If you sell products – you need to be “Recall Ready”
Like it or not Product Recalls are a part of business life.
Are you ready to run your first recall?
If you are successful at selling physical products – there is a high probability that your business will encounter a recall at some stage. Poor recall implementation can kill your company; done correctly, your recall will be an opportunity to build brand value.
There are a number of reasons we are seeing an increase in the number of recalls being launched. Some of these are the negative side effects of some common and effective business practices including: rapid new product deployment, on-going cost out exercises and the use of Chinese manufacturers.
3 triggers for a recall are:
- Manufacturing process failure – a component is manufactured in a non-compliant manner, “breaking” the safety compliance eg incorrect plastic used so that it is not flame resistant and it should be.
- User Safety Incidents: end users have used the product in a manner that has resulted in harm to them or property, albeit not how you expected it to be used.
- Product Design Failure: resulting in potential harm to users or property
The 7 Tip Recall ready check list:
- Risk assess your product portfolio: Early detection of failure is the best way to minimise the impact of failure. Invest more on the Quality Assurance of your products that represent the highest cost of failure to you, including: total sales, cost of goods etc.Remember: Risk = (likelihood of failure) x (impact of failure)
- Minimise the size of a potential recall – Batch code every thing: Use a batch coding system in your manufacturing process. That way if you have a manufacturing failure, you can limit the number of products you need to recall by manufacture date/batch, reducing the expense of the recall.
- Include Recall provisions in all Supplier Contracts: Make sure your supplier/manufacturer contracts have explicate clauses covering your recall process. In particular, recovery of the costs of the total recall programme; noting that this will be over and above the purchase price of the goods.
- Make it easy/cheap to contact your end users: Regulators are pedantic about ensuring a “reasonable” percentage of the sold product are “remedied” in the recall programme. Your challenge will be to cost effectively notify your customers, especially 2+ years after sale. Where ever possible maintain a database of end-user contact details including email, cell phone, address etc. A social media audience is a great way of contacting customers at recall time. It will be too late to establish social media audiences and channels post recall triggering event. i.e establish your social media presence now – in the good times.
- Identify key suppliers prior to crisis: Initiating a recall is an intense time of activity. Establish some key supplier relationships now, rather than at the time of initiating a recall. Your list of key suppliers should include: Specialist Legal Counsel (that have relationships with your regulators), PR, Web and general IT development (for recall management and reporting systems), a specialist programme manager (if you do not have any one capable on staff).
- Assess and decide if recall insurance is appropriate or not: Depending on your business, recall insurance may be affordable or not. At very least review the appropriateness of this for your business.
- Document a Recall Process: Prepare ahead of time your recall process. Be clear on how you will execute a recall in your business should the event occur. Pre-think key decisions, considerations and what functions that will be involved in the recall process.
– How will you decide what is the appropriate remedy (repair, replace, refund)?
– Understand your legal rights as a supplier and how you can offer an affordable and reasonable solution to your end users and customers.
Break your recall process /project into phases:
This is part of a series of blog posts on “Product Recalls” and “Managing Chinese Suppliers”. The content of this new series is based on experiences learned managing: three major home appliance recalls inside 12 months, involving hundreds of thousands of consumer products sold in Australia and NZ.
PS: Mark is currently looking for his next General Manager role or a Consulting assignment in NZ or Australia. Contact him at: Mark@growthmanagement.co.nz