Lead Paint: Costing Mattel and the Toy Industry More Than Just $2.3 Million

Years after the initial lead paint scandals that tainted Chinese products in the eyes of global consumers, the U.S. Consumer Product Safety Commission is finally getting around to impose fines on Mattel for their violations. According to Reuters, the commission imposed a "$2.3 million civil penalty against Mattel Inc. for violating a ban on bringing dangerous products to the United States ...[stemming] from Mattel's recall of 95 types of toys and up to 2 million units, from shelves in recent years, primarily for excessive lead content in paint." At Spend Matters, we are glad to see these fines imposed, as it's clear that it took two to tango in regards to tainted Chinese products. Mattel and others not only under invested in supplier performance and quality management, they also focused exclusively on reducing unit costs at the expense of product quality.

In the end, Mattel got from China exactly what they bargained for -- cheap, inferior (and potentially dangerous) products. By the same token, had Mattel made the investment in China and their suppliers to provide higher quality, safer products, they most likely would have gotten a better result. Mattel, however, was not alone in getting from China exactly what they deserved based on their myopic focus on unit cost without requisite supplier development and monitoring. Other companies such as US importer RC2 Corporation saw their stock decline over 80% after similar lead paint incidents involving Thomas the Train. Fortunately, the lead-free silver (PB) lining in these incidents is that product quality and safety is once again a top concern not only for companies, but the consumers ultimately buying the products.

And for China, more recent scandals including Melamine-laced milk products have only proven out that quality issues directly impact everyone – not just Western consumers wanting to buy as many cheap products as possible. The infant and toddler deaths and illnesses associated with tainted baby formula and other milk products started China down a much more serious path of monitoring product safety and quality. But changing a cultural mindset that impacts Westerners as much as it does the Chinese will take time.

If consumers and companies only care about buying a product at the cheapest possible cost, they'll get exactly what they demand -- along with potential complications that could lead to a much higher total cost equation and the knowledge that their sourcing decisions might actually cause physical harm. Make no mistake about it. Lead paint and product quality is not a China problem. It is a sourcing problem.

Jason Busch

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