Mattel's Toy Recall

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1. Causes for recall The primary causes of Mattel's recall problems from 2000 to 2007 were design flaws (i.e. loose parts, small magnets which could become dislodged), manufacturing issues (i.e. excessive lead paint), and product misuse (i.e. might cause strangulation). A vast majority of the problems came from product design resulting in safety hazards. The data on the post-August 2007 recalls confirmed this observation: while 17.4 million (88%) recalled toys were associated with loose magnets due to defective design, 2.2 million (12%) were related to manufacturing defects which contained excessive lead. Within Mattel’s recall problems, only a small percentage (10-15%) could be attributed to outsourcing issues. Of the problems related to lead paint, it turned out that the two contracted manufacturers, which were commissioned to make non-core Mattel products, had used paint from sub-contractors. Although Mattel’s policy only allowed paint from certified suppliers, in this case the two vendors didn’t follow the procedure. The reasons led to the violation could be explained as follows: * Loose vendor management: Mattel’s policies on vendor management were not followed. It wasn’t aware that its vendors had been using paint from uncertified subcontractors, and it didn’t have a record to keep track of all subcontracting activities. It allowed its long-term suppliers to have its own routine testing, with additional quarterly spot testing by Mattel. However it failed to specify and ensure testing methods were compliant to Mattel standards. In addition, Mattel’s 200 employees who were responsible for vendor inspection were located in Hong Kong, rather than co-located with Chinese vendors. * Cost-sensitive business environment: Suppliers in China were experience tremendous cost pressure. On the one hand, a concentrated customer base left the manufactures little

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