Mattel Toy Recall

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Executive Summary

Mattel has been criticized heavily for having to recall not once but thrice in 5 weeks 20 million toys manufactured in China with lead paint and/or loose, potentially dangerous magnets. Clearly Mattel does not have sufficiently tight quality control procedures in its supply chain to compensate for the extra risks of outsourcing to Chinese subcontractors and clearly there are design flaws in the toys with the magnets that could come loose. Although many observers give the company credit for responding to the crisis quickly with an apology from the CEO and pledges to institute more rigorous product safety checks, Mattel still faces a number of problems, including significant costs associated with the recalls and new monitoring systems, potential lawsuits and a hit to its reputation just as the holiday shopping season gets ready to launch1.

Introduction

Mattel Inc. has recalled more than 20 million toys it manufactured in China, citing problems with lead paint and concerns about loose magnets that children could swallow. Mattel blames the most recent recall on a practice that may be all-too-familiar to engineers with experience manufacturing in China – namely, a vendor’s furtive change in materials or manufacturing processes2.

Tom Debrowski, Mattel’s executive vice president for worldwide operations, explains that a subcontractor hired to decorate parts of the Sarge toy ran out of the paint Mattel specified for the car’s roof and windshield. The subcontractor, a company called Hong Li Da (HLD), then substituted a paint that contained lead. Debrowski says HLD acted without informing Mattel or its primary vendor for the car, Early Light Industrial Co. The product safety problem may seem especially pronounced in the toy industry because it relies so heavily on Chinese production. According to the Toy Industry Assoc., China makes about 80 percent of all toys sold in the U.S. Not all of Mattel’s recall woes can be blamed solely on Chinese manufacturing. In fact, Mattel called back 18.2 million toys because they contain small magnets that could become loose3.

Mattel is working in cooperation with the U.S. Consumer Product Safety Commission and other regulatory agencies worldwide. Mattel is also working with retailers worldwide to identify and remove affected products from retail shelves. Where the lead paint is concerned, it was negligent of Mattel not to have specified more concretely, and inspected more closely, what its Chinese suppliers were doing and where the magnets are concerned, it was negligent of Mattel not to have had a better design for its products4.

Case presentation

Mattel’s Global Manufacturing Principles (GMP) apply to all parties that manufacture, assemble, license or distribute any product or package bearing any of the Mattel logos. GMP provides guidance and minimum standards for all manufacturing plants, assembly operations and distribution centers that manufacture or distribute Mattel products. GMP requires internal and periodic independent monitoring of Mattel’s performance and its partners performance to the standards. Mattel is prepared to end partnerships with those who do not comply5.

Mattel’s recall involves 83 products and was discovered by an European retailer in early June 2007. Mattel even helped the contract manufacturer blamed for the recall, due to use of lead paint, to set up its own testing laboratory, which should have guarded against the paint problem. But while Mattel follows strict labour laws at its own facilities in China, it has also followed other manufacturers in relying on dozens of other contractors and sub-contractors. With a supply chain that may contain as many as 3000 factories in China, the task of quality control, audits and inspections becomes increasingly difficult6. Cheating on the use of raw materials, exploiting workers, employing children and paying bribes to avoid safety inspections are all a consequence of markets that have...
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