products.
Mattel learned in its investigation that some of the subcontractors and external vendors, in a bid to save money and time, violated the rules by using cheaper lead paint instead of unleaded paint. For instance, Hong Li Da, a subcontractor working for the Chinese contractor of Mattel, Early Light Industrial, used a cheap lead paint violating the safety norms (Lawrence and Weber, 2013). In total, Mattel found out that seven of its contractors had produced the lead paint-coated products. In its investigation, Mattel also discovered a flaw in its design of some of the toys which contained small magnets and therefore, could potentially pose threat to a child's life, if swallowed. Upon discovering the flaw of the design, Mattel changed the design of the toys in a way that the magnets could not be broken free and ingested accidentally.
Recommendations
It was a big thing for Mattel to recall its products due to the violation of safety standards. It took Mattel a few decades to establish its reputation as a responsible company, and the problem created over the use of lead paint could change all of that within moments. However, the primary problem was to ensure that the unsafe products, which were coated with lead paint, should be removed from the market as soon as possible. Upon hearing from a European retailer about the lead paint problem for the first time, Mattel ran a huge internal investigation only to find out the involvement of Chinese subcontractors in manufacturing those faulty toys. It also made further investigation and discovered that other batches of toys also contained the same lead paint. It voluntarily expanded the scope of investigation and subsequently recalled more than 1 million toys which were coated with lead paint (Hurley, 2012). The unsafe toys were identified and withdrawn from the market without delay. Mattel also publicly announced the names of the subcontractors who violated the health and safety standards of the toy making process. The company also apologized to the Chinese manufacturers (Thottam, 2007). After the Mattel incident, it was perceived that all Chinese manufacturers employed unsafe practices and did not conform to the quality standards. However, it was far from truth. 65% of the total toys in the world were produced in China, and some of the best quality toys were produced and shipped from the Chinese market. There were few subcontractors who were not up to the world quality standards, and it was not right to hold everyone responsible for a handful of manufacturers. The CEO of Mattel apologized to the Chinese manufacturers, in case if the incident caused them trouble.
Secondly, Mattel also needed to get the trust of its customers back. The CEO of the company apologized to the customers, as well (Hurley, 2012). Mattel never tried to defend itself or deny the things that have happened. In fact, the management of the company very clearly said that it was a lapse from the quality and safety audit department. It never tried to defend itself and its management which ultimately worked in favor of the company.
Finally, Mattel made the supply chain and safety and audit process more robust to ensure that something like this never repeats in future (Hurley, 2012). Mattel employed more people in the subcontractor site to ensure the safety and quality of its products. It also reviewed its product designs to check product safety. It even created a new post of director to ensure the safety and quality of its products.
Rationale
In most of this type of cases, we see that the big business houses try to stonewall the whole scenario. It creates barrier for further investigation and information sharing so that the actual impact of the problem is not known to the customers and public. Then the company tries to put forth a message that it is a small and isolated case. However, Mattel took a completely different approach. It handled the case in a very transparent manner (Hurley, 2012). Even in the face of huge degradation of its brand image and goodwill, it never tried to hide facts. In fact, it worked with the regulators and subcontractors to create an environment which not only identified the root of the problem but also saved the image of the company to a great degree. During the hearing proceedings on the case of lead paint, the judge praised Mattel for being completely helpful and transparent about all the facts and figures.
Secondly, Mattel also implemented a robust plan to ensure safety for the future. First, it openly stated the names of the subcontractors who were associated with the lead paint toys. It not only helped Mattel improve the quality of its future production but also helped improve the overall quality of toys produced from the Chinese factories. Mattel ensured the quality and safety of its product in multiple phases. Initially, the quality and safety check was done by the subcontractors as per the quality and safety standards of Mattel. Then Mattel started the process of checking toys randomly to see whether or not the quality and safety standards were met duly. However, Mattel has now made the process more robust. It has stationed Mattel employees in the subcontracting locations to oversee the in-house safety and quality checks. After the batches of toys are shipped, a central supply chain safety and quality check team checks each and every batch of toys before sending them to the market for selling (Hurley, 2012). This robust planning has ensured that no such incident happens ever again. In fact, no mishap happened after 2007 and that helped Mattel rebuild its brand value.
Finally, apologizing to the Chinese manufacturers was also a move well executed by the company (Thottam, 2007). Mattel knew that without the Chinese manufacturers, it was impossible to make good money from the toy business. It needed its major toy suppliers to remain loyal to them. The Chinese manufacturers also needed Mattel to keep the promising business venture intact. Mattel only identified and severed relationship with those found guilty and responsible of violating the safety standards. It maintained a good relationship with others to continue the outsourcing of manufacturing of toys like before.
Conclusion
Mattel is one of the reputed toy brands in the world. However, it faced a potential erosion of its brand image and business when the lead paint issue surfaced. It acted in a way very different from most of the business houses. Firstly, it voluntarily expanded the scope of investigation and recalled millions of toys found unsafe. Secondly, it apologized to its customers for the lapse in safety and quality check and unsafe design of its toys. It also apologized to the Chinese manufacturers who were not guilty of the quality and safety violations but who suffered nevertheless due to the chaos created over the issue. Mattel behaved transparently in dealing with the problem and even took help from the regulators to improve the toy making process. Finally, it created a robust safety and quality check process across the globe. These recommended actions helped Mattel in many ways. Firstly, the transparent approach of the company gave all the stakeholders a holistic picture of the breakdown, and how Mattel was changing the whole process to fix it. Secondly, an improved process aims to ensure that no such mishap is repeated in the near future. This helped Mattel slowly restore the confidence of the customers it lost.
References
Mattel, Inc. #1 (2014). Corporate Responsibility. Retrieved on 3rd February 2014 from <http://corporate.mattel.com/about-us/corporate-responsibility.aspx>
Mattel, Inc. #2 (2014). Mattel History. Retrieved on 3rd February 2014 from <http://corporate.mattel.com/about-us/history/default.aspx>
Lawrence, A.T. and Weber, J. (2013). Business and Society: Stakeholders, Ethics, Public Policy, 14th Edition. McGraw-Hill. ISBN-10: 0078029473.
FORTUNE 500 (2008). Our annual ranking of America's largest corporations. Retrieved on 3rd February 2014 from <http://money.cnn.com/magazines/fortune/fortune500/2008/snapshots/272.html>
Hurley, Robert (2012). How Mattel Regained Trust. Financial Times. Retrieved on 3rd February 2014 from < http://www.ft.com/intl/cms/s/0/61baac6e-2a84-11e1-9bdb-00144feabdc0.html#axzz2sJF2TF4d>
Wisner, Joel D. (2009). THE CHINESE-MADE TOY RECALLS AT MATTEL, INC. University of Las Vegas. Nevada. Retrieved on 3rd February 2014 from <http://faculty.unlv.edu/wisnerj/mba720_files/Mattel_case2.pdf>
Thottam, Jyoti (2007). Why Mattel Apologized to China. Time.com. Retrieved on 3rd February 2014 from < http://content.time.com/time/business/article/0,8599,1664428,00.html>
