SCDigest Editorial Staff

The News: The well-publicized recall of 1.5 million lead-tainted toys made in China is having ramifications across corporate supply chains, with Washington regulators, and Chinese officials. Meanwhile, Mattel finally identified the factory that produces the recalled products, with the week-long delay in naming the Chinese supplier likely to spur regulatory efforts to close perceived loopholes in existing law.

SC Digest Says:

The delay in naming the supplier alone is likely to create calls to change the regulations allowing the sourcing location to be withheld, as government officials and others will argue the supplier may be sending other dangerous products into the U.S. that also need to be stopped or recalled. What do you say? Send us your comments here

The Impact: The Mattel recall of more than one million toys from its Fisher-Price division, encompassing approximately 83 products on which the Chinese supplier used lead-based paint, is the latest in a series of high publicity incidents related to the product safety of imports from China. The result is almost sure to generate even more calls from Washington to add regulations to offshore procurement processes, and has CEO and Supply Chain executives increasingly nervous about the costs and risks in Chinese sourcing.

The Story: The giant recall involved some of the Fisher-Price unit’s most popular toys, including Elmo, Dora the Explorer, and Sesame Street characters. This latest incident of unsafe products from Chinese suppliers is adding fuel to the growing call for stronger regulation of Chinese imports. (See Will Product Safety Issues Create Need for an "Import Czar?"). It is almost certain that additional legislation will soon be introduced into Congress to strengthen existing law.  

With the increased scrutiny from government and the huge levels of negative publicity and cost to Mattel from the recall incident, will CEOs of other companies slow down or reverse the rush to China as an offshore supplier?

While the cost to pull out of China would be huge and unrealistic for many companies already invested there, those that haven’t made the move, or are considering offshoring additional products there, will probably slow down for a bit, experts say. In addition, added costs to better ensure safety, and additional costs likely to be added to the supply chain from coming regulations, will further reduce some of the advantage of going offshore to China, the focus of attention in Washington. (See Global Supply Chain: Mattel Incident Shows Companies Can’t Go On the Cheap when Sourcing from China, Must Take Proactive Control of Entire Supply Chain).

Meanwhile, a week after the controversy started, Mattel named the Chinese company responsible for using the lead paint, saying the toys came from Lee Der Industrial Co. Ltd., located in Guangdong province. Under current U.S. law, distributors and importers are not required to identify the specific manufacturers of recalled goods. Despite requests to identify the supplier, Mattel had declined to do so until yesterday, saying that it did not want to name the Chinese supplier before completing an investigation.

The delay in naming the supplier alone is likely to create calls to change the regulations allowing the sourcing location to be withheld, as government officials and others, with some logic, in SCDigest’s view, will argue the supplier may be sending other dangerous products into the U.S. that also need to be stopped or recalled.

Jim Walter, Mattel’s senior vice president of world-wide quality assurance, said, "It's my understanding that [the Chinese supplier] is producing toys for other companies."

What is your view of the current mini-crisis over product quality from China? Should Mattel have named its supplier faster? Do you believe all this will stop some companies from moving offshore? What regulations would help? Let us know your thoughts at the Feedback button below.