1. - UNSAFE FOR CHILDREN - MATTEL’S TOY RECALLS AND SUPPLY CHAIN MANAGEMENT

2. DUE TO LEAD PAINT ISSUE…!!! Elmo characters from Sesame Street
ON AUGUST 2007 !!!
RECALLED 83 PRODUCTS
DUE TO LEAD PAINT ISSUE…!!!
Dora The Explorer
Big Bird
Elmo characters from Sesame Street
etc

3. RECALLED SMALL MAGNETS…!!! DUE TO DESIGN PROBLEMS…!!!
ON SEPTEMBER 2007 !!!
6 MORE RECALLS…!!!
SAME REASON…!!! +
RECALLED SMALL MAGNETS…!!!
DUE TO DESIGN PROBLEMS…!!!

4. ON OCTOBER 2007 !!!
ANOTHER RECALL
DUE TO LEAD PAINT…!!!

5. ??? ALL HAVE BEEN MANUFACTURED IN CHINA
OWNER OF THE FACTORY THAT HAVE USED LEAD PAINT
COMMITTED SUICIDE
………………

6. Brand has been Hammered ………………

7. ONLY 15 % OF THE RECALLED TOYS (mostly carried outside of China)
BUT…
ONLY 15 % OF THE RECALLED TOYS
DUE TO
MANUFACTURING ERRORS
MAIN REASON
DEFECTIVE DESIGNS
(mostly carried outside of China)

8. SO…
MATTEL & MANUFACTURING FACTORY GOVERNMENTAL AGENCIES OF CHINA TOY IMPORTING COUNTRIES

9. 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 billion
After tax income $ 600 million

10. 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

11. MATTEL SUPPLY CHAIN Core Products Non Core Products
First experience with manufaturing in Asia
Japan, 1959, Barbie Dolls…
2 types of Products:
Core Products
Non Core Products

12. MATTEL SUPPLY CHAIN STRATEGY: Produce Core Products in Owned Factories
Use Local Vendors to Produce Non Core Products

13. 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

14. 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

15. 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……

16. PRESSURES ON CHINESE TOY MANUFACTURERS
WAL-MART-EFFECT…!!!
Pressure on Suppliers to Cut their Costs Down

17. 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
REASONS
Manufacturing Problems
Design Problems
Product Misuse

18. 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

19. 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…

20. 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

21. 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

22. 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

23. 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

24. MATTEL’S 2007 RECALL CRISIS
CONSUMER REACTION
EMOTIONAL RESPONSE
“MADE IN CHINA” BRAND LOOSE CUSTOMER CONFIDENCE
FOUND US GOVERNMENT AND CHINESE MANUFACTURING FAULTY

25. 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

26. MATTEL’S 2007 RECALL CRISIS

27. 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

28. 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)

29. MATTEL’S 2007 RECALL CRISIS
CONCLUSION
UNDERSTAND
INTEGRATED GLOBAL SOURCING
REQUIREMENTS
&
SUCCESS FACTORS

30. MATTEL’S 2007 RECALL CRISIS
CONCLUSION
BE AWARE OF
INTEGRATED GLOBAL SOURCING
RISKS