Supply Chain Pressure

The New York Times has an article about the lack of safety monitoring for some heart-related health care products. But this isn't an isolated problem. From the New Jersey importer that had to recall 450,000 light truck tires to some of the recent toy recalls, companies are starting to learn the difficulties of managing an extended supply chain or design chain. The concept says that companies have an interconnecting chain of suppliers and distributors and sellers that all affect product manufacturing, inventory, and distribution.

As companies have taken the standard business advice and focused on their "core competencies," they've extended these chains, having more come from outside sources. But rarely to the companies have any control over their partners. For them it's like going to a big mall and getting this from here, that from there. However, such a hands-off approach isn't going to continue to work. Particularly in an industry that directly affects people's well-being and safety, someone has to be able to guarantee the integrity of what the purchaser gets. That generally comes down to the name on the label.

It may be that many companies are going to have to take a leaf out of Wal-Mart's playbook and get more involved with their partners. As most businesses don't have the big box retailer's resources, it seems that there is a market opportunity here: consultancies that can take the specifications of clients and travel to their business partners, checking on the components they produce. It would probably have to be an organization with global scope, because manufacturing is geographically diverse. But a large management or technology consulting firm might consider this as a useful type of service offering, and one that is bound to get more popular as the number of recalls because of bad ingredients or components rise.

Mattel Admits to Scapegoating China on Product Problems

According to the weekend Financial Times, Mattel had to apologize to "the Chinese People" last Friday. The company had been blaming its series of toy recalls this year on Chinese contractors:

The apology was in stark contrast to recent comments from Robert Eckert, Mattel’s chief executive. In testimony to the US Senate last week, he suggested that the fault for the group’s recent product recalls lay with outside contractors. “We were let down, and so we let you down,” he said.

The story that Mattel had told involved the presence of lead paint, but the vast majority of recalled units - 18 million - suffered from design flaws.

In a later statement, Mattel said that some reports had “mischaracterised” its comments and said it had “apologised to the Chinese today just as it has wherever its toys are sold”. But the statement made clear that it was also apologising to the country and its reputation over the magnet-related recalls.

Oh, what a mess Mattel has made. Just a month or two ago, the company was receiving accolades for its prompt attention to the problems and its handling of the public relations crisis. Guess they can toss the good work out the window - it was nothing but misdirection. I can remember at one point seeing the numbers involved in one recall and wondering why the bulk seemed to be about design problems, but I didn't follow up on that, and shame on me for doing so. But where were the reporters who were actively following the story for their news organizations? There appears to be a numbers phobia in the business press, which is disturbing considering just how much of business is related to and described by numbers.

Big Toy Recall Underscores Business Danger of Outsourcing

As the New York Times and other outlets have reported, Mattel is recalling something like a million toys because a Chinese contract manufacturer had used lead-based paints. That follows other companies' recalls of products made in China: food, toothpaste, tires, and another set of toys. What is particularly disturbing for business, as well as for consumers, is that Mattel had a supposedly sophisticated set of safety checks and was dealing with a vendor it had used for 15 years.

For years experts have said to outsource non-core processes and functions because that way companies could focus on where they could make the most difference to their businesses. However, how do you define a core competency? If you can't ensure that suppliers will do what you need, perhaps manufacturing is something that should be core. If you can't operate without certain types of information technology, maybe keeping at least the capability of doing that work should be core. I can understand wanting to save money, but the savings aren't as astronomical as many think when the risk is something like this.