Unsafe For Children

Study Questions

1. Why do companies outsource?

Answer:
Reasons to Outsource:
 Lower operational and labor costs are among the primary reasons why companies choose
to outsource. When properly executed it has a defining impact on a company's revenue
recognition and can deliver significant savings
 Companies also choose to outsource or offshore so that they may continue focusing on
their core business processes while delegating mundane time consuming processes to
external agencies
 Outsourcing and offshoring also enable companies to tap in to and leverage a global
knowledge base, having access to world class capabilities
 Freeing up internal resources that could be put in to effective use for other purposes is
also one of the primary benefits realized when companies outsource or offshore
 Many times stranded with internal resource crunches, many world class enterprises
outsource to gain access to resources not available internally
 Outsourcing, many a time is undertaken to save costs and provide a buffer capital fund to
companies that could be leveraged in a manner that best profits the company
 By delegating responsibilities to external agencies companies can wash their hands off
functions that are difficult to manage and control while still realizing their benefits
 Outsourcing and especially offshoring helps companies mitigate risk and is also among
the primary reasons embarked upon
 Outsourcing also enables companies to realize the benefits of re-engineering
 Some companies also outsource to help them expand and gain access to new market
areas, by taking the point of production or service delivery closer to their end users
With the extensive negotiations from mass market companies like Walmart with toy makers like
Mattel to reduce costs, forced companies like Mattel to switch manufacturing from high cost
locations like US to low cost locations like China.

2. What were the primary causes of Mattel’s recall problems? Were these the results of
outsourcing?
Answer:
The primary causes of Mattel’s recall problems were the excessive use of lead paints in their toys
as well probability of loose magnet ingestion by children to prevent injuries and save lives.
Manufacturing error due to excess use of lead paints while design defects that allowed small
magnets to be dislodged. With the long concern relation lead, Mattel required all the factories in
it supply chain to adhere to quality standards relating to use of paints and other materials but the
main problem came when the vendors concerned subcontracted some of the doll making
processes and the inspection of the subcontractors was meant to be done by Mattel, which
seemed to lacking in most of the cases. With the manufacturing of Mattel toys in China and with
the major pressure from mass market companies like Walmart to reduce costs with high costs
still on, Chinese factories were unable to invest much in quality programs or product testing.
And, testing for raw material from Chinese suppliers were not done to check for low quality
substitute as Chinese companies seem to do anything to reduce costs.
Lead paint exposure concerning manufacturing problems could seriously Children with frequent
exposure to it through toys created by Mattel through manufacturing in China created a lot of
hype as the protection system against lead paints were not effective and unproved suppliers using
false quality certification didn’t help them much. Furthermore, the design problems associated
with Mattel regarding the defects in product designs with use of small magnets in their toys
which seemed to be not enclosed properly due to design flaws and could seriously threaten
Child’s life. Furthermore, potential misuse of Mattel toys seems to be also the cause of toy recall
which were not effectively anticipated by the designers.
These results couldn’t be completed attributed to outsourcing because Debrowski, the head of
worldwide operations confirmed that the vast majority of recalled toys were due to use of loose
magnets which can be considered as design fault by the Mattel, who seemed to have long series
of acquisition against them and much less recalled toys due to manufacturing fault concerning
excessive lead use.

3. What actions were taken by the principals in the case to address the recall problems?
Were these actions right? Why, or why not?
Answer:
To address these recall problems, Mattel starting implementing a three-point check system to
improve its process:
 Certified paint suppliers be used and requirement of testing of every single batch of paint
at every single vender
 Tightening control throughout the production process at vender facilities with increment
of unannounced inspections
 Testing every production of finished toys to ensure compliance before it reaches the
customers
Mattel also revised rules regarding excessive subcontracting. With the blame mostly being
placed on China for manufacturing defects, Mattel took full responsibility after knowing that the
major recall were due to design fault rather than manufacturing fault.
In response to Mattel recall problems, China enforced a nationwide quality licensing system
requiring official inspections before toys exports. Chinese official also launched a public
relations offensive stating that out of the several batches of toys being exported from China there
has been fewest recalls before the Mattel’s case and tried to blame Mattel recalls on international
safety standard rather than problem with local manufacturers. Further, an agreement was signed
between US and China regarding prohibition of use of lead in toys. They also launched a
database to help Chinese companies understand the inspection and quarantine standards of
importing countries. With the seriousness being put in quality checks, Chinese government also
issued training program where people from manufacturing plants were trained about issues
related to quality, testing and safety policies and also inspected various toy makers around the
country with the focus of modernizing the facilities to improve quality standards. And, also
removed small and substandard companies and tried to focus on redirecting companies to quality
and safety.
To further address these recall issues, investigation committee from US had harsh criticism of
both Mattel and China and also presented data regarding high recalls of consumers products
imported from China.
These actions were right to some extent. Mattel trying to impose the three point check system to
ensure safety and quality of toys and taking the total blame of recall for which China was being
held responsible for. Furthermore, China enforcing a nationwide licensing system for continuous
inspection of toys exports was the right path to take and encouraging all the manufacturing local
industries to adhere to safety standards but trying to blame on the cause of the recalls on
international safety standard was the wrong thing to do and they should try to adhere there
manufacturing in accordance with international safety standard for global acceptance by the
consumers. Training programs put to place by China could really help sub-standard local
industries to come in accordance to quality, testing and safety policies but removing small and
substandard companies was the not right approach as many small companies in China seems to
be running on small margins and could seem to generate less money to modernize their facilities
for quality and in line with safety standard. So, economic help from Chinese government could
help the redirecting process of substandard companies to modernized companies.

4. What should Mattel do now? What should governments do?

Answer:
Mattel should take the worldwide criticism positively and try to understand the extent of
consumer’s confidence in their products at the present and try to design toys which meet quality
and safety standard with concentration of design aspects in manufacturing as well as usability.
Use of magnets in those has been history for most of toy companies so Mattel should stop using
magnet on total in their toys. With all the financial costs of recall, Mattel still made of profit in
the following year which they could take as a positive and work on reassuring the public that
their toys are totally safe and can meet all the quality and safety standards rather misleading the
public. With Mattel’s manufacturing being mostly in China, Mattel should make share all the
companies in supply chain adhere to quality standards regarding use of lead paints and other
materials and track down all the subcontractors in the manufacturing process and do a thorough
inspectors of all the venders involved and check for the reliability of the quality certificated
presented by the venders. With more and more recalls regarding Chinese products imports in US
and huge question regarding the reliability of Chinese products, Mattel could look for other
alternative nations like China which can assure them the quality and safety standards they are
looking for.
The US government rather than mainly criticizing other nations regarding the imported products
quality should first focus on a developing good inspection system to assure that imported
products meet the international safety standards and maybe even ban products from some nations
from which highest recalls have recorded unless they can assure that they are in sync with the
international safety standards. With the responsibility to protect from various types of consumer
products, all these types of responsibility should be under jurisdiction and legalization of
agencies concerning safety checks seems mandatory and maximum penalties for the ones who
don’t fit to the safety regulations that can impact consumer health.
China seems to be the nation with highest number of recalls in US exports. So, Chinese
government should understand the reason for highest number of recalls of their products and try
to implement the modernization of the manufacturing industries in sync with international safety
standards and try to change the view of the world towards China regarding the extensive use of
cheap manufacturing at any cost with no regards to public safety of the product. Though, Mattel
took full responsibility of the recall, China had some hand on the manufacturing defects as well
which could be taken as a lesson and try to analyze the subcontracting process through
manufacturing and encourage industries to not go to fancy vendors who are just concerned with
lost cost rather than go to vender who can assure quality materials in the manufacturing and can
also present standard quality certificates which should be inspected for reliability as well.

5. How can accountability be better managed in long, global supply chains?

Answer:
Accountability means being held responsible for a task agreed to be accomplished. The
obligation of an individual or organization to account for its activities, accept responsibility for
them, and to disclose the results in a transparent manner. It also includes the responsibility for
money or other entrusted property. In today’s world, accountability for global supply chains
must extend far beyond signing a contractual agreement. The Mattel case shows us, that even
with the most trusted suppliers, a favorable contract with clearly stated terms and policies is not
enough. Mattel’s suppliers failed to comply with the regulations set in the contract to not use
multiple levels of subcontractors and to only use paint that was lead free. The extra step that
Mattel (and many other companies in a global supply chain) needed to take was to ensure
compliance with the agreed upon terms. With the pressures to continue to cut costs and still
produce the same quality, companies in global supply chains must be involved with the supplier
in every step of the procurement process until a final product has been delivered. As companies
continue to engage in business overseas, the following steps can be taken to help better manage
accountability in long, global supply chains:
Communication and Collaboration:
It is very important that companies communicate expectations to their suppliers. The contract
would be the first line of establishing what is needed from the suppliers, the regulations that need
to be followed, as well as the consequences for not adhering to the contract. To ensure
compliance, routine meetings with suppliers must be conducted to outline goals and measure
performance. The contracting company should share information with suppliers on things like
known low quality raw material suppliers, new regulations, and new technologies.
Training and Education:
Mattel had employees in Hong Kong whose sole responsibility was training and supervising its
Chinese contractors. Questions has to be asked about what type of training and supervising were
these employees responsible for giving first and foremost, suppliers must be educated on product
safety and how important it is that their work reflects the contracting companies expectations.
Supplier must be properly trained on best practices in testing the raw materials they receive as
well as the final product to ensure they meet quality standards. Since multi-tiered contracting is
hard to prevent, implementing employees in new positions to monitor the multi-tiered suppliers
would be a valid option.
Verification, Validation, and Inspection:
Often companies are satisfied with just testing samples that are sent from suppliers. This is not
good enough, testing must be done throughout the procurement process on actual production
batches. Also, companies must require venders to do tests on their own products, as well as any
raw materials they receive that help produce the final product, so any threats can be found early
in the production process. All results should be shared with the contracting company. A common
misconception in the global supply chain is that contracting companies are fine just testing
sample batches, even though it is known suppliers often substitute less expensive material in
final production.