Tuesday, August 14, 2007

Racing to the Bottom?


August 14, 2007 Mattel Said to Plan 2nd Toy Recall, By David Barboza. It would be Mattel's second major recall in a month because of defective toys that were made in China.

This a good example of business risk associated with "racing to the bottom", taking advantage of inexpensive labor w/o managing the supply chain as closely as they should. Given the recent losses associated with Mattel's recalls, were the cost savings realized with the move to a country with lower environmental standards and corporate oversight worth it? Would a financial analysis bear out the investment made 15 years ago? I bet the managers that made the decision reaped the short term benefits (what did the stock do at that time?) and are nowhere to be found in Mattel's organization today.

An article posted to The Huffington Post entitled, China's Quality Problem: A Long-Term vs Short-Term Thinking Teachable Moment, highlights the danger of thinking "end of pipe", in this case referring to Dr. Deming's work on what I would summarize as Total Quality Management. The quote highlighted in the article is appropriate to those thinking about designing industrial systems to mimic nature and systems thinking relative to sustainable business:

You cannot produce high quality [environmentally benign] products by inspecting them at the end of production. All you can do at that point is prevent poor quality [harmful] products from reaching consumers, at a tremendous waste of time, energy, and materials. High quality [environmental neutrality] results from a process of redesigning your manufacturing processes - including your relationships with your suppliers - so that your products are built correctly in the first place. This is a long-term process requiring a continuous learning and improvement mindset.
I added the terms in the [brackets] to bring some sustainable thinking into the topic.
What appears in the Economist issue dated August 18th, China's Toxic Toymaker. Granted, the overall percentage of toys affected is more than likely very low. It's very easy to blow something like this way out of proportion (as many things are in the US media), especially since it potentially affects children. The trade protectionists will be grabbing this and using it to their advantage. What I see is an opportunity for more corporate diligence in the supply chain, preventing these issues from happening at all.

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