Mattel and China: Why Supplier Performance Management Matters

Even if you don't care for the politics of The Wall Street Journal Op/Ed page -- for those global readers of Spend Matters, the Journal's politics are about as far to the right as The New York Times is to the left -- you've got to admire the headlines (registration and subscription required) and witty commentary so prevalent in its editorials. Consider their recent essay, "Poison Me Elmo," as an example. In it, the editors talk about how many "American companies doing business in China have been slow to wake up to the challenge and responsibility of managing quality control there ... [But now] they're waking up now, as they realize their brand reputations depend on it." In the rest of the article, the editors discuss how "the private market stands a better chance of protecting consumers than an army of government inspectors ever will."

This is particular interesting if you consider that "it took Chinese authorities up to two weeks to identify the factories responsible for the tainted pet-food ingredient that caused such a stir in March. The North American companies had bought the ingredient through a trading company. Mattel, in contrast, had a longstanding relationship with the factory responsible in this case. That didn't avert corner-cutting on the supplier's part, but it did make the problem easier to trace, and correct."

The future of global trade depends on the willingness of procurement organizations to invest in supplier development and quality programs to apply local standards to products and services sourced around the world. Just as Dell learned with it's now famous call center issues in India, many manufacturers are now realizing that an underinvestment in supplier development and performance monitoring -- be it in China or the country next door -- can lead to catastrophic supply disruptions and/or significant negative PR. Perhaps this latest round of quality concerns will be the spark that really forces companies to go beyond the scorecard when it comes to supplier performance and risk management.

I've got another reason to be proactive -- especially in today's supply risk laden times. And that's your suppliers -- and their executives, in at least one case -- might not be around if your wait. Unfortunately, for Mattel, it looks like they won't have the same old factory general manager to work with to improve things at their old supplier for one of the toy recalls in question. Why? Because he committed suicide last weekend.

- Jason Busch