Archive for the ‘Product Sourcing and Strategy’ Category

Swimming Naked in the Supply Chain: Getting to Know Factories & Sourcing

By on April 14, 2009 | Category: Product Sourcing and Strategy | Comments Off on Swimming Naked in the Supply Chain: Getting to Know Factories & Sourcing

As the phrase goes, "when the tide goes out, you find out who has been swimming naked" many businesses are painfully finding out whether their offshore manufacturing sources are without bathing suits.  Some companies have turned much greater attention to the managing of their costs and risks in the supply chain in recent years, and a few have found competitive advantage in doing so.  Now, it's becoming a necessary means of survival. 

Panjiva, a company which data mines US Customs data along with other sources to develop insight into manufacturing and trade trends, notes in this blog post that "From January 2009 to February 2009, in just a single month, the number
of global manufacturers shipping to the U.S. dropped 10%, from ~131K to
~118K."  Furthermore, Panjiva reports that:

Many SMEs do not have the resources to build risk models to assess risk in the supply base and to create and implement expensive risk management plans.  However, even without sophisticated quantitative methods, the principles can be applied.  Thinking through various events that can occur, the likelihood of these events, and the impact they can have, can be a useful exercise for an SME to undertake.  In good times, many won't delve too deeply into creating contingency plans.  Of course, in challenging times, it's the companies that did set this up who eat the market share of those who are too busy scrambling to save the company.

Given the economic environment, a few risk infused events that are more likely to occur on the supply side might be price increases, MOQ increases, or quality fade–stemming out of a situation in which a supplier, or even a 2nd tier supplier, is hitting the skids business-wise and needs to find a way to get more cash with the customers and orders they still have.  They may be looking at monthly survival. 

A lower probability event that may have a high impact may be your supplier going under and completely disappearing.  Worst case scenario: they disappear with your money.  Or, perhaps they don't respond to your emails and phone calls next time you are ready to place an order.  This won't give you much time to source another supplier, develop their manufacturing processes to meet your specifications, and pick up where the last one left off.

How can we create a decisive advantage in managing these risk factors?  Create greater visibility in your supply chain and expand your portfolio of options.  Visibility is  information–thus extract more information from your suppliers and about your suppliers.  The easiest way greater transparency can be had is with a more open, trusting dialogue.  These kinds of things are much easier to do face-to-face, particularly in countries like China.  But use third party information to help create a comprehensive picture.  Consider having factory and company financial audits performed.  Information from local banks used by your suppliers, government agencies, and other sources can give you an idea of the financial status of your factory.  Another useful source is the company Panjiva, mentioned above.  Panjiva offers reports on the importation data for thousands of suppliers that allow one to learn about fluctuations in a suppliers shipments to the U.S., their other product lines, and other customers.  In this case, knowledge is power and with it, you obtain a much better view into your suppliers current situation and their impetus for trying to renegotiate terms. 

Also, are you single sourced on key products and components?  Source second and third suppliers for your products.  Alternative sourcing options gives you leverage with knowledge of general pricing and terms available in the market, as well allows you a stronger negotiating position by not feeling entirely dependent on one supplier.  

Summer's around the corner…if you don't already have a bathing suit, now is the time to start shopping.

Global Sourcing Outlook: Staying on Top in the Short Term

By on December 17, 2008 | Category: Product Sourcing and Strategy | Comments Off on Global Sourcing Outlook: Staying on Top in the Short Term

Did you hear?  The world economy is facing tough times.  No–not another blog post or news story about the economy throwing up all over…everything.  Obviously, businesses across the globe are facing challenges on both the demand and supply sides.  Below, I've put together four suggestions for actions you can take now, to make sure your business does not get burned on the supply side, particularly if you have manufacturing sources offshore. 

Good practices for the short-term in a recessionary world economy:

  • Do a cost audit of your current supplier(s) and consider new suppliers.  Prices negotiated 6 months ago may be uncompetitive now.  Manufacturers are hungrier.  Some, if not many, of their costs of production have dropped.  Many of these cost reductions are driven by falling world demand (which we hope, and I believe, is a short-term phenomenon).  Cost saving opportunities and their causes will vary from supplier to supplier, so reviewing price at your existing factories as well as looking at new sources, may yield an opportunity for short-term cost savings that could help your bottom line now.  When demand picks up, it will be on your supplier(s) to raise the issue of rising costs with you.  But, there is always a lag time between increasing costs and rising prices, so don't fail to capitlize on current conditions.

  • Monitor the financial health of your sources.  Factories, both domestic and offshore, are facing very tough times and many are closing shop.  Generally, when this is happening, their isn't much incentive for factory owners/managers to let their customers know, "hey, we may not be around in a few months".  While "credit checks" in low-cost country sources (LCCS) are generally not typical of what we might consider a credit check in the U.S. (i.e. running a credit check through Dunn & Bradstreet),  informational audits that can be performed through 3rd party information gathering, and can aid your assessment of your supplier(s) financial health and risk.  There are companies that perform these services in popular LCCS' like China, India, Mexico, etc., and you can generally get an idea of a factory's current credit situation and perhaps some current financial information.  This could give you the heads up you need to start securing second and third sources of supply, in case your primary source suddenly stops responding to your emails and phone calls, and their website disappears.  Performing these kinds of audits are not too expensive, $US500 to a few thousand dollars, and may save you your business in the long run.

  • Continue monitoring your quality control, and if you haven't been doing so very well thus far, START NOW!  Don't become a quality disaster/recall headline or a product liability defendant.  When times get tough, suppliers look for ways to lower costs and maintain margins.  Many may feel inclined to let the quality of materials or workmanship slip to save a few cents on your next order.  If there is ever a time to continue your quality control program or implement a quality control program, it is when companies supporting you are potentially hurting. 

  • Don't treat your suppliers as the enemy.  An honest conversation may open up new opportunities for mutual gain.  When times get tough, people often begin looking for easy scapegoats and targets.  It may be tempting to push unreasonable demands and threaten even your best suppliers.  None of the recommendations above are intended as a suggestion to get absurdly tough on the vendors supporting you.  Be diligent, negotiate well, and expect results. Approach the need for businesses to survive during these challenging times from the perspective of "how can we work together to mutually survive and eventually flourish?"  Gaining transparency in the supply chain ("transparency"– basically sharing information) is a best practice in good and bad economic conditions.  Being forthright and reasonable with your suppliers will not only earn you their respect and appreciation, but may open opportunities for new ways to reduce costs, improve efficiency and/or quality, and present new business opportunities.  This is such an easy, but often overlooked method of dealing with supply chain challenges, and it might begin with a simple and honest conversation. 

Chinese Fish Switcheroo: Beer Switcheroo

By on October 26, 2008 | Category: Product Sourcing and Strategy | Comments Off on Chinese Fish Switcheroo: Beer Switcheroo

I thought this recent post on Richard Brubaker’s All Roads Lead to China was timely given my last post on the fish-switching.  Rich’s story is short and sweet:

Corona2

This evening while hosting a dinner party, one of my guests noticed
something funny about his beer (a Corona).  simply put, he said “this
isn’t beer”.

After a few people took their skeptical sips, we hauled out the rest
of the bottles in the refrigerator to make the side by side comparison.

Which, as you will notice, showed us that we had in fact a bad batch of beer on our hands.

1) The color of the real (bottle on left) vs. the fake  (bottles on right) show distinct color differences
2) Look at the different levels on the fake ones
3) Bottle caps on real bottle curve in where the bottle cap ridges point out

so, for those of you tipping back a bottle of Corona, be careful.  I
cannot say that there was melamin in the beer, but lord only knows what
was really in that bottle.

You can’t pop a bottle open in a store for a QC swig, but fortunately, you can walk through a factory and QC your goods prior to shipping them.  Simple enough…

The Next Sourcing HotSpot: From China to…Madagascar?!

By on March 27, 2008 | Category: Product Sourcing and Strategy | Comments Off on The Next Sourcing HotSpot: From China to…Madagascar?!

Madagascar_mapWell, not really…

I’m currently on another sourcing trip in China.  I’m headed to Vietnam in a week.  My first week in China has been very busy and has provided a lot of food for thought on the manufacturing shake-up that is taking place in China right now.  Is it really a shake-up?  Yes and no.  It’s not as if all hell’s breaking loose over here.  But, almost every supplier I have met with has groaned about increasing material, energy, and labor costs, as well as the impact of the currency exchange rates.   Many of these things are not unique to China.  Nevertheless, it’s never fun to report increases in costs to your customers–and they certainly don’t enjoy it.   

One of the tough spots Chinese suppliers find themselves in, is it’s not atypical for foreign businesses sourcing in China to consistently apply pressure to lower costs.  Hence the erosion of quality in materials and product–or the practice of quality fade by suppliers to preserve their margins.  In addition to constant cost pressure from many customers, there is often pressure to improve working conditions for laborers and decrease negative impacts on the environment. 

What foreign buyers often miss or conveniently ignore, is the fact that improving labor and environmental conditions costs money.  The burden of these improvements are typically placed on the supplier.  Finally, China has enacted labor laws that should improve the average factory worker’s security.  Thus, as we are seeing now, costs are beginning to rise, and the most inefficient, energy intensive, high-labor, low value operations are either shutting down or moving elsewhere.  This is really neither good or bad.  It is good, because, like many have asked for, working conditions will begin to improve in China. 

But what will many businesses do?  Many will begin to look elsewhere for lower cost labor.  Currently, there is no "next-China" on the horizon.  Some are looking at inland China, but many are also eyeballing Vietnam, India, Eastern bloc Europe, and Africa.  Many of these destinations may make sense currently and will likely become more prominent in the future.  But China is far from being dislocated as the epicenter of manufacturing soon.  Remember, it’s not just your factory that you will move, but all of the supporting supply chain that must be found anew in your next destination.  This will not be easy, as demonstrated by the extreme case of…Madagascar.

The most exotic destination I’ve heard of a company moving to, to date, is Madagascar.  That’s right–the exclusive home of the Dwarf Lemur and the Aye-Aye.  One of my supplier’s other customers has actually set up a source in Madagascar to assemble product.   Contrary to intuition regarding a supply chain like this, the company claims they are saving money.  While I find it hard to believe, I know very little about their situation.  I do know that supply chain flexibility and responsiveness must not be critical to the business model.  Keep in mind that Madagascar has little to none in the way of a
manufacturing base.  This means that the company must continue to
source an overwhelming number of items from China and ship them to
Madagascar.  They cannot even get shipping cartons in Madagascar, so
they must ship the shipping cartons from China. 

Wonders never cease…

China’s First Steps Away From Low-Cost Manufacturing and What it Means For Your Company

By on February 25, 2008 | Category: Product Sourcing and Strategy | Comments Off on China’s First Steps Away From Low-Cost Manufacturing and What it Means For Your Company

In 2007, there was increasing chatter in manufacturing, sourcing, purchasing, and related circles regarding various forces in China causing price inflation.  The Chinese government’s move to discontinue export rebate taxes last summer in certain categories and industries was one of the first signs of the Central government’s desire to curb manufacturers’ role in the over-heated economy.  A weakening dollar and U.S. recession would soon come into play, as well as increasing labor costs and changing labor laws impacting China’s eastern manufacturing hubs.  There was even talk of many Chinese manufacturers closing up shop after this Chinese New Year holiday and the snow storms preventing mass numbers of workers from coming back to their jobs.  The chatter filtered over into blogs, and now I have friends and associates sending me newspaper articles that talk of companies looking to move more deeply into China’s interior, or source product from other countries altogether.

Almost a year ago, I did a series of posts entitled Offshore Sourcing: An Ever-Shifting Landscape, in which I discussed U.S. apparel companies who had moved their supply chains into Vietnam from China and got into hot water when threatened by a potential rift in trade regulations between the U.S. and Vietnam.   In the world of low-cost chasing companies, there’s no doubt that many execs will read stories like this in the SF Chronicle and ring up their purchasing manager immediately and ask what they’re doing about getting into Vietnam, India, Bangledesh, etc. 

I’d like to offer a few points to consider when thinking about the future of manufacturing in China, building supply chains in emerging low-cost destinations, and moving production from one destination to another:

  • Reactionary strategies will most likely get you into trouble.  Don’t be like the guy who ran out and put his home on the real estate market when he ‘heard’ that the real estate market in the U.S. was in trouble.  Generally speaking, careful consideration of your own company’s needs, your manufacturer’s circumstances, and your competitive positioning in the marketplace will dictate far more in terms of where you should be sourcing, rather than what is being said to take place on a macroeconomic scale in your source country (unless massive civil unrest is taking place, a violent coup, or Starbucks is beginning to appear on every corner). 
  • As the sourcing landscape can be "ever-shifting", nobody (at least, I haven’t met anyone with the gift of sourcing-clairvoyance yet) is quite sure of what exactly this all means yet.  Some suggest that supply lines will simply extend deeper into China to take advantage of the huge pool of low-cost labor that still resides there.  Others, emphasize that China will inevitably move up the value chain and low-cost manufacturing will indeed flee to lower-cost sources.  There are arguments for and against both.  It’s likely that a combination of both of these trends, along with some that no one is in a position to see, will emerge in the near future.  The only trend I would venture to say is imminent, is the ubiquity of Starbucks.
  • This will impact industries, and companies of different sizes. very differently.  Apparel is much more likely to move from country to country.  Consumer electronics manufacturing is much less likely.  Corporations looking to stay on the good side of Wallstreet from quarter to quarter may be much more likely to see what lines of supply they can move in order to keep costs down.  Smaller companies may be better able to absorb increases in cost through a long-term strategy of seeking out ways to improve the value of their relationship with their current suppliers. 
  • Don’t fall into some false hope that the challenges associated with manufacturing in China will be less prevalent in other low-cost countries.  Experience has shown the opposite to be true.
  • Following on the last point, if you do plan to expand your supply chain into a  new country, take the appropriate steps in developing new suppliers and give your company time to troubleshoot and refine the relationship and process before relying heavily on then new source.

The bottomline is careful consideration of the circumstances of your company,  your supply chain, and industry will be far more important in determining where to source from in the short-term.  Understanding these issues will present a far better perspective to make decisions from regarding when and if to expand your supply chain into other countries when the macroeconomic writing is indeed on the wall. 

US Companies Manufacturing in China: Staying Cool and Staying Put

By on December 10, 2007 | Category: Product Sourcing and Strategy | Comments Off on US Companies Manufacturing in China: Staying Cool and Staying Put

A survey completed by SmartCube, a firm that specializes in business research, indicates that despite the press and outlash regarding the recent China-quality debacles, the vast majority of U.S. companies aren’t considering changing their supply chains, and certainly aren’t considering picking up from China and moving elsewhere.

Smartcube_2
After the bad news about Mattel, toothpaste, and pet food, many China detractors speculated that companies in the U.S. would begin rethinking their quality control and supply chains, and perhaps even consider other countries to avoid the issues that they believed to be unique to China.  The SmartCube blog reports that:

In fact, the majority of manufacturers surveyed are confident their
supply chains are more than adequately secure to ensure the safety of
their products. Indeed, nearly 80% of respondents (all of whom were
manufacturers who currently manufactured their products in China)
reported that they felt no need to review their supply chain activities
in the wake of the well-publicized toy and toothpaste recalls. Further,
these global manufacturers believe that the recent recall issues, while
serious, are aberrations and not symptomatic of some more fundamental
issue inherent within Chinese manufacturing. They appear to be on solid
ground, as Mattel itself has apologized for initially putting the blame
on its Chinese suppliers.

Some interesting takeaways from the survey include:

  • "Among the 22% of respondents that did say they would review their
    supply chain activities, more than one-third said they would make
    changes to the supplier evaluation process during selection or they
    would assign a person to look over quality adherence at the supplier
    location."
  • "About 30% would send quality inspectors overseas to the
    production plants."
  • This is noteworthy because these are not quick-fix
    solutions; these respondents are considering deploying significant
    resources to achieve greater product quality.
  • We were not surprised to see that none of the survey respondents
    indicated that they would stop outsourcing manufacturing altogether.

Whether companies have indicated that they will be making supply chain changes or not, I think most companies and individuals working with Chinese manufacturers will have quality closer to the forefront of their minds.  This might result in anything from small corrective actions and a greater meticulousness, to qualifying suppliers more thoroughly or "making a list and checking it twice" (sorry..listening to Christmas music). 

Qualitystan_map_3
In terms of companies relocating their supply chains, that’s nonsense.  It’s not easy to pick up and move factories, let alone countries.  It eats up time, money, and in the end, China is not unique with respect to the quality issues that arise in manufacturing.  Those who are sure we can escape the quality issues of manufacturing in China by simply moving to another country may be using this map to base their opinions.

It would be nice to review the findings of the study in more detail, but like Dan
Harris of ChinaLawBlog
, who posted on the study, I can’t seem to find
them.  Assuming SmartCube does their job well, it will be business as usual in factories in China. 

    

Video of Chinese Factories: Injection Molding and Tooling

By on October 2, 2007 | Category: Product Sourcing and Strategy | Comments Off on Video of Chinese Factories: Injection Molding and Tooling

Want to see how millions of everyday products all around you, including the one your are typing on, are made in China?

I’ve been sitting on quite a bit of video footage of Chinese factories from recent trips over there and thought I’d put some up to give people a quick peek into some of the people, places, and processes that often take place.  This video focuses on the process of plastic injection molding and mold building.  Plastic injection molding is used to create millions of everyday products.

The video is shot at a few different locations in the Dongguan area of southern China.  The factories shown range from "good" to "excellent" in the way of organization, cleanliness, quality of product, technical abilities, etc. 

A quick overview of what’s depicted in this video, in sequential order:

  • Injection mold planning taking place in CAD designs
  • Mold building shop, including very large and small injection molds as well as the polishing/texturing process
  • A few processes used to create molds, including CNC machining and EDS machines
  • Plastic injection molding machines, in which the tools are loaded and used to shoot off large volumes of parts
  • Product painting, assembly, and packaging

There is no speaking in this video–but video seems to convey a great
deal regardless.  I have included some lively music ("Roll it Up", by Crystal Method) to keep you entertained, so dance or move if needed.
Forgive me if the handheld video quality makes you feel like you are
watching Tom Hanks storm Normandy beach in Saving Private Ryan.  I need
to invest in a tripod.  Or have one manufactured… 

Enjoy.

  

Raising Your Supplier’s Prices in China: Not the Answer You’re Looking For

By on September 28, 2007 | Category: Product Sourcing and Strategy | Comments Off on Raising Your Supplier’s Prices in China: Not the Answer You’re Looking For

Hand_out_money_2
So much to chew on lately in the blogosphere and media regarding
China’s quality, prices, liability, etc.  There is a lot of noise out
there regarding "who" is to blame and "why".

Paul Midler, of TheChinaGame blog, recently wrote a post entitled The New Bugaboo: Low Prices.
Midler presents some good counter-arguments to those out there that
claim US businesses’ chase for low prices is the true culprit in these
quality fiascos. Midler’s general points are:

A) US companies cannot fully control their suppliers.  Chinese
suppliers, just like any person, are in control of their own actions
and decisions.  Consider the analogy he uses:

Consider yourself in this situation: You ask someone to run to the
store to buy you a candy bar, and you give him more cash than
necessary. Keep the change, you tell him. The guy gets to the store and
decides to shoplift the candy bar instead of paying for it. Are you
responsible for this person’s unethical actions?

B) Putting the blame on the abstract cause of "price pressures" to
excuse Chinese suppliers’ failure to live up to certain standards in
environment, labor, and quality criteria simply passes the buck in
terms of responsibility.

C) Simply paying the suppliers more money to solve these problems is
a ridiculous notion.  If actually implemented, many Chinese suppliers
would be laughing all the way to the bank with no intention of actually
improving conditions to the level that we’d like.  Unless we were of
course to pay more next year, right?  Paul offers another good analogy:

First, if you give more money to a supplier who has behaved
unethically, isn’t that sending him the wrong message? What would these
people say about a CFO caught embezzling corporate funds? “Well, he
must have taken the money because he needed it. Let’s give the guy a
raise and see if the problem clears up on its own.”

I agree with Mr. Midler.  Price is the reason companies approach low-cost countries, like China,
with manufacturing in the first place.  It isn’t the Sichuan hotpot
dinner (although I do find myself wandering out to restaurants
specifically for this reason).  Simply paying more for a given product will probably do nothing to fix the issue.  Consider this little anecdote
I wrote a while ago about surgeons masks being offered at a factory I
toured in Shenzhen.  U.S. companies wanted surgeons masks available to
factory workers.  The factory begrudgingly purchased them.  Half the
workers didn’t want to wear them. 

In another case, an associate of mine with a U.S. automotive tool
sourcing company a few years back, got burned when he offered laptop
computers to some employees.  Being new to China and a bit naive, he
thought he would give laptop computers to three employees in their
newly formed Changzhou office.  Supposedly, the workers would be
delighted and their productivity would improve.  The employees were
gone, laptops in tow, in a matter of a few weeks. 

These are only two, small anecdotes.  But they demonstrate a point.
It goes far beyond simply offering a piece of equipment, clothing, or
raising the price.

Raising Your Supplier’s Prices in China: Not the Answer You’re Looking For

By on September 7, 2007 | Category: Product Sourcing and Strategy | Comments Off on Raising Your Supplier’s Prices in China: Not the Answer You’re Looking For

Hand_out_money
So much to chew on lately in the blogosphere and media regarding
China’s quality, prices, liability, etc.  There is a lot of noise out
there regarding "who" is to blame and "why".

Paul Midler, of TheChinaGame blog, recently wrote a post entitled The New Bugaboo: Low Prices.  Midler presents some good counter-arguments to those out there that claim US businesses’ chase for low prices is the true culprit in these quality fiascos. Midler’s general points are:

A) US companies cannot fully control their suppliers.  Chinese suppliers, just like any person, are in control of their own actions and decisions.  Consider the analogy he uses:

Consider yourself in this situation: You ask someone to run to the
store to buy you a candy bar, and you give him more cash than
necessary. Keep the change, you tell him. The guy gets to the store and
decides to shoplift the candy bar instead of paying for it. Are you
responsible for this person’s unethical actions?

B) Putting the blame on the abstract cause of "price pressures" to excuse Chinese suppliers’ failure to live up to certain standards in environment, labor, and quality criteria simply passes the buck in terms of responsibility.

C) Simply paying the suppliers more money to solve these problems is a ridiculous notion.  If actually implemented, many Chinese suppliers would be laughing all the way to the bank with no intention of actually improving conditions to the level that we’d like.  Unless we were of course to pay more next year, right?  Paul offers another good analogy:

First, if you give more money to a supplier who has behaved
unethically, isn’t that sending him the wrong message? What would these
people say about a CFO caught embezzling corporate funds? “Well, he
must have taken the money because he needed it. Let’s give the guy a
raise and see if the problem clears up on its own.”

I agree with Mr. Midler.  Price is the reason companies approach low-cost countries, like China,
with manufacturing in the first place.  It isn’t the Sichuan hotpot
dinner (although I do find myself wandering out to restaurants
specifically for this reason).  Simply paying more for a given product will probably do nothing to fix the issue.  Consider this little anecdote I wrote a while ago about surgeons masks being offered at a factory I toured in Shenzhen.  U.S. companies wanted surgeons masks available to factory workers.  The factory begrudgingly purchased them.  Half the workers didn’t want to wear them. 

In another case, an associate of mine with a U.S. automotive tool sourcing company a few years back, got burned when he offered laptop computers to some employees.  Being new to China and a bit naive, he thought he would give laptop computers to three employees in their newly formed Changzhou office.  Supposedly, the workers would be delighted and their productivity would improve.  The employees were gone, laptops in tow, in a matter of a few weeks. 

These are only two, small anecdotes.  But they demonstrate a point.  It goes far beyond simply offering a piece of equipment, clothing, or raising the price.

Mattel: a Model for Offshore Manufacturing and Quality (unless you jump out of a bathtub naked onto a toy horse named “Blaze”)

By on July 31, 2007 | Category: Product Sourcing and Strategy | Comments Off on Mattel: a Model for Offshore Manufacturing and Quality (unless you jump out of a bathtub naked onto a toy horse named “Blaze”)

Mattel_28
Amidst the flurry of news stories going on right now about product quality and China, the NY Times recently ran an article (free registration maybe required) about the world’s biggest toy maker, Mattel, as an exemplary model for offshore manufacturing and product quality.  Hats off to Dan Harris of Chinalawblog for writing up a post about the article.  I sent the blog post and article to Roger Rambeau, a partner at Global Sourcing Specialists, this morning and we chatted about the "old days" when he worked his way up from the production line with Mattel to become a Vice President of manufacturing.  Roger managed and worked with Mattel’s manufacturing plants and offices both at home and in several countries, including Mexico, Taiwan, China, Hong Kong, Singapore, and others.  Throughout his career, he was responsible for Mattel’s quality and manufacturing.  The NY Times article quoted 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 as saying

“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.”

I chatted with Roger, who first went over to China with Mattel in 1971 (well before China was "cool"), about the article this morning, and he concurred:

Mattel was a leader–out there in front of everyone else.  Their practices stemmed from the core principles of the company and we acted accordingly whether at home or abroad.  We took the initiative to work quite a bit
with the US Government’s Consumer Product Safety Commission and had a lot to do with the development of ASTM (an international product standards organization).  Well before they brought in S. Prakash Sethi, (cited by the NY Times article as a critic of worker mistreatment and hired by Mattel to independently monitor Mattel’s factories and vendors’ plants), Mattel hired a guy by the name of Chuck Williams, who was instrumental in developing quality and safety standards in the company and industry.  You’ve got to remember that this was very early on and manufacturing processes overseas could be very rudimentary.  When we first went over to Taiwan, female workers would come into the plant on their bicycles and take home die cut material to sew at home, and then bring it back as a finished piece. 

Mattel would measure and pretest products
against the ASTM standards and then send them to an outside laboratory for testing.  If the product involved flammability issues, we did flammability testing.  Small parts issues–we did drop testing and choke testing.  Mattel was behind putting a material in marbles so that if a kid swallowed a marble, it could be seen in an X-Ray, rather than invisible.

Now, consumers and the media have become wise that a lot of companies sourcing product in China and overseas in general aren’t paying nearly enough attention to their operations there.  But, even for industry leaders like Mattel, problems arise.  The NY Times article and Mattel’s own executives point out that Mattel hasn’t been completely free of their own problems in this respect either.  It’s not easy and it’s never going to be a perfect process–at home or abroad.   Roger regaled me with a few stories this morning which illustrate that not everything can be accounted for:

180pxblaze1_2
Sometimes problems are the result of design oversights.  A few years ago, a child got their tongue stuck in a product in a way that the Mattel design team hadn’t even considered possible when they designed the product.  In another instance, a plastic toy horse named "Blaze" that a child could sit on and play was being sold.  The horse was made of two parts–front and back–with a seam in the middle where the saddle was.  One little boy, exuberant about his horse, was taking a bath and jumped out of the bath naked and ran over to his horse and jumped into the saddle.  The force of the boy coming down on the horse caused the seam in the saddle to open, catch his member, and shut tight.

The boy lived, but was not ok, if you know what I mean.  After hearing that story, I wasn’t ok for about 5 minutes.   Even an industry leader couldn’t see that one coming…

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