Surely partnering with companies in China is a good move for any manufacturer that wants to reduce its manufacturing and logistics costs, no matter where you may be located in the world, due to China's low labour costs and superior logistics management acumen.
But as Mattel, the toy-manufacturer, found out yesterday, sometimes these partners will short-change the quality testing and assurance processes to make a quick buck.
Mattel recalled 967,000 toys in the US alone, on August 1,2007, due to lead being detected in the paint used to coat these toys.
The dangers of ingesting/inhaling lead, according to article, "The Dangers of Lead Paint" on Hy-Tech Thermal Solutions' website, are as follows:-
"If not detected early, children with high levels of lead in their bodies can suffer from: damage to the brain and nervous system, behavior and learning problems (such as hyperactivity), slowed growth, hearing problems and headaches.
Lead is also harmful to adults. Adults can suffer from difficulties during pregnancy and other reproductive problems (in both men and women). Other effects are high blood pressure, digestive problems, nerve disorders, memory and concentration problems, and muscle and joint pain."
I took a look at Mattel's Recall Page and their recall on August 1 is by far the greatest in it's history, with 83 Fisher Price toy product categories being recalled due to the presence of lead-based paint.
50% of Mattel's revenues come from contract manufacturing done in China.
Mattel owns the other manufacturing facilities.
Mattel is investigating whether the problem arose from the contract manufacturer or from the vendor who supplied the paint. (Mattel's contract manufacturers are required to source paint from certified suppliers.)
Mattel is investigating how the lead-based paint was able to slip through their safety checks and the independent audits that are supposed to be done at all factories.
Mattel has worked with this supplier for over 15 years and has said that the supplier should have been familiar with Mattel's regulations and how things are done.
Toys affected include the Sesame Street and Nickoledean toys such as the Dora the Explorer Backpack, and the Giggle Gabber, a toy shaped like Elmo or Cookie Monster that toddlers shake to hear giggles and funny noises.
Mattel was able to prevent 2/3rds of the toys from reaching consumers by contacting its retailers such as Wal-Mart and Toys 'R' US, Target and telling them not to put the toys on the shelves. However 300,000 of these toys have already been purchased by American consumers.
According to article, Lead Paint Prompts Mattel to Recall 967,000 Toys", by Louise Story, New York Times, August 2,2007:
"In light of the recalls, Nickelodeon — which owns the characters Dora the Explorer and Diego — has decided to introduce a third-party monitor to check up on all of the companies that make toys under its brands, including Mattel.
Sesame Workshop, the nonprofit organization behind the “Sesame Street” program, is considering adding third-party testing, Gary E. Knell, president and chief executive of Sesame Workshop, said in a statement.
This summer, the Toy Industry Association has been working with the Consumer Product Safety Commission on new regulations to require more stringent safety checks. Carter Keithley, president of the association, said the federal government needed to help the industry block China from using lead paint. "
Very interesting!!!!
In my opinion, the above brings out two points:
1) In supply chains like this, who should take ownership of the entire supply chain, in order to ensure that quality testing and assurance is properly done, throughout the chain? - Well, I think the companies that stand to lose the most, out of this fiasco - Sesame Workshop and Nickelodeon.
As seen from the above,Mattel cannot be trusted with this responsibility, as 50% of its revenues come from China.
I think Sesame Street and Nickelodeon need to do more than just assign independent testers to Mattel factories.
They need to rein Mattel in.
After all, Mattel needs brands like Sesame Street and Nickelodeon, so that its toys will sell.
(How this relationship works is that Mattel pays Sesame Workshop and Nickelodeon, millions of US dollars in license fees, so that it can use their brand names and images, and make toys of their famous characters, for a period of time.)
But an incident, such as what happened on Monday, damages the Sesame Street and Nickelodeon brands.
In order to lessen the chances of this happening again, Sesame Workshop and Nickelodeon, need to emulate Nike.
Nike does no manufacturing, but outsources this function to manufacturers in Asia.
It maintains strict control of its supply chain. Quality standards must be adhered to, or else those in breach, will lose their contracts with Nike - plain and simple, no excuses are tolerated.
Nike's products are of superior quality, even though all of their manufacturing is done in Asia.
2) Not because a contract manufacturer has the facilities and provides cheap labour, means that you should use it in your supply chain.
These manufacturers must be properly investigated, due diligence must be done, to ensure that they will abide by your guidelines and not cut corners.
If they have had breaches in the past, you can be assured that they will repeat those breaches.
It is good that Mattel is working closely with the US Consumer Product Safety Commission to properly investigate the sequence of events that led to this breach. - They just need to convince the Chinese authorities that product quality breaches are not in China's best interest.
Quality breaches, unfortunately, have become common for some Chinese manufacturers, so much so that the US Congress has called for legislation mandating more regulations on Chinese imports.
(In recent months, factories in China have been sources of poisonous pet food sold in stores in the United States, dangerous car tires, and lead paint on the popular Thomas & Friends wooden toys.)
Mattel may have to be prepared to let this contract manufacturer go, if the problem originated there -Even though they have had a relationship for 15 years.
There are too many hungry manufacturers in China who will be more than willing to abide by strict standards (including the ten other contract manufacturers that Mattel uses in China),to get a share of the USD $6 billion in revenues, that Mattel makes each year.
Additionally, Mattel's own quality assurance processes need to be checked and rechecked, for there are obvious gaps there.
Nickelodeon and Sesame Workshop have their work cut out for them, but I believe that it will be worth it in the long run.
Sources Include:
1. Article, "Lead Paint Prompts Mattel to Recall 967,000 Toys", by Louise Story, New York Times, August 2,2007.
2. Article, "The Dangers of Lead Paint", Hy-Tech Thermal Solutions' website
Gillian
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