Case Analysis: Mattel and the Toy Recalls Issue Identification: Mattel has been dealing with a series

of recalls that affected their products manufactured in China. The first issue discovered was that some of the toys they produced contained unsafe levels of lead; which was in the paint used on some of their products. Secondly, it was discovered that some of their products that contain magnets have been coming loose and posing a health threat to some of the consumers if ingested. All the issues depicted follow a common challenge of restoring consumer confidence in their products following the recalls. As the case states, the decision ahead was not only about whether to recall the Sarge Cars and other toys that might be unsafe, but also how to deal with the recall situation. The first decision that needs to be made is firstly how to handle the recall and minimize any negative effects caused by it. The next decision that should be made is how Mattel can ensure that recalls, such as the ones depicted in the case, do not repeat. One of the challenging parts in addressing these issues is that as it stands Mattel has a very long and complex supply chain in China. Given the fragmented nature of this supply chain, it is often very difficult to maintain an adequate level of quality control within the process. This has become one of the more pressing issues facing Mattel with their China operations. The decision they now have to make is how to deal with the current impediment; as well as preventing any further mishaps in the future. Analytical Approach: As it stated in the case, over the years, U.S. toy companies have shifted a majority of production operations overseas. To that, Chinese toy imports to the U.S. accounted to 86% of the total toy imports into the country. Mattel also engages in outsourcing with a majority of its toy production based in China. While it produces roughly half of their product lines in company owned facilities in China, Mattel frequently relies on third party vendors to produce non-core product lines. They had contracts with 1|Page

roughly 37 principal vendors to produce toys. These vendors would also have their own mix of supply chain and operations management to produce the product. As a result the supply chain in China, according to the article, was very long and complex. This in affect reduces Mattels ability to quality check every point in the supply chain. Another issue to take into consideration is that the toy industry is very unique in terms of business cycles. Firstly, the industry as a whole tends to be seasonal. The majority of sales coincide with the holiday season for the majority of the industry. Secondly there is a lot of uncertainly for product success. A single product can elevate a company to success, or bring the company to bankruptcy should it fail. With these factors in mind, it is easy to see how a tainted brand image can effectively bring a company down. This is precisely why Mattel needs to handle the situation properly and maintain a good relation with its customers. With tight competition, a deteriorated brand image could reduce Mattels market share in the industry. Alternatives: As it stands, Mattel must be able to address short term and long term objectives to these issues. Of which they must be able to address these questions: How can the company minimize the negative consequences which are germane to any product recall? Finally, how could the company ensure such recalls did not recur? One of the issues identified in the case is Mattels over reliance on vendors, as well as vendors creating their own supply chain. This in effect introduces many complexities to quality control. Which is how one of the leading issues began; with an outsourced vendor substituting the use of an unapproved paint supply in their production line. If the supply chain is more tightly controlled, this issue could possibly have been avoided. Nevertheless, there is lack of quality control and Mattel needs to revamp its processes. The first alternative would be to keep the recall handling as it is. In which Mattel is providing consumers with coupons on the recalled products. They would also maintain the same business 2|Page

operations and communication to ensure there is no disruption to the flow of the supply chain or production. The second alternative I have identified would be to recall all the products coming out of China and revamp the supply chain to reinforce stringent regulations on suppliers and vendors. Recommendations: My recommendation is for Mattel to follow the second alternative described above. Mattel is an industry leader not only by its sales, but also through its pioneering efforts to be a good corporate citizen. To maintain this status and market position, Mattel needs to implement a short term initiative to regain that consumer confidence. As such, they should implement a full recall on all their products coming out of China. As they have admitted, there were several occasions were management lacked the confidence in identifying which products coming out of China contained lead paint. Therefore in order to be 100 percent safe Mattel should recall all of their products. Doing so will be costly, however given the nature of the toy industry, any deterioration of consumer perception will cause Mattel to lose their market leadership. Therefore they should send the message that they place consumer safety above all, and will be doing everything they can to resolve the issue. Lack of transparency and ambiguity in communication can have a negative impact on the situation. Especially when dealing with a media firestorm. Mattel needs to be able to act quickly and ensure consumers have the utmost insights on impeding issues. The first thing that needs to be implemented is a full and transparent line of communication between Mattel and the consumers. Creating an online website where consumers can get information on the recalls, and how to initiation a recall, will allow Mattel to open a good line of communications. Displaying this due diligence will restore consumer confidence in Mattels business practices. With such a high reliance on China to manufacture the toys, Mattel needs to take into consideration further quality control procedures to counter issues such as lead contaminated paint. The challenge now lies in how to manage quality within the supply chain. As part of fulfilling a long term 3|Page

objective, Mattel needs to regain tight control over the vendors and suppliers. They need to ensure that all vendors maintain and adhere to Mattels approved supply list. As such, they should revoke or terminate contracts with vendors that violate this stipulation. As depicted in the case, Mattel is very lenient with how vendors ran their operations. However given the business practices observed, Mattel can no longer stand aside and allow poor quality controls. Therefore maintaining a strict vendor and supply list and performing frequent audits on the supply chain, will ensure that Mattel can maintain the level of quality that not only abides by health regulations but also provides value to the product. Anticipated Implementation challenges: Clearly my recommendations to Mattel would be very costly for the company to implement. They would have expel a fair amount of resources; such as creating temporary teams to manage the recalls and communication, as well as taking a loss on all the recalled products out of China. The first alternative described provides Mattel with a passive approach to dealing with the issue. By providing customers with a simple coupon to repurchase another Mattel product, they can minimize the losses they take in lost sales. Also, revamping the supply chain is a very tedious and costly task. This could disrupt business operations and slow down production. However, as the case clearly depicted, the toy industry is very volatile to perception and brand image. With Mattel being in such an industry, it must ensure that consumers have confidence in the quality of products they produce. With a high reliance on China, and no clear indication on which products are causing the issues, Mattel needs to assess the quality control within their supply chain. Reinstating tight quality control will help regain the damaged consumer confidence. As such, doing the bare minimum in a recall situation would send the wrong message. To maintain the market leadership and strong brand image, I would highly recommend the second alternative of issuing full refunds on all products out of China as well as revamping the supply chain.

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