Product Recall In The Digital Era


Businesses today have witnessed a sea change, moving from the age of manufacturing, where the focus was on increasing productivity and reducing operational costs to the age of the customer. But with the changing trends there has also been a steep rise in the number of product recalls. The year 2015 witnessed the highest number of automobile recalls for more than one million vehicles including both cars and motorcycles, according to the Ministry of Heavy Industries, Government of India.

Ensuring quality and safety

Product quality and safety are the integral drivers for any brand. With the advent of social media platforms, organizations have plethora of options to promote their products and services, keep their customers engaged and build customer loyalty. The internet, mobile and social media has allowed easy dissemination of information but with the rise in the number of product recall incidents this could have a flip side. The case of Mercedes in 2005, when drivers resorted to a protest campaign on internet, company had to recall 1.3 million vehicles.

The impact of incidents like product recalls could be fatal on the company’s brand image and on the financial sheet as well. According to a research done by Rhee & Haunschild in 2006, in a severe recall a lesser known automaker brand would lose 1.6 per cent of its market share whereas a known automaker brand would have a 2.9 per cent decline in its market share.

With globalization, businesses have become widespread and regulatory compliances concerning product safety have become stringent, each country has its own sets of laws and regulatory bodies dealing with product safety. In the United States for example, there are six Federal agencies which regulate defective, unsafe or hazardous products. They have a website portal which has all the information for the US government recalls. Customers also have hotlines and websites to report complaints of any defective product. Post the significant Maggi controversy, Food Safety Standards Authority of India (FSSAI) aimed at setting up new regulations for better quality standards.

In a Harris interactive poll, in case of a food recall, 55 per cent consumers indicated that post recall they would switch brands temporarily, 15 per cent would never purchase the recalled product and 21 per cent would avoid purchasing any brand of the manufacturer of the recalled product. There has been a rapid increase in the number of product recalls in recent years. Below are some statistics indicating that manufacturers are at a risk despite the efforts they put in product safety and quality. 

In the automobile sector, Maruti Suzuki India encountered its biggest recall in May 2016 recalling 75,419 units of its top selling car Baleno and 1961 units of the Swift DZire variant

In food, The ban of Maggi by FSSAI resulted in a whooping $50 million worth of noodles and 400 million packets to be destroyed. The trend continued with FSSAI banning branded beverages from Monster Energy India Private limited and Akoaroma Company. Also a recall of three energy drinks from Hector beverage Private Limited added to the list.

Prevention and Cure 

With the upsurge in the recall statistics and stringent regulatory norms the case for focus on safety issues is undeniable. It is vital that organizations have systems to ensure continuous quality monitoring right from step one. This calls for systems which can handle ad-hoc incidents. Can your systems do it?

With the growing need for contextual information and handling unstructured processes there is an upsurge for Case Management systems. Case Management systems based on your BPM and ECM systems, provides your core systems with an agility layer and supports end-to-end management in pre-recall and post-recall cases. They enable the organizations to handle exceptions as they come by offering flexibility in designing the processes.

Timely Prevention: Time is of the essence in such cases. If continuous complaints or incidents are recorded about a product, timely action should be taken to avoid a recall. Every organization has a preventive strategy which generally includes supplier audits, site security reviews, promote TQM and product testing, create recall plan and manuals. Case management systems based on BPM and ECM platforms assists in developing recall plans based on the past case trends, product testing by recording any deviations from the set SLAs, continually monitor processes, field safety inspection and reporting.

Counting the costs: In case of a recall, it is imperative to inform stakeholders about the type of recall and the scale of response. A recall is a very cost intensive process. The direct cost heads included in a recall are of logistics, repair and replacement, investigation, business interruption and re-engineering cost. Besides these there are various indirect costs which the company bears like competitors gain your market share, reduced sales of other products and less favorable terms with distributors.

In 2010, Toyota’s used cars and trucks were priced nearly 40 per cent higher than competitors; post-recall it shrunk to 20 per cent. Case Management systems allows you to collaborate and communicate across multiple parties. It also ensures that you have complete visibility throughout the recall process, gain operational intelligence and manage you costs effectively.

Post-recall recovery - Post-recall it is imperative to gain customers trust back in the brand. Taking the ownership and acting fast are the best ways to save your brand from further damage. While claims settlement and repair expenses are also to be taken care of. The major steps post recall are product reintroduction and customer response monitoring.

Post-recall users can generate ad-hoc reports and identify the root-cause. Also with the ability to view the past trend records across organization and case patterns, recall impact can be reduced. The user can view a unified case file which would present him with all the information about the product life cycle empowering him to take optimal decisions acceptable by all.

Businesses need a robust system to continually monitor customer response across social platform and handle exceptions as they come. Systems which acknowledge the complaint received, resolve and identify the root-cause to prevent such product failures are needed.

For companies to be customer centric, it is essential to provide them with the best quality products which needs the best of class raw materials, extensive quality testing and continuous collaboration across suppliers, retailers and other stakeholders. Case Management systems based on the BPM and ECM platforms helps you to accomplish such important tasks seamlessly.