World Trade - February 2009 - (Page 34)

GLOBAL TRENDS have eased cost pressures as well. Falling oil prices coupled with extra space on container ships has, at least for the moment, stalled the climb of transportation costs. On the demand side, U.S. consumers who may have been scared away from the Made in China label after 2007’s recalls are likely to relax their worries about safety and make decisions based on price. A move down the value chain means buying goods made in China. These savings may help to offset the costs of complying with new safety guidelines enacted by Congress in response to the massive recalls of 2007. Under the Consumer Product Safety Improvement Act of 2008, manufacturers must provide a certiﬁcate showing that that a third-party lab has tested all toys for lead and phthalate levels. The lead rule is retroactive: even products made before the law passed must be off shelves by February 2009. Dane Chamorro, Chinese regional manager for Control Risks, says the new rules underscore the mistakes U.S. companies made by rushing into China without calculating the hazards associated with a cheap price tag. For example, the safety standards create an incentive to backtrack through the supply chain to research the quality of substrates like paint and dye—steps companies could have taken before but might have neglected out of a desire for speed. Now more than ever it’s important to assess quality control plans, do spot checks and revisit written requirements for quality. “If you don’t do that, you’ll be cruciﬁed,” Chamorro says, “and rightly so.” Mattel’s updated safety and quality control plan includes Gene Rider, president of quality control provider tests on all in-coming materials, increased in-process tests, Intertek Consumer Goods North America, says it’s spot checks paint on ﬁnished products every two weeks also important to remember that most recalls stem and more frequent random inspections of vendors, accord- from design failures, not production problems. Mattel ing to spokeswoman Jules Andres. The changes to quality surprised, and frustrated, U.S. market watchers in Sepcontrol also go deeper into the supply chain, with require- tember 2007 when executives apologized to China for ments that vendors and subconsaddling factories with too much tractors segregate all production of the blame for product recalls. and substrates designated for But the gesture was a sign the “Orders are probably Mattel. Paint, for example, must company accepted some blame be kept separate from paint used going to stay in China for for writing product specificaon other companies’ products. tions that didn’t create a system The company also wrote speciﬁc catching errors. now, but there are fewer forThe recession has also accelrules barring subcontractors from further subcontracting any part of orders because demand erated a trend that’s been undertheir contractual obligations. way for a few years: U.S. toy Industry sources say the has fallen substantially.” companies shifting production recalls have served as a reminder from their hub in Guangdong that relationships and continuity to less expensive workshops furdon’t mean the same thing in China and the U.S. Both ther inland in China and abroad, in Malaysia, Indonesia factories blamed for Mattel’s recalls had been working and Vietnam. with the corporation for many years. Robin Leong, who The company at the heart of the 2007 recall controhandles supply chain matters for Hogwild Toys in Port- versy may be the best equipped to make the transition. land, Oregon, says it’s important to ﬁnd people who Unlike most U.S. toy companies, Mattel has a long history understand local customs as well as technical issues. of diversiﬁed manufacturing, with factories in Mexico, “The culture is important,” he says. “Doing business Indonesia, Malaysia, Thailand and China, and about 50 in China and doing business in the U.S. are two differ- percent of that production in company-owned facilities. ent things.” Executives told investors this summer that it plans to Leong, who grew up in Malaysia, visits the dozen explore “longer term options in Northern China and Viet factories contracted by Hogwild three or four times a Nam” which promise savings of 5 to 10 percent. year. “The headaches are still on the ﬂoor,” he says. “You Smaller companies are making that move as well, need to be there.” and may able to do so faster than larger companies like 34 WORLD TRADE FEBRUARY 2009

Table of Contents Feed for the Digital Edition of World Trade - February 2009

World Trade - February 2009 Contents Taking Stock in America Confronting Corruption in Latin America Supply Chain Watch Tradewinds Where's the Goods? Where's the Money? Hope on the Horizon Managing Fleets in Turbulent Times The Impact of China's Economic Slowdown on U.S. Supply Chains The Fuel Volatile Supply Chain Getting the Most from On-the-Fly Transactions Managing Supply Chain Risk by Managing China Sourcing Capacity OECD Global Economic Outlook for 2009 'Natural' Agricultural Monopolies No More

World Trade - February 2009

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