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Strategic analysis of mattels global operations

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  • Legal & A ; Regulatory hazard

The chief aim of this survey is to make a strategic analysis of the planetary operations of supply concatenation within Mattel Toys Inc. Here its supply concatenation will be evaluated along with the risks/ security menaces it faced and a model will be presented to pull off these hazards.

With turning product/service complexness, supply webs are besides going progressively complex in the aftermath of outsourcing and globalisation. This has affected hazard, altering it continuously. Hazard can by and large be termed as a chance of hurt, jeopardy, harm or any other unwanted results. ” The Royal Society ( 1992 ) defined a more systematic account of hazard: ” the chance that a peculiar inauspicious event occurs during a declared period of clip, or consequences from a peculiar challenge. ”

In this survey, we will propose a model for future supply concatenation hazard direction in the position of Mattel ‘ s callback in 2007. This callback left a trail of media studies, public review, probes and immense lessons learnt.

1. 1 Mattel Toys Inc.

Mattel Toys Inc. is a planetary leader in the design, industry and selling of playthings and household merchandises. It comprises of top-selling trade names such as Barbie, Fisher-Price brands etc. Mattel is recognized as the 100 Most Trustworthy U. S. Companies by Forbes Magazine. ( Beginning: Wikipedia ) .

In 2007, it experienced a sequence of uninterrupted dismaying merchandise callbacks in which around twenty one million playthings were pulled out from sale. Whether the playthings were faulty in design to lose little magnets, which if consumed could harm childs, or they were playthings contaminated with lead pigment coming from unethical Chinese sellers was irrelevant as the instance was subjected to high media review and got highlighted for quality misdirection and varied logistic patterns in outsourced sellers. ( Biggemann 2008 )

The tabular array ( figure 1 ) below shows the playthings recalled from Mattel ‘ s several sellers and their sub-vendors:

Industry experts suggest that Mattel is locked in a relationship with China holding five mills and fabrication at that place for about 25 old ages. It outsources its production up to 50 per centum to third-party makers and about 65 per centum of its playthings are produced in China.

“ In malice of quality control attempts, Mattel has had 36 callbacks since 1998 and two formal Consumer Product Safety Commission ( CPSC ) admonitions. It ‘ s most controversial callback, up until 2007, involved 10 million Power Wheels plaything vehicles. ” ( Biggemann 2008 )

Below is a timeline picturing the cardinal events that took topographic point during the class of this callback,

Figure 2: Mattel ‘ s merchandise callback timeline

The consequence of this callback was ruinous for Mattel and it lost more than 45 % of portions in market value ( figure-3 )

Fig. 3 Mattel Stock Prices 2007 Beginning: Woo 2008

Mattel was fined $ 2. 3 million by Consumer merchandise safety committee ( CPSC ) in civil punishments for go againsting a federal lead pigment prohibition that resulted in the callback of 1000000s of plaything ( Beginning: CNNMoney ) . Although gross revenues at international markets helped it derive some net income for that interval ( Casey, 2008 ) , yet these had really small impact on their one-year figures as compared to its loss.

The response of Mattel can be studied at the following two degrees

External Communication: Mattel with CPSC, implemented the CPSC ‘ s “ fast path ” plan to pass on with parents and retail merchants utilizing a mix of print, electronic and new media. ( Fig. 4 )

Fig. 4 Fast path callback tactics Beginning: Woo 2008

Internal Organization: After the recall Mattel internal environment of the administration was changed in following ways:

Creation of Corporate Responsibility division

Announcement of merchandise unity policy and audit by senior direction.

Three-point safety cheque system was besides instituted.

The inquiry now raised was “ How did Mattel stop up in such a slippery state of affairs? ” Is it a instance of heavy disregard or something worse? It is argued that this was the consequence of Mattel ‘ s flawed sourcing scheme.

Literature Review

Plaything industry is one of the oldest industries for creativeness and highly volatile in nature. In the United States entirely there are about 3 billion playthings sold per twelvemonth ( Source: Toy Asoociation ) . Toy gross revenues estimation are about 22 billion USD ( Richtel et al, 2008 ) . Figure 5 estimates the one-year plaything gross revenues from July 06 – June 07 which marked a rise up to 22. 5 billion USD.

Figure 5: State of Toy Industry

Erratic and altering demands in this industry make a bed of volatility due to undersized and customized selling-openings and rapid merchandise lifecycles. Toy demand and toy retail merchants ‘ demands are really volatile and expect plaything industries to be really market responsive ; but most toy makers respond with conventional mass-production scheme which is really minimum in response and really mismatched to their scheme. Supply webs of such industries are turning into complex and dynamic mesh of changing relationships ( Harland et al. , 1999 ) . Hazard is intensifying and its focal point is of all time altering within the dynamism of supply webs all due to outsourcing of supply operations overseas and besides due to turning complexness of product/service life-cycle.

Of late research has explored schemes to minimise hazard in toy supply ironss and webs. One of the chief assets of plaything makers is their web place and the relationships and policies that come with these ( Turnbull et al. , 1996 ) . To buttockss and manage hazards, web positioning dramas an of import function particularly in resource sharing, repute direction and footings of contract ( Henders, 1992 ) .

To get down the research, a literature hunt was undertaken with the purpose of turn uping articles related to provide concatenation security and hazard. The hunt included all diaries known to print articles related to security, hazard, and/or supply concatenation direction. Examination of the literature reveals four nucleus premises that are systematically mentioned as critical for houses seeking to keep effectual degrees of security and in minimising and/or pull offing supply concatenation hazard.

( 1 ) Preparation and planning enterprises.

Business and supply concatenation continuity planning has been the focal point of the supply concatenation security/risk literature. A four-step concern continuity program, which comprise of creative activity of consciousness, bar, redress, and information direction is needed to protect from external hazards ( Zsidisin et al., 2005a ) .

( 2 ) Security-related partnerships.

Formation and care of security related partnership is strongly advocated in the security literature. Sheffi ( 2001 ) conceives that keeping relationships with providers and governmental governments is compulsory to ease supply concatenation continuity, therefore guaranting against plus and merchandise harm.

( 3 ) Organizational version.

Recent research presents an emergent focal point covering with organisational adaptability to pull off response to probable or recognized supply concatenation hazards and crises. The literature advocates the acceptance of stairss towards procuring supply concatenation assets and restricting hazard exposure.

( 4 ) Security-dedicated communications and engineering.

There is a increased demand towards execution and use of communications channels dedicated to security/ risk-dedicated. Harmonizing to Zsidisin et Al. ( 2005a, B ) it is necessary for the house to pull off information and cognition system, and to continuously upgrade them to efficaciously extenuate supply concatenation hazard.

In instance of Mattel Toys Inc, hazard came from the fact that about half of its playthings are made in Mattel workss and about half are outsourced to vendor workss. Some of the jobs came in when these seller workss besides outsourced to other seller workss and once more these other seller workss outsourced, therefore, doing the supply concatenation really long – or ‘ deep ‘ .

The longer the supply concatenation, the harder it is for the foreign houses to maintain path of who did what, when and the concluding quality of the parts or merchandise ( Lyles, 2008 ) .

The following subdivision provides a security model to cover with the past and unanticipated hereafter hazards in the complex supply web of Mattel Toys. They are suggested guidelines for identifying, measuring and pull offing hazard.

3. 0 Theoretical Model

This subdivision of the essay contains the overarching methodological analysis for covering with Mattel ‘ s state of affairs. For this intent, the Supply Network Risk Tool put frontward by Harland et al. , 2002 has been used ( fig-6 ) . A diagram exemplifying the full methodological analysis has been given below. This is followed by a justification for choice, and designation of defects.

( Fig6. Supply Network Risk Tool, Source: Harland et al. , 2002 )

3. 1 Justification of the Theoretical Framework

The model is built on earlier research and consists of single models for each subdivision, therefore measuring the job in item. It provides a holistic position to measure the situation/incident and follows a definite sequence for function and implementing hazard scheme. For break like that of Mattel ‘ s callback in 2007 it provides a resilient attack for pull offing the hazards involved in an efficient mode.

3. 2 Testing/ Expansion of the theoretical Model

The Supply web hazard model consists of six subdivisions which evaluate the overall state of affairs of the organisation in a comprehensive mode, and suggests solution consequently. During the class of this enlargement, Mattel ‘ s state of affairs is analyzed and at the same time the model is examined and later critiqued.

Measure -1Map Supply Network: The supply concatenation of Mattel Toys from get downing to stop that existed before the callback in 2007 can be represented as follows.

( Fig7. Mattel ‘ s Global Supply Chain, Source: Barad, 2002 )

The conceptual supply concatenation of Mattel Inc. ( fig. 7 ) is mapped concentrating nevertheless, on the Chinese unit. Based on secondary research and the supply concatenation map given above, the undermentioned statements can be inferred about Mattel plaything Supply concatenation:

The upstream supply concatenation comprises of the Suppliers, Subcontractors and the sellers. This forms the construction of histrions in the supply concatenation.

The ownership of Mattel in China is restricted to its Mattel China Group which comprises of the Hong-Kong based company, Mattel Die Cast Limited, Hwa-tai Precision molds and TC SZ Ltd.

The quality control system is managed by external hearers utilizing Mattel ‘ s guideline. The hearers are authorized to attest sellers who follow Mattel ‘ s ordinances purely and these sellers so are non held for normal strict review. The sellers are encouraged to purchase from Mattel certified providers.

Step-2 Identifying Hazards:

Hazards ( table 1 ) within Mattel ‘ s complex supply web have been identified.

Then these have been categorized into assorted types which have been used as a guideline to analyze the hazard ( table 2 ) and effects faced during their great merchandise callback in 2007.

Step-3 Assessing Hazard

In this subdivision a probability-impact matrix has been created to measure the impact of hazard ( mentioned in figure 3 ) on the supply web of Mattel Toys based on its chance of happening.

The matrix clearly shows that most of the major hazards associated with its supply web lies in High Impact – Low Probability and High Impact – High Probability part. This matrix has been used as a mention to make another matrix ( below ) for a specific hazard that Mattel suffered i. e. , the great callback of 2007.

During this period, all hazards had really high impact on Mattel ‘ s supply web and caused reverses and break which were difficult to retrieve from.

Measure -4 Pull offing Hazard:

There are a few ways in which Mattel can increase their capablenesss of supply concatenation hazard direction utilizing the model by integrating the undermentioned ways ( Beginning: Kinaxis ) ;

Visibility -A Visibility across the supply concatenation web is needed for measuring supply concatenation hazard and efficaciously counter any events/disruptions. This supply concatenation hazard direction tool must be integrated with ERP systems and must be able to include systems required to back up the distribution and supply nodes.

Event sensing and alarming -A System should be incorporated for early sensing of supply concatenation break so that the response clip can be reduced.

Analytics -A Analytics tools should be used to efficaciously measure the impact of possible supply concatenation event. Analytics is used to retroflex the event and find the impact from it.

Simulation -A simulation is done to pattern different hazard scenarios. This is used to pattern alternate extenuation attack and to guarantee that these attacks are effectual. In Mattel instance it could be used to react to an unforeseen supply concatenation event such as the crisis in 2007and comparison assorted response options.

Scenario comparing -A Teams should develop multiple attacks to the resoluteness the job. The squad so should measure all the attacks and make up one’s mind on the attack that meets the ends of the organisation.

Measure -5 Form collaborative supply web hazard scheme

To be successful in today ‘ s aggressive plaything market, retail merchants and makers should drive tilt and closely controlled supply ironss. As the rate of promotional selling and advanced merchandise launch continues to turn, companies are largely caught between dynamic client demands and relatively fixed fabrication and logistics parametric quantities and restrictions. Collaborative planning helps in covering with supply concatenation issues. To better supply concatenation reactivity in Mattel, it requires shared visibleness with providers and retail merchants into events go oning now and in the hereafter, while working jointly to decide issues and jobs environing bringing restraints.

Step-6 Execution:

To maintain up with dynamism of market demand and unobserved hazards, Mattel needs to implement its schemes for hazard direction in clear structured, and/or procedural manner. Harmonizing to Freedman ( 2003 ) , scheme execution should embrace order, committedness, inventiveness, direction control and advanced executing accomplishments. In Mattel, the Corporate Responsibility division should utilize this as a guideline for their consultative and research. Freedman ( 2003 ) besides observed that chairing complexness is one of the nucleus stairss in scheme execution. This is in respect to Mattel ‘ s supply concatenation web which was complex and vendor mismanagement lead to one of their biggest callbacks.

It is recommended for Mattel, to develop and educated their work force to manage unforeseen hazards in supply webs ( Harland et al, 2002 ) . Their work force demands to be made more cognizant of the entire built-in hazards faced after the great callback and larn to place such hazards in early phases. They need to concentrate on current patterns of hazard direction and measure if these are apt after the callback. Mattel needs to manage complexnesss within their supply concatenation web by increasing visibleness in it. This can be achieved by analyzing hazard at the degree of the web instead than restricted position to merely immediate sellers ( Harland et al, 2002 ) .. They need to increase entree to and command of sub-vendors throughout the supply web. This in bend will assist them to expose hazards throughout their supply concatenation. Besides they need to develop/upgrade their bing supply web hazard scheme and convey it in-line with their organisational patterns and the model suggested here.

The key to successful hazard direction execution is by placing two state of affairss to react to provide concatenation events ( Beginning: Kinaxis ) ;

An unforeseen supply disruption1

And, an awaited supply break by put to deathing a extenuation scheme

In both instances, the chief undertaking is to alarm on clip that an event has occurred. It ‘ s hard to react to an event if you lack information on it. The supply concatenation demands to be monitored continuously. The pattern of hazard direction – from descrying hazards, through taking suited hazard direction schemes, and so changing the construction of the supply concatenation – is an information-demanding process ( Beginning: Husdal ) . This means it is really dependent on information sharing. The cardinal activity so is to place critical information signalling hazard while filtrating informations.


In the aftermath of Mattel ‘ s great callback in 2007, it is seen that their scheme for outsourcing brought about one of their biggest losingss and led to trade name tarnishing and major autumn in their market value. Their response to this crisis was well-handled but this raised inquiries on how they foresee their hazards and debar them?

The suggested security model draws a bird ‘ s oculus position of their supply web and buttockss hazard at every degree of their supply concatenation. It provides 6 key tools to buttockss hazard and some effectual stairss to implement them. Later this model is besides subjected to self-critique but from a broader image it can supply some cardinal alteration to the defects in Mattel ‘ s current scheme.

Limitations & A ; Further Research

The theoretical account is critiqued to place the defect of the model:

The theoretical account is build upon bing theoretical account and does non supply any new technique to supply a entire security solution.

The theoretical account is subjective in nature as the writer Harland et al, 2002, themselves pointed out that on classification and designation of hazard, the position of assessors measuring may be different.

It may non ever be possible for organisations to continuously analyze hazards and have strategic models in place

The puting up of collaborative agreements in supply web and designation of hazards and execution of this in bing system may turn out dearly-won

As the theoretical account is subjective in nature, there might be difference in sentiment of the assessors on the evaluation of peculiar hazard in the organisation.

More research is required for improved integrating of makers and supplier mentalities from developed to developing states. Even though both these positions may look similar as both are web based but their deep-seated basicss may be different. Further research is required to understand weakness of outsourcing/ offshoring undertakings and how deficiency of communicating and control disrupts the supply or consequences in sub-standard products/services.

Recommendations for Mattel-

1. Increase visibleness of supply web

2. Visible control of sub-vendors and their sub-contracting

3. Stricter quality control norms throughout supply concatenation and checkpoints at every degree

4. Hazard appraisal should be done more thoroughly and should be ingrained in the civilization of the company.

Appendix 1:

Strategic hazard

New engineerings can render their merchandises obsolete

Sudden displacements in client gustatory sensations

childs are acquiring older younger ( KGOY )

plaything retail merchants are consolidating

retail monetary value is falling

Operationss hazard

Failed/ out-dated engineering

Labour work stoppage

Catastrophes and Natural Calamities

Supply hazard

increasing customization

outsourcing of operations

break to the provider

quality jobs, stuffs and parts deficits etc

bankruptcy of provider

Customer hazard

Shift in client purchasing form

Shift in client penchants

More competitory merchandises during demand

Repute hazard

Recall history

Fiscal hazard

Drop in market portion

Devaluation of company portion monetary value

Fall in recognition evaluation

Legal & A ; Regulatory hazard

Changes in ordinance and authorities policies


Supplier state legalities

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