by Kim S. Nash

Toy Recall Tests Mattel IT

Sep 06, 20074 mins
Supply Chain Management Software

Lead paint, dangerous parts force toymaker's supply chain backward.

Mattel, the $5.7 billion toy company, this week issued its third product recall, this time of 848,000 Barbie accessories and Fisher-Price toddler toys that could contain lead paint. Mattel’s second recall for lead hazards in the past two months comes on top of a recall in August of toys made with small magnets that could cause children to choke.

The three recalls mean Mattel’s information technology managers face perhaps their toughest test ever. As the company pushes out products to warehouses and distribution centers around the world in preparation for crucial holiday buying, Mattel is at the same time trying to pull back 20 million potentially dangerous toys.

That much product in motion—in opposite directions—could break any company. During a product recall, “The intensity of the need for information gets compressed,” says Walter Staehle, a director of industry management at Siemens and former shop-floor manager at Kraft.

IT’s job in a recall is to produce data that lets senior managers understand the extent of the problem and how it started. They also need continually refreshed data on how the recall is going. The CEO has to face the public with real information if he wants to preserve the company’s reputation and sales.

The CEO and other senior leaders have to figure out which and how many products are affected, where they are and how to get them back, while dealing with confused and sometimes angry consumers, distributors and retailers. Both the speed and the quality of response matter—and they matter to the public as well as to the company’s internal operations, Staehle says.

It’s one thing to get an estimate of the number of products affected, he says. “But having to go back three, four, five times with revisions damages your credibility and your ability to act precisely.”

A company shouldn’t hold 17 shifts worth of factory output because no one is sure when the bad production run started and ended, he says. “It’s like triage in surgery. Do you chop off the leg or deal with a specific wound?”

Mattel, like most big manufacturing and consumer products companies, uses a mix of enterprise software—for example, Manugistics to manage supply chain and demand, Kewill Ship to manage transportation, and Oracle, Microsoft and IBM databases, among other packages, run at Mattel’s main data center in El Segundo, Calif.

Mattel CEO Bob Eckert tried to stem consumer worries in a video statement this week on the company’s website. “We’re thoroughly testing our toys to ensure they’re the high quality you expect,” he said. “I want to again apologize for this situation.” He’s said the same on CNN, and in full-page ads in The New York Times.

Eckert will likely have to talk about what the recalls will do to Mattel’s business. He is scheduled to outline the company’s prospects at investment bank Oppenheimer in New York next week and again the following week at Bank of America.

Making substantial use of the Web will help Mattel maintain good relations with retailers, says John Quelch, business administration professor at Harvard Business School.

For example, to avoid relying heavily on Wal-Mart, Toys “R” Us and other stores to answer consumer questions, Mattel has set up recall websites with details on product names and manufacturing codes, as well as photos and clickable quizzes to help customers figure out if they own a bad toy. Then Mattel offers consumers prepaid mailing labels sent via e-mail to return the toys.

Quelch admires the way Mattel is handling the public relations surrounding the recall but notes that the company has to be careful. “The last thing Mattel wants to do is have millions of products handed to retailers, which causes a huge logistics problem there,” Quelch says. That, in turn, could detract from any goodwill between retailers and Mattel, he says, and “could result in fewer products being sold this holiday season.”

Hasbro, meanwhile, has intensified toy testing, according to the Reuters news service, to try to avoid landing in the same recall mess as Mattel. Hasbro’s IT and business leaders, no doubt, should also use their business intelligence systems to find ways to capitalize on their rival’s pain.