Strategic analysis of global operations of supply chains

Strategic depth psychology of global operations of interpret twinesThe main objective of this study is to do a strategic analysis of the global operations of egress orbit deep down Mattel Toys Inc. Here its go forth kitchen range go forth be evaluated a considerable with the s divvy ups/ warrantor threats it faced and a feigningling will be presented to manage these insecuritys.With growing product/service complexity, grant mesh topologys ar also becoming increasingly complex in the wake of outsourcing and globalization. This has alter take a chance, changing it continuously. hazard can generally be termed as a probability of injury, hazard, damage or any other unwanted outcomes. The Royal monastic order (1992) defined a more systematic explanation of riskiness the probability that a grouchy adverse event occurs during a stated period of time, or results from a particular challenge.In this study, we will suggest a manikin for future supply chain risk manageme nt in the view of Mattels suppose in 2007. This recall left a trail of media reports, public critique, investigations and huge lessons learnt.Mattel Toys Inc. is a global leader in the design, manufacture and marketing of wagers and family products. It comprises of top-selling brands such as Barbie, Fisher-Price brands etc. Mattel is recognized as the 100 Most Trustworthy U.S. Companies by Forbes Magazine. (Source Wikipedia)In 2007, it experienced a sequence of continuous alarming product recalls in which around twenty one million toys were pulled out from sale. Whether the toys were defective in design to lose small magnets, which if consumed could harm kids, or they were toys contaminated with lead winder coming from unethical Chinese v sackors was irrelevant as the case was subjected to high media critique and got highlighted for quality mismanagement and varied logistic practices in outsourced vendors. (Biggemann 2008)The table (figure 1) on a lower floor shows the toys recal led from Mattels respective vendors and their sub-vendorsIndustry experts suggest that Mattel is locked in a relationship with China having five factories and manufacturing there for nearly 25 years. It outsources its production up to 50 part to third-party manufacturers and almost 65 percent of its toys argon produced in China.In spite of quality control efforts, Mattel has had 36 recalls since 1998 and two formal Consumer Product Safety commitment (CPSC) admonishments. Its most controversial recall, up until 2007, involved 10 million Power Wheels toy vehicles. (Biggemann 2008)Below is a timeline depicting the key events that took place during the course of this recall, paradigm 2 Mattels product recall timelineThe result of this recall was catastrophic for Mattel and it lost more than 45% of sh ares in market value. Although sales at international markets jocked it addition some profit for that interval (Casey, 2008), yet these had genuinely little impact on their annual figu res as compared to its loss. The question now raised was How did Mattel end up in such a tricky situation? Is it a case of heavy neglect or something worse? It is argued that this was the result of Mattels flawed sourcing strategy.Literature revueToy industry is one of the oldest industries for creativity and extremely volatile in nature. In the United States alone there are approximately 3 gazillion toys sold per year (Elsasser 2007). Toy sales estimate are nearly 22 billion USD (Strickler 2007). Figure 3 estimates the annual toy sales from July 06 June 07 which pronounced a rise up to 22.5 billion USD.Figure 3 State of Toy IndustryErratic and changing demands in this industry create a layer of volatility due to undersized and customized selling-openings and rapid product lifecycles. Toy demand and toy retailers ingests are very volatile and expect toy manufactures to be very market responsive but most toy manufacturers respond with conventional mass-production strategy which i s very minimal in response and very mismatched to their strategy. egress networks of such industries are growing into complex and dynamic mesh of varying relationships (Harland et al., 1999). Risk is escalating and its focal point is ever changing within the dynamism of supply networks all due to outsourcing of supply operations overseas and also due to growing complexity of product/service life-cycle.Of late enquiry has explored strategies to minimize risk in toy supply chains and networks. One of the main assets of toy manufacturers is their network position and the relationships and policies that come with these (Turnbull et al., 1996). To asses and manage risks, network billet plays an important role especially in resource sharing, reputation management and terms of contract (Henders, 1992).To begin the research, a literary productions search was undertaken with the intention of jam articles colligate to supply chain shelter and risk. The search included all journals known to publish articles link up to security, risk, and/or supply chain management. Examination of the literature reveals four core premises that are consistently mentioned as vital for tightens seeking to maintain effective aims of security and in minimizing and/or managing supply chain risk.(1) Preparation and planning initiatives.A central focus of the supply chain security/risk literature is melody and supply chain continuity planning. Zsidisin et al. (2005a) beseech a four-step business continuity plan, including awareness creation, prevention, remediation, and knowledge management, thought to be salient for firms needing to protect themselves and their supply chains from external risks. The business continuity planning concept is conceptually aligned with the supply chain risk paradigm, i.e. supply continuity planning by Zsidisin et al. (2005b), who suggest that controlling risks at the supplier level is critical for firms wishing to avoid faultings in supply lines.(2) Secu rity-related partnerships.A nonher theme found in the security literature addresses the formation and maintenance of security-related supply chain partnerships. Sheffi (2001) posits that leveraging relationships with suppliers and governmental agencies is necessary to ensure against asset and product damage and thereby facilitate supply chain continuity. He proposes that supplier relationships should be construct both locally and globally, with higher tolerance for cost and lead-time requirements, in order to diversify supply risk.(3) Organizational adaptation.An additional emergent research focus deals with organizational adaptability as a coping response to potential or realized supply chain risks and crises. The literature broadly suggests that supply chain security-oriented firms take adaptative steps toward both securing supply chain assets and minimizing risk exposure.(4) Security-dedicated communications and technology.A final characteristic at the firm level is the imple mentation and usage of security/ risk-dedicated communications channels and/or security-facilitating or risk minimizing technology. Zsidisin et al. (2005a, b) state that the ability of the firm to manage information and knowledge, and to build continuously on the knowledge base, are imperative conditions for mitigating supply chain risk.In case of Mattel Toys Inc, risk came from the fact that about half of its toys are made in Mattel plants and about half are outsourced to vendor plants. Some of the problems came in when these vendor plants also outsourced to other vendor plants and again these other vendor plants outsourced, thus, making the supply chain very long or deep.The longer the supply chain, the harder it is for the foreign firms to keep track of who did what, when and the final quality of the parts or product (Lyles, 2008).The next section provides a security textile to deal with the past and unforeseen future risks in the complex supply network of Mattel Toys. They are suggested guidelines for marking, taxing and managing risk.Theoretical FrameworkThis section of the essay contains the overarching methodology for dealing with Mattels situation. For this purpose, the Supply Network Risk Tool put forward by Harland et al., 2002 has been practice sessiond. A diagram illustrating the entire methodology has been given below. This is followed by a justification for selection, and identification of shortcomings.(Fig4. Supply Network Risk Tool, Source Harland et al., 2002)Justification of the Theoretical FrameworkThe framework is built on earlier research and consists of singular frameworks for each section, thus evaluating the problem in detail. It provides a holistic view to assess the situation/incident and follows a definite sequence for mapping and implementing risk strategy. For disruption like that of Mattels recall in 2007 it provides a resilient approach for managing the risks involved in an efficient manner.Testing/ Expansion of the theore tical FrameworkThe Supply network risk framework consists of six sections which evaluate the overall situation of the organization in a comprehensive manner, and suggests solution accordingly. During the course of this expansion, Mattels situation is examine and simultaneously the framework is examined and later critiqued.Part 1- Map Supply Network The diagram provided below is a snapshot of Mattels supply chain from beginning to end that existed before the recall in 2007.(Fig5. Mattels Global Supply Chain, Source Barad, 2002)Identifying RisksRisks (table 1) within Mattels complex supply network commence been identified.Strategic risk (Simons 1999) rendering Affects business strategy implementationFor MattelNew technologies can render their products obsoleteSudden shifts in customer tasteskids are getting older younger (KGOY)toy retailers are consolidatingretail price is fallingSupply risk (Meulbrook 2000)Definition Adversely affects inward flow of any type of resource to enable o perations to take place also termed input riskFor Mattelincreasing customizationoutsourcing of operationsdisruption to the supplierquality problems, materials and parts shortages etcbankruptcy of supplier customer risk (Meulbrook 2000)Definition Affects likelihood of customers placing orders grouped with factors such as product obsolescence in product/market riskFor Mattel sac in customer buying patternShift in customer p reference pointsMore competitive products during demandOperations risk (Meulbrook 2000)Definition Affects a firms internal ability to produce and supply goods/servicesFor MattelFailed/ out-dated technologyLabour strikeDisasters and Natural CalamitiesReputation risk (Schwartz and Gibb 1999)Definition Erodes value of whole business due to loss of confidence.For MattelRecall historyFinancial risk (Meulbrook 2000)Definition Exposes a firm to potential loss through changes in financial markets can also occur when specific debtors defaultFor Mattel throw up in market sha reDevaluation of company share priceFall in credit ratingLegal Regulatory risk (Meulbrook 2000)Regulatory definition Exposes the firm with changes in regulations affecting the firms businessLegal definition Exposes the firm to litigation with action arising from customers, suppliers, shareholders or employeesFor MattelChanges in regulation and government policiesLawsuitsSupplier country legalities past these have been categorized into various types which have been used as a guideline to examine the risk (table 2) and consequences faced during their great product recall in 2007.Type of RiskIdentified RisksConsequencesCausesSupply RiskQuality relatedLead Paint ContaminationLoosely fitted componentsSupplier relatedFraud dumbfound DefaultRecall of products and associated costsLawsuitsRe-evaluation of suppliersSuppliers pulled out of marketincrease retailer controlDefective raw materials moving downstreamTrust deterioration discrepancy from quality standardsOutsourcing of quality contro l execrable transparency in Contract TermsPoor tractability of source of supplierFalsification of documents by suppliers drill of uncertified led paintDeviation from quality standardsImproper sub-vendor trackingFalsification of documents by suppliersImproper regulationOperations RiskDesign relatedUnfeasible magnet designRecall of products and associated costsCosts of redesign and RDFailed testing both in design and production stageFlawed RDCustomer Reputation RiskMarket relatedBrand ImageLoss in salesLoss in customer loyaltyUncertainty unfit consumer experience and accidentsHealth hazardsFalling consumer confidenceDecreased Brand LoyaltyAdverse impact on other productsLoss in revenueIncreased uncertainty in buyersHarmful productsBetrayal of customer trustDelicate target marketLegal Regulatory RiskPolicy lawsuit relatedLegislativeRegulatoryLawsuitsFine by CPSCLed to new and tighter regulationsDid not track their own standardsPolitical influence by stakeholdersFinancial Risk econom ical relatedDrop in share priceDrop in salesDrop in sales and revenueImplementation of 3-fold plan by MattelRetail pulloutRecall of productsMedia critique and bad publicityCustomer falloutStrategy RiskOutsourcing relatedVendor subcontractingSub-vendor quality controlDrop in product standardHarmed consumer baseAffected brand nameDropped market shareVendor subcontracting and consequently sub-vendor again subcontractingFlawed track of sub-vendor and sub-sub-vendor activitiesAssessing RiskIn this section a probability-impact matrix has been created to assess the impact of risk (mentioned in figure 3) on the supply network of Mattel Toys based on its probability of occurrence.High2,3,5,6,7,8,11,12,13, 18-23*Impact*Refer vermiform appendix ab for description of number1,4,10,14,15*ProbabilityLowHighThe matrix clearly shows that most of the major risks associated with its supply network lies in High Impact Low Probability and High Impact High Probability region. This matrix has been us ed as a reference to create another matrix (below) for a specific risk that Mattel suffered i.e., the great recall of 2007.HighFraud, Contract Default, Quality- Lead contamination, Design- Magnet component,Impact*Refer Appendix ab for description of numberBrand Image, Loss in sale, Loss in customer loyalty, Legal Regulatory, Drop in share priceLowProbabilityHighDuring this period, all risks had very high impact on Mattels supply network and caused setbacks and disruption which were hard to recover from.Managing RiskThere are a few ways in which Mattel can increase their capabilities of supply chain risk managementVisibility In order to properly assess supply chain risk and respond to events, visibility across the supply chain is required. This means that the supply chain risk management motherfucker mustiness be capable of integrating with, and object lessoning ERP analytics from, threefold disparate ERP systems, including systems supporting the supply and distribution nodes.Ev ent detection and liveing The sooner a supply chain disruption is recognized, the faster the response. An alert that shows up in e-mail or a portable e-mail device will ensure that the grab people are made aware of the event when it happens. Too many times, event detection is based on the event itself. To be truly valuable, alert should be triggered based on the anticipated impact of the event. For example, if a supplier goes out of business, but the loss of this supplier doesnt impact key metrics, an alert whitethorn not be necessary.Analytics The full suite of supply chain analytics needs to be modeled in the supply chain risk management tool to ensure the impact of a potential supply chain event is understood. When an event happens, analytics are used to model the event and determine the impact. Above all, these analytics need to be performed in real time, especially when responding to an unanticipated supply chain disruption. When an event happens, every second counts and a co mpany cant wait age or weeks to understand the impact or to determine resolution alternatives.Simulation Simulation is critical to both sides of supply chain risk management. When assessing the risks, simulation helps to model different risk scenarios. Further, simulation is used to model alternative mitigation strategies to ensure that they are sound. When responding to an unanticipated supply chain event, simulation is used to model and compare the various response alternatives.Collaboration The risk management team will need to evaluate several possible mitigation alternatives. Members of the team will likely not have the detailed knowledge necessary to explore all alternatives in the detail needed to develop a robust mitigation strategy. The ability to bring other people into the evaluation process is critical both to validate the proposed strategy and to propose key improvements to the strategy. Similarly when responding to an unanticipated supply chain event, collaborating w ith those with the detailed knowledge ensures that the response alternatives are reasonable.Scenario comparison in the process of developing mitigation strategies or responses, the team whitethorn develop multiple approaches that potentially resolve the problem, but in differing ways. The team needs to make a decision on which resolution or mitigation alternative trump meets the goals of the organization. One approach may extend lead times by 30 days, while the other may increase the cost of goods sold by 10%. The decision on which approach is best needs to be evaluated in light of corporate goals.Form collaborative supply network risk strategyTo be successful in todays aggressive toy market, retailers and manufacturers should drive lean and closely controlled supply chains. As the rate of promotional marketing and modern product launch continues to grow, companies are mostly caught between dynamic customer demands and comparatively fixed manufacturing and logistics parameters and limitations. Collaborative planning helps in dealing with supply chain issues. To improve supply chain responsiveness in Mattel, it requires shared visibility with suppliers and retailers into events happening now and in the future, while working jointly to resolve issues and problems meet delivery constraints.ImplementationTo keep up with dynamism of market demand and unseen risks, Mattel needs to implement its strategies for risk management in clear structured, and/or procedural way. According to Freedman (2003), strategy implementation should encompass order, commitment, ingenuity, management control and advanced execution skills. In Mattel, the Corporate Responsibility division should use this as a guideline for their advisory and research. Freedman (2003) also observed that moderating complexity is one of the core steps in strategy implementation. This is in regard to Mattels supply chain network which was complex and vendor mismanagement lead to one of their biggest recalls. It is recommended for Mattel, to train and educated their workforce to give care unanticipated risks in supply networks (Harland et al, 2002). Their workforce needs to be made more aware of the total inherent risks faced after the great recall and learn to identify such risks in early stages. They need to focus on current practices of risk management and evaluate if these are apt after the recall. Mattel needs to handle complexities within their supply chain network by increasing visibility in it. This can be achieved by examining risk at the level of the network rather than restricted view to just immediate vendors (Harland et al, 2002).. They need to increase access to and control of sub-vendors throughout the supply network. This in turn will help them to expose risks throughout their supply chain. Also they need to develop/upgrade their existing supply network risk strategy and bring it in-line with their organizational practices and the framework suggested here.The key to succ essful risk management implementation is by identifying two situations to respond to supply chain events (Source Kinaxis)An unanticipated supply disruption1And, an anticipated supply disruption by executing a mitigation strategyIn both cases, the main task is to alert on time that an event has occurred. Its difficult to respond to an event if you lack information on it. The supply chain needs to be monitored continuously. The practice of risk management from spotting risks, through choosing suitable risk management strategies, and then altering the structure of the supply chain is an information-demanding procedure (Source Husdal). This means it is very dependent on information sharing. The key activity then is to identify vital information signalling risk while filtering data.CritiqueThe model is critiqued to identify the shortcoming of the frameworkThe model is build upon existing model and does not provide any new technique to provide a total security solution .The model is sub jective in nature as the antecedent Harland et al, 2002, themselves pointed out that on categorization and identification of risk, the view of assessors assessing may be different.It may not always be possible for organizations to continuously examine risks and have strategic frameworks in positionThe setting up of collaborative arrangements in supply network and identification of risks and implementation of this in existing system may prove costlyAs the model is subjective in nature, there might be difference in opinion of the assessors on the rating of particular risk in the organization.ConclusionIn the wake of Mattels great recall in 2007, it is seen that their strategy for outsourcing brought about one of their biggest losses and led to brand tarnishing and major fall in their market value. Their response to this crisis was well-handled but this raised questions on how they foresee their risks and avert them?The suggested security framework draws a birds eye view of their supp ly network and asses risk at every level of their supply chain. It provides 6 key tools to asses risk and some effective steps to implement them. Later this framework is also subjected to self-critique but from a broader picture it can provide some key modification to the shortcomings in Mattels current strategy.Recommendation