Mattel Case Study

INTM 441

Mattel Case Study

8/28/13

The toy industry is a very competitive industry consisting of over 800 companies in the U.S. as of 2002. Of these companies, Mattel and Hasbro are the two titans, with combined sales of 8.7 billion USD in 2006. To remain competitive over the last couple of decades, US companies have begun moving operations oversees. From 1992 to 2006, Chinese toy imports increased from 41 percent to 86 percent with only 10 percent of toys domestically produced. As more demand was put on the Chinese to manufacture toys for the world market, the web of supply chains grew increasingly complex. As a result, the pressure put on the various industrial infrastructures led to a compromise in safety.

The majority of recalls made between 2003 and 2006 consisted of toys made in China. In 2007, out of thirty one recalls issued between January and July, only one was from toys not made in China. As the number one producer of children’s toys world wide Mattel should have been paying attention to these numbers and taken actions to mitigate the chance for a recall.

The problems at Mattel stem from the fragmentation of the business and its supply chain. Mattel used third party manufacturers in addition to its own factories, as well as marketed purchased products from unrelated companies. They began to rely more heavily on third party manufacturers for their non core brands, with half of all total toys coming from third party factories. Approximately 3000 Chinese companies made products for Mattel, however only 37 principal vendors were in direct contact with the company. With such limited communication with product suppliers making 400 million toys a year in a country with a history of lax product safety standards, the number of recalls Mattel had to issue is not surprising.

The recall in this case study illustrates the slow reaction time large fragmented companies can have when faced with manufacturing problems....