With regard to Chapter 3’s opening case, what, if anything, could BP’s CEO have

Question

With regard to Chapter 3’s opening case, what, if anything, could BP’s CEO have done differently to have prevented and/or avoided the resulting fall-out from the crisis? Explain. (Chapter 3s opening case below)

In early July 2007, one of Mattel’s European retailers discovered lead on some toys. “On July 6th Mattel stopped operations at the factory that produced the toys and initiated an investigation. “1 The toys were produced by Early Light Industrial Co. Ltd which subcontracted the painting of parts to the vendor, Hong Li Da. Both vendors were located in China. The Early Light Industrial Co. Ltd. factory had been a Mattel vendor for 15 years. Mattel had required vendors to use paint that had been provided by

suppliers that were certified. Hong Li Da was required to use paint supplied directly from Early Light but it violated Mattel’s standards and used paint from a third party supplier that was not certified.2 The owner of the Hong Li Da factory that was associated with using lead paint hung himself in a warehouse on August 11, 2007.3 On August 2, 2007, Mattel’s Fisher-Price subsidiary recalled almost a million toys made in China. The toys were colored using lead-based paint. One recalled toy had paint that was 200 times over the acceptable limit of lead in the United States. Children who suck on toys with lead could possibly be poisoned. Lead poisoning can result in learning and behavior problems or even death. Lead is cumulative, so it should be removed from a child’s environment every time it can.4 On August 14, 2007, Mattel recalled an additional 18 million products made between May and July 2007 because of their use of strong magnets that could detach, posing a danger to children. If two or more magnets were digested by children, the magnets would attract each other in the intestines, causing damage. Toys with strong magnets had been on the market since 2003. A toddler died in 2005 after swallowing several magnets of a toy made by Mattel.5 There were no laws to address the hazards of strong metals and Mattel recalled them after incidents of harm were reported. In this case, the recall did not occur because the company was cutting corners. “Technology advanced faster than toy makers’ perceived risk.“6

The magnets had gone through rigorous stress tests, but the industry had not considered the disastrous effects of a child’s swallowing two or more of the magnets. On September 4, 2007, Mattel recalled another 530,000 toys after performing additional tests, and found that these Chinese-made products also contained excessive amounts of lead.7 While there are several contributing factors regarding the issues and problems in this case, Mattel’s outsourcing relationship with China raises questions. Effective outsourcing occurs when there is a full partnership and sharing of responsibility between companies. If Mattel had engaged its business partners in China with strict random auditing, education, and technology transfer, a more cooperative and accountable relationship may have developed with its manufacturers. Boeing followed such “best practices,” and was able to develop an effective outsourcing partnership in which accountability was expected and delivered from its Chinese subcontractor Xi’an.8

Explanation / Answer

From the above case, the business relationship between Mattel and its subcontractors in China has miserably failed. Early Light Industrial Co. subcontracted the work to another party which the Mattel is not aware of .This makes a clear breach of trust between Early Light Co and Mattel . Mattel should have a signed a contract which should terms that limited Early Light from subcontracting its work to any other third party.

Even if it was allowed for the Early Light Co to subcontract its work to Hong Li Da, the Mattel should have been intimated about it.Mattel should have audited the facility of Hong Li Da before it commenced production to ensure the products were being made as per norms.It was even possible for Early Light Co to ensure that Hong Li Da was following strict norms and was following the customer specifications.

It shows that there was no clear understanding of responsibility among the different entities.There was no technology transfer to educate the suppliers of Mattel.Hence there is a need for the contractors to be accountable before they can subcontract its work to the third party.Early light Co also failed to share the customer specifications with Hong Li Da of using the paint that required to be procured only from Mattel Approved Supplier.But they indulged in cutting corners, to make profit. If the manufacturer can't satisfy your safety standards, you're better off finding another supplier.

Out-sourcing can help you get hefty profits but if not done concisely, it will make you lose your business reputation and finally may move you out of your business.Outsource work on which you have control.Hence random auditing of supplier facility, Quality check of Product from the supplier and carrying out a thorough First Article Inspection.The Company frequently needs to educate its suppliers on the product requirements and norms.

Related Questions

Navigate

• Browse (All)
• Browse W
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.