Case Study – How Chinese Toymakers Respond to Recalls Essay

In 2007, the US Consumer Product Safety Commission CPSC announced five different recalls of Mattel’s toy because of the below two issues: 1. 9. 3 million play-sets with small magnets inside toys could be swallowed by young children and it may have potential of fatal accident. They included Polly Pocket dolls and Barbie and Tanner 2. Exceed of lead contain of the paint by US safe limit 0. 06% of paint. They included 1. 5 million Fisher Price infant toys and 253000 of Mattel “Sarge” die cast car. Such recalls has sharpened the concern whether industry and governments can stop and control Chinese manufacturer from using lead paint.

From those cases, we should not only focus on “How Chinese Toymaker Respond to Recalls”, we should also focus on “How Manufacturer, Importer and Retailer Respond to Recalls”. II. Cases Lee Der Toy Company Case – On August 2007, Fisher-Price, subsidiary of Mattel, announced to recall plastic toy, which were excessive lead contain in paint, were produced by Lee Der. The excessive lead paint were provided from Lee Der’s paint supplier Dongxing New Energy Limited, of which’s paint was not tested by Lee Der, and Dongxing was not in contractor paint supplier list from Mattel.

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One of the reasons was that the boss of Dongxing was a friend of Shu-hung Cheung, vice chairman of Lee Der. Chinese government has given the pressure to Lee Der after the recalls because Chinese government would protect the quality image of Chinese product, Lee Der wanted to have some amendments after the recalls such as producing new toys which claimed had passed quality tests with US requirement. However, all was faked. Cheung committed suicide after that. Le Qu Toy Case – Le Qu was a family owned company in Dongguan, Guangdong and produced toys for foreign companies.

They had their own design team and own brand name. Different from Lee Der, Le Qu paid more attention to follow domestic manufacturing quality requirement and had a good reputation among partners, competitors and customers. However, they did not do too much to prevent recall from happening. In 2007, Le Qu also received recall from Mattel. But because of lacking experience, preparation and sufficient working capital to overcome the crisis, Le Qu failed to bankruptcy in early 2008. Early Light Industrial Co. Ltd (ELI) – ELI is a private company by Francis Choi from Hong Kong and s one of largest toy manufacturer in the world. ELI also faced the problem of excessive lead contain paint in 2007 from the recall of “Sarge” toy car which were produced by ELI’s subcontractor. Before the recall was announced, ELI had already found the problem because of unstable quality of paint suppliers. ELI did not tolerate this problem and they took action to avoid this happen again. They built a new factories to integrate each process of its toy manufacturing in 2005, 2 years earlier than the recall. They used several contractors to deal with increasing demand in the market.

However, during the recall, ELI understood that they could not control certain problem such as mistake from subcontractors. So ELI knew that they needed to make themselves less dependent with subcontractors. Such integration of process can control the quality of product from their own factory and avoid any mistake from subcontractors. III. Analysis and Recommendations From retailer’s perspective, the announcement of recall must be launched as soon as possible once the problem has been found for the benefit of the consumer. The recall is the best strategy to minimize the loss of image and reputation of the company.

Moreover, it is “encouraging” toy makers to institute programs that allow toys to be traced back to the factory that made them. Recommendation – To provide the quality product to the consumer, retailer should implement the quality control for all products in the store. They should inspect the good from third party agency before launching to ensure the product must fulfill quality standard form government. Random checking from different demographic store must be taken place. From importer’s perspective, the strategy from Mattel reacted prematurely disproportionate blame on Chinese toymakers and appeared fearful and defective.

Recommendation – As all we know the recall can impact the sales, damage the image reputation, so once the crisis broke out, management team should consider what issues would make the corporation most vulnerable and which would be the most urgent. Have a good planning to handle the recall measures and compensation procedure is needed to be done. After the crisis, long term quality control with outsourcing factories must be planned. Toy safety regulation must be posted in company website with different language so that all outsourcing vendors can access and update every year.

Quality. Control training should provide to qualified vendors within certain period of time. From manufacturer perspective, we can see there are three different reactions to handle the recall. Lee Der – As Cheung used the vendor of his close friend and trusted their product without testing them for production, it was the integrity issue that Lee Der did not follow the requirement from Mattel to use the vendor from the supplier list. Moreover, whoever they used from the list or not, they should take incoming quality control of the paint to ensure the paint should fulfill the required standard.

Although quality control will cause the increase in cost, it can help to maintain the quality standard and reputation of the company. Le Qu – Le Qu focused on too much on product development and paid less attention to manufacturing quality. However, when they received the recall from Mattel, Le Qu woke up suddenly and realized that the importance to follow the regulation from customer. It was too late to react and cause the failure of the company. ELI- ELI has a good management team to monitor the quality control as well as the company strategy of development that so they can monitor the quality standard from subcontractor.

Also they know that problem of any mistake from subcontractors are harmful to the company, so they have a planning to build own factory to integrate all the process from in-house process so as to minimize any potential mistake from outsourcing. For sure such measure and improvement need to have a huge investment and will not see the return immediately. But it can help to control product quality and maintain the reputation from customer. It will help for the long term business return.