Lessons Learned from High-profile Product Recalls

March 4, 2011
Brands that can rely on a comprehensive and fully vetted plan will avoid costly financial mistakes.

Few things can hurt a brand more than a faulty product warranting a recall. Whether it's mandated by the government or on your own volition, the damage to an organization's reputation is unavoidable and immediate.

As the economy gains steam, organizations are working fast and furious to outperform competitors. The pressures of a global marketplace have brands fighting for shelf space and consumer mind share. Meanwhile, investors are clamoring for ever-improving financial performance. Some might suggest that businesses have lost sight of a commitment to delivering quality products.

The fact is, no reputable company deliberately sets out to make products that don't perform as they should -- that would just be bad business. But it does happen.

2010 was riddled with recalls from some of the largest brands in the world; just Google Toyota and quality. You'll almost certainly come across headlines calling out the sticky accelerator pedals that forced one of the largest car manufacturers in the world to recall more than 5.3 million vehicles.

Electronics giant, Sony, recalled more than half a million of its Vaio laptops for overheating issues. Its competitor, Toshiba, announced the recall of 41,000 Satellite T-model laptops worldwide because of potential overheating problems as well. Global GPS technology provider, Garmin, recalled 1.25 million GPS devices for overheating and exploding batteries. Mobile phone supplier Nokia replaced 46 million batteries for overheating issues in 2007.

It seems like every day, we see product recall announcements. Some may remain discreet but others are front page news for weeks and months on end.

So what can we learn from past recalls?

Be Prepared
Mistakes happen, but the brands that can rely on a comprehensive and fully vetted plan will avoid costly PR and financial mistakes. Since accuracy and speed is at a premium in these situations, having a plan enables you to effectively manage internal and external communication. Like any risk mitigation plan, this comes with understanding and preparing for risk scenarios before they occur.

Find out ahead of time how good your visibility is into components from all of your suppliers. How long is it going to take to set up a Web page with recall information for your customers or staff a multi-lingual contact center? What is it going to take to set up replacement product fulfillment operations?

Answer these questions, formulate a plan and stick to it.

The specifics of a plan will vary by company, but should include the following elements:

Ensure you have an Audit Trail
First and foremost, you must take an active role in managing quality standards for every component that goes into your products. But when faulty components do enter your manufacturing processes, audits make it possible to systematically link forward and backward to determine the ripple effect. Specifically, if you find out a component batch is faulty; you can trace and isolate the products that contain the malfunctioning parts. Likewise, if you know what components went into a product under recall, you can analyze and isolate the component causing the problem. In a recall situation, this capability can mean the difference between a generic and product-specific recall, as well as the ability to potentially isolate a problem to a specific batch of products that may not have even made it to market.

Identify Key Stakeholders and Information Requirements
When a risk event is triggered, it's important the key decision makers are already identified and have a pre-established communication protocol in place. The plan should outline how the stakeholders will communicate and the best format for those discussions to take place -- whether in person, via conference call or Web meeting. What is the key information that stakeholders will need and how will that information be shared? This type of clarity accelerates the collection of relevant data for decisive action.

Agree on a Communication Plan
The success and failure of a product recall depends to a large degree on how you manage internal and external communication. There are multiple audiences to consider, including employees, suppliers, channel partners, end customers and the press. While the specific messaging might vary in each recall situation, responsibility for message development, documentation and outreach to each audience should be clear in your plan. Social media can significantly complicate product recalls -- be prepared to answer questions when and if they come up. Relevant feedback from these channels should be fed back into the decision-making engine of the communications process to allow messaging to be updated as the situation demands.

Establish Customer Recall and Fulfilment Operations
Not all product recalls involve direct returns and shipments to end users, but those that do demand an integrated infrastructure. Areas to consider include Web support for things like recall product validation, logging product return requests, and tracking replacement orders. Physical return and resolution centers may be necessary in multiple geographies along with financial processing capabilities in situations where there is a refund element. Furthermore, the need for multi-lingual customer support across all channels should be considered to account for customers in all regions. Customer support strategies should be set to answer customer questions and re-enforce brand communications under any circumstance.

Risk vs. Cost and Finding a Comfort Zone
While many companies will have elements of this infrastructure in place, pulling everything together in an emergency timeframe is going to hinder the effectiveness of your response. It's important that a skeleton infrastructure be maintained, though enlisting the help of an external global services company to maintain infrastructure readiness may be a greater use of resources to ensure a company is ready to tackle it all.

When it comes down to it, companies will find their comfort zone on the spectrum of preparedness based on their own assessment of risk versus cost. The most significant investment will come in the prioritization of time and resources rather than in incremental costs.

For many, these will be plans that never need executing. For those who receive that dreaded call from a supplier or company engineer, however, it could be the difference between a proactively managed customer brand experience and a public relations nightmare.

Lorcan Sheehan is senior vice president, Marketing & Strategy for ModusLink, a designer of supply chain management, aftermarket and e-Business solutions.

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