Strategic analysis of global operations of supply chains

Strategic abbreviation of worldwide operations of readying duranceThe main objective of this study is to do a strategic analysis of the global operations of furnish kitchen range inwardly Mattel Toys Inc. Here its leave scope will be evaluated along with the hazards/ credentials threats it faced and a framework will be presented to neck these ventures.With growing return/ usefulness complexity, affix ne twainrks atomic number 18 also becoming increasingly complex in the wake of outsourcing and globalization. This has affected guessiness, changing it continuously. adventure can generally be termed as a probability of injury, hazard, damage or any different(a) unwanted outcomes. The Royal Society (1992) defined a more(prenominal) doctrinal explanation of bump the probability that a particular adverse answer devolves during a stated period of time, or results from a particular challenge.In this study, we will suggest a framework for future provision concate nation risk charge in the facet of Mattels mobilise in 2007. This reckon left a trail of media reports, public followup, investigations and huge lessons learnt.Mattel Toys Inc. is a global buy the farmer in the devise, manu featureure and marketing of miniatures and family merchandises. It comprises of top-selling brands such as Barbie, Fisher-Price brands etcetera Mattel is recognized as the 100 Most practiceworthy U.S. Companies by Forbes Magazine. (Source Wikipedia)In 2007, it follow upd a sequence of continuous alarming product recalls in which around twenty one million toys were pul lead 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 paint coming from unethical Chinese vendors was irrelevant as the subject field was subjected to high media critique and got highlighted for quality mis watchfulness and varied logistic practices in outsourced vendors. (Biggemann 2008)The table ( convention 1) below shows the toys recalled from Mattels respective vendors and their sub-vendorsIndustry experts suggest that Mattel is locked in a relationship with China having five factories and manufacturing thither for nearly 25 years. It outsources its outturn up to 50 percent 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 Commission (CPSC) admonishments. Its most controversial recall, up until 2007, involved 10 million Power Wheels toy vehicles. (Biggemann 2008)Below is a timeline depicting the describe events that took ramble during the play of this recall,Figure 2 Mattels product recall timelineThe result of this recall was catastrophic for Mattel and it lost more than 45% of sh ars in market value. Although gross sales at international markets helped it gain almost profit for that interval (Casey, 2008), yet these had actually little shock on their yearly figures as compared to its loss. The question now raised was How did Mattel end up in such a tricky situation? Is it a fiber of heavy neglect or something worse? It is argued that this was the result of Mattels flawed sourcing strategy. literary works ReviewToy industry is one of the oldest industries for creativity and extremely quicksilver(a) in nature. In the United States alone there are approximately 3 billion toys sold per year (Elsasser 2007). Toy sales label are nearly 22 billion USD (Strickler 2007). Figure 3 estimates the annual toy sales from July 06 June 07 which marked 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(p) to undersized and customized selling-openings and rapid product lifecycles. Toy demand and toy retailers demand are truly volatile and expect toy manufactures to be very market responsive precisel y most toy manufacturers serve with accomplished mass-production strategy which is very minimal in response and very repugnant to their strategy. Supply cyberspaces of such industries are growing into complex and dynamic interlock of varying relationships (Harland et al., 1999). Risk is escalating and its focal point is ever changing within the dynamism of tot up networks all due to outsourcing of come out operations foreign and also due to growing complexity of product/service life-cycle.Of tardily research has explored strategies to minimize risk in toy egress fetter and networks. genius of the main summations 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 positioning plays an important role especially in resourcefulness sharing, reputation management and terms of contract (Henders, 1992).To begin the research, a literary works search was undertaken w ith the intention of locating articles colligate to tack orbit security and risk. The search included all journals known to publish articles related to security, risk, and/or tote up chain management. Examination of the lit reveals four core expound that are consistently mentioned as vital for unwaveringlys seeking to maintain utile levels of security and in minimizing and/or managing make out chain risk.(1) Preparation and prep initiatives.A central stress of the supply chain security/risk literature is business and supply chain continuity planning. Zsidisin et al. (2005a) offer a four-step business continuity plan, including awareness creation, prevention, remediation, and association management, thought to be prominent 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 su ggest that controlling risks at the provider level is critical for firms wishing to avoid open frames in supply lines.(2) Security-related partnerships. other theme found in the security literature addresses the formation and caution of security-related supply chain partnerships. Sheffi (2001) posits that leveraging relationships with providers and governmental agencies is necessary to procure against asset and product damage and thereby facilitate supply chain continuity. He evokes that supplier relationships should be built both locally and globally, with higher gross profit for cost and lead-time requirements, in order to diversify supply risk.(3) Organizational ad minded(predicate)ation.An extra emergent research focus deals with organizational adaptability as a manage response to authority or realized supply chain risks and crises. The literature broadly suggests that supply chain security-oriented firms take adaptive steps toward both securing supply chain assets and minimizing risk exposure.(4) Security-dedicated communications and technology.A final feature of speech at the firm level is the employation 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 entropy and fellowship, 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(prenominal) 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 fractiouser it is for the foreign firms to save track of who did what, when and the final quality of the parts or product (Lyles, 2008 ).The adjoining prick provides a security framework to deal with the past and unexpected future risks in the complex supply network of Mattel Toys. They are suggested signposts for identifying, taxing and managing risk. hypothetic poserThis section of the essay contains the overarching methodology for dealing with Mattels situation. For this purpose, the Supply meshing Risk in like mannerl put forward by Harland et al., 2002 has been use. A plat illust pass judgment the entire methodology has been given below. This is followed by a justification for selection, and designation of shortcomings.(Fig4. Supply Network Risk Tool, Source Harland et al., 2002)Justification of the Theoretical manikinThe framework is built on earlier research and consists of individual 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 disrupti on like that of Mattels recall in 2007 it provides a resilient set out for managing the risks involved in an efficient manner.Testing/ Expansion of the theoretical 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 analyzed and simultaneously the framework is examined and later critiqued.Part 1- represent 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 obligate been identified.Strategic risk (Simons 1999) translation Affects business strategy implementationFor Mattel radical technologies can render their products obsoleteSudden shifts in customer tasteskids are getting old er younger (KGOY)toy retailers are consolidatingretail determine is fallingSupply risk (Meulbrook 2000)Definition unfortunately affects inward strike of any type of resource to enable operations to take place also termed input riskFor Mattelincreasing customizationoutsourcing of operationsdisruption to the supplierquality problems, materials and parts shortages etcbankruptcy of supplierCustomer risk (Meulbrook 2000)Definition Affects likelihood of customers placing orders grouped with factors such as product obsolescence in product/market riskFor MattelShift in customer buying numberShift in customer preferencesMore competitive products during demand trading operations 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 Mattel call in hist ory financial risk (Meulbrook 2000)Definition Exposes a firm to potential loss by means of changes in financial markets can also occur when specific debtors defaultFor MattelDrop in market shareDevaluation of political party share footingFall in credit rating ratified Regulatory risk (Meulbrook 2000)Regulatory definition Exposes the firm with changes in normals poignant 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 legalitiesThen these abide been categorized into various types which have been utilise as a guideline to examine the risk (table 2) and consequences faced during their swell product recall in 2007.Type of RiskIdentified RisksConsequencesCausesSupply RiskQuality relatedLead Paint ContaminationLoosely fitted componentsSupplier related posticheContract DefaultRecall of products and associated cost sLawsuitsRe-evaluation of suppliersSuppliers pulled out of marketincrease retailer controlDefective raw materials moving downstreamTrust deterioration bending from quality stocksOutsourcing of quality controlLow foil in Contract TermsPoor tractability of source of supplierFalsification of documents by suppliersUse 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 Image evil in salesLoss in customer loyaltyUncertaintyBad consumer experience and accidentsHealth hazardsFalling consumer confidenceDecreased Brand LoyaltyAdverse bear on on other productsLoss in revenue change magnitude uncertainty in buyersHarmful productsBetrayal of customer trust flabby target marketLegal Reg ulatory RiskPolicy suit relatedLegislativeRegulatoryLawsuitsFine by CPSCLed to sassy and tighter regulationsDid non track their own standardsPolitical influence by stakeholdersFinancial RiskEconomic 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 relatedseller subcontractingSub-vendor quality controlDrop in product standardHarmed consumer baseAffected brand nameDropped market shareVendor subcontracting and then 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.senior high school2,3,5,6,7,8,11,12,13, 18-23* impaction*Refer Appendix ab for description of number1,4,10,14,15* hazardLow hig hThe 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 used 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 ship canal 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 convey that the supply chain risk managemen t tool must be capable of integrating with, and postureing ERP analytics from, multiple disparate ERP systems, including systems supporting the supply and distribution nodes.Event detection and alerting The sooner a supply chain disruption is recognized, the faster the response. An alert that shows up in email or a portable e-mail device will ensure that the appropriate large number 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 may not be necessary.Analytics The full suite of supply chain analytics needs to be precedented 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 stupefy the event and determine the impact. Above all, these analytics need to be performed in real time, especially when responding to an out of the blue(predicate) supply chain disruption. When an event happens, any second counts and a company cant wait days or weeks to understand the impact or to determine resolution alternatives. role model 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 palliation 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 palliation alternatives. Members of the team will likely not have the detailed knowledge necessary to explore all alternatives in the detail needed to start out a robust palliation 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 with 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 may develop multiple approaches that potentially fragment the problem, but in differing ways. The team needs to make a finality on which resolution or mitigation alternative best meets the goals of the organization. One approach may extend lead times by 30 days, magic spell 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 innovative product launch continues to grow, companies are mostly caught mingled with 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 surrounding delivery constraints.ImplementationTo go by 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. harmonise to Freedman (2003), strategy implementation should encompass order, commitment, ingenuity, management control and forward-looking execution skills. In Mattel, the Corporate Responsibility division should use this as a guideline for their advisory and research. Free dman (2003) also observed that chair complexity is one of the core steps in strategy implementation. This is in regard to Mattels supply chain network which was complex and vendor distraction lead to one of their biggest recalls.It is recommended for Mattel, to train and educated their workforce to handle 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 end-to-end the supply network. This in turn will help them to expose risks end-to-end 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 successful 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 knotty 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 wh ile filtering data.CritiqueThe model is critiqued to identify the shortcoming of the frameworkThe model is build upon existing model and does not provide any cutting technique to provide a total security solution .The model is subjective in nature as the author 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 a nd 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 supply network and asses risk at any level of their supply chain. It provides 6 key tools to asses risk and some efficient 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