Toying with the facts

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ONE of the largest toy recalls in recent history was announced by Mattel in mid-August. Almost immediately, stories began to fill newspapers and newscasts focusing on the unreliability and lack of safety standards existing in the Chinese manufacturing market.

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Hey there, time traveller!
This article was published 21/09/2007 (5491 days ago), so information in it may no longer be current.

ONE of the largest toy recalls in recent history was announced by Mattel in mid-August. Almost immediately, stories began to fill newspapers and newscasts focusing on the unreliability and lack of safety standards existing in the Chinese manufacturing market.

Toy companies were happy to point the blame at the Chinese manufacturers to mitigate any harm to their business. Bob Eckert, CEO of Mattel, blamed the recall on one of his suppliers who, he insisted, had not followed the rules. Chinese manufacturers defended themselves, consumer confidence plummeted.

News of the recall piqued my curiosity and I decided to investigate 20 years of data on toys recalls. My first intention was to study the issue enough to discuss it in my international business course. Considering how some experts were advocating the boycott of Chinese goods, my curiosity might actually have been the fear of losing my job. After all, no one could really teach international business if there was no international trade.

My first hypothesis was very simple. If Chinese manufacturing was bad, then the number of recalls should systematically increase over the years. Companies in the West started shifting toy manufacturing to China close to two decades ago. Chinese-made toys constituted 22 per cent of total toy imports to the U.S. in 1989. This figure increased to 50 per cent in 1995 and currently stands at 81 per cent. To my surprise, I did not find similar increases in recalls. In fact, the recalls did not show an increasing pattern for over 15 years. The recalls showed an upward trend only in the last couple of years.

My second hypothesis was based on another simple fact: China only manufactured toys as per the designs given by toy companies. If there was a problem with Chinese manufacturing, then manufacturing related recalls should increase over the years. To my surprise, I found that 76 per cent of all the recalls were because of design flaws such as toys having small parts, long strings, sharp edges or open gaps. In contrast, about 10 per cent of the recalls were because of manufacturing flaws such as poor raw material, shoddy assembly or lead paint.

The pattern that I found by examining 20 years of recalls data was very similar to what happened in the latest recalls by Mattel. In the last few weeks, Mattel recalled about 20 million toys. Of these, less than two million were recalled due to lead paint concerns, which was a manufacturing problem. By contrast, about 18 million toys worldwide were recalled due to small magnets that were falling off the toys. If two or more of these magnets are swallowed by a small child, they can potentially cause intestinal perforations or blockage. Undoubtedly, the manner in which magnets were placed in the toys is an issue decided by design engineers of Mattel and not an overseas manufacturer.

I closely followed the media coverage of Mattel’s recall (and the subsequent ones). At one point, Bob Eckert agreed that the magnets were a design problem and not a manufacturing issue at all. Yet, time and again, the story that went around was that Mattel trusted a Chinese supplier who used lead paint. In other words, Mattel was wronged by an unscrupulous Chinese manufacturer. We can question Mattel about its quality control systems, but let us give it the benefit of doubt and agree that they were wronged. Still, this only applied to lead paint that constituted less than 10 per cent of the toys recalled. What about the remaining 90 per cent toys recalled because of flaws in the designs, for which Mattel was singularly responsible?

It is true that Chinese manufacturing has its problems. As a friend wrote to me, “My parents for years have warned me not to purchase things made in China… Chinese media are filled with stories of black-heart products, items that are made without conscience. To us Chinese, that’s not really news. But it’s news to North America, because it’s rare here to hear that people would produce fake eggs, recycle condoms, or purposefully add harmful chemicals into food to maximize profits and minimize costs. What is acceptable and what isn’t is not shared globally. That is a shame.”

It may sound ironic, but this is exactly what drives companies to internationalize: differences between countries with respect to standards, regulation, and wages.

Toy companies have been getting their products made in China for the last 20 years. They know exactly what conditions to expect in China. They use China as a manufacturing hub to capitalize on lower wages and standards. Even a first-year international business student would suggest that lower wages or lower standards do not come in isolation; they always come together. So, it is only likely that some of these lower standards will travel back to the West along with the products made in China. The toy companies needed to invest in the systems and processes necessary to avoid such events. That is precisely the essence of managing an international business.

As for the issue with lead paint, it is unreasonable to put all the blame on China, leave alone blaming it for design problems such as magnets. I was not at all surprised that Mattel tried to focus public attention on the smaller problem of lead paint (for which it too needed to share the responsibility) and pushed to the background the magnets recall, for which it was solely responsible. But, what surprised me was how easily it pulled wool over the eyes of the entire world.

When I placed my findings in the public domain, they resonated with the media, academics, and regular citizens. It is rare for practitioners to agree with the comments and findings of academics. Yet, in this case several industry experts and insiders agreed that design problems are the biggest issue and cause most harm. It left me wondering, if design problems are the bigger problem than manufacturing defects, why was Chinese manufacturing put on the mat? More importantly, who will be responsible for the consequences of this? Are finger-pointing and the deflection of blame putting consumers and international trade relationships at risk?

Dr. Hari Bapuji is an assistant professor in the department of business administration in the Asper School of Business at the University of Manitoba. These findings were more extensively explained in Toy Recalls — Is China Really the Problem? published by Asia-Pacific Foundation of Canada. That report was co-authored by Bapuji and Paul Beamish, a professor at Ivey Business School, University of Western Ontario.

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