Wednesday, July 25, 2007

Dancing Elmo Smackdown

The recent wave of recalls and warnings from China has ignited
worldwide concern about the safety of Chinese products, potentially
mucking up a global system built, in large part, on outsourced
manufacturing. As a result, companies are trying urgently to figure out
how to do business here, without risking their reputation, consumer
trust, or customers’ lives.

Mattel may have some of the
answers. In the 1990s, critics charged the company with running
sweatshops in Asia. Now, independent analysts, and even watchdog
groups, say Mattel may be the best role model for how to operate
prudently in China.

“Mattel realized very early that they
were always going to be in the crosshairs of sensitivities about child
labor and product safety, and they knew they had to really play it
straight,” said M. Eric Johnson, a management professor at the
Tuck School of Business at Dartmouth, who has visited numerous
factories in China, including some of Mattel’s. “Mattel was
in China before China was cool, and they learned to do business there
in a good way. They understood the importance of protecting their
brand, and they invested.”

Mattel, and many of the outside analysts, say the key is command and
. Unlike many other companies, Mattel, which makes about 65
percent of its toys here
, actually owns the plants that produce its
most popular wares. About 50 percent of Mattel’s toy revenue
comes from core products made in these company-run plants
, a high
proportion in the industry — and a more costly method than using
the lowest-bidding local manufacturer.

Its workers check toys for safety on site and in facilities like the
one here in Shenzhen. An independent auditor inspects factories and
posts reports on the Internet.

Mattel aggressively expanded the number of plants it owned in Asia.
Noncore products, like trinkets made under movie-licensing deals, could
be outsourced. But Barbie dolls and Hot Wheels, among others, would be
kept in tightly controlled factories.

In 1997, Mattel took a significant step to improve its image and
working conditions. The company hired S. Prakash Sethi, a professor at Baruch College, part of the City University of New York, who had an international reputation as a critic of worker mistreatment.

Mr. Sethi would make unannounced visits to Mattel’s factories and
vendors’ plants. He insisted that he would only monitor Mattel if
the toy maker let him post his reports publicly and uncensored.

Mattel agreed.

Ten years later, Mr. Sethi says Mattel, unlike most companies operating
abroad, still gives him 100 percent independence in his reports, which
are often critical. “Mattel is the gold standard,” he said.

That doesn’t mean the company, based in El Segundo, Calif., and
its subsidiaries, Fisher-Price and American Girl, haven’t had
recalls — 25 in the last 10 years. But, rather than supply-chain
defects, the recalls have mostly involved design flaws, or consumer


The staff is mostly young and female, migrant workers who typically
leave home for three- or four-year stints in factories after high
school. Many of them say they work 10 hours a day, six days a week, for
about $175 a month, typical for this region.
Before the company approves any of its new toys — some 5,000 each year — it produces small batches.

Once full-scale production begins, toys are pulled off the line periodically and supplies are tested as they come in the door.

All the toy testing and safety measures cost money. But the Mattel
brand can command a premium price, said Mr. McGowan, the analyst at
Wedbush Morgan.

And, he said, “a major toy safety problem” could prove much more costly than prudence.
Article Link (NYTimes)

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