Taking a Proactive Global Approach to Product Recall and Replacement

by Sunshine Farzan, Harte-Hanks

Reverse Logistics Magazine, Nov/Dec 2007

It can happen to any manufacturing company, national or global, of any size, for any reason, at any time. A product recall, whether voluntary or not, can send costs skyrocketing and revenues plummeting simultaneously —and instantly. How a company manages a recall, and recovers from it, depends greatly on its ability to execute under fire. Urgency, empathy, safety all must be communicated—and program management needs to be prompt, courteous, respectful, and professional. A product flaw cannot be compounded by flaws in the actual execution of the recall itself.

The logistical challenges of a recall are huge. Moreover, when product recalls and replacements are global, the challenges companies face are significantly magnified. While meeting the challenges may seem daunting, the downside of failing to meet them can be huge, if not catastrophic.

With product recalls viewed rightly by many businesses as unfortunate but inevitable, it is critical for all to have a comprehensive contingency plan for dealing with a recall when, not if, it occurs. Given this perspective, the best time for developing recall strategies, processes, and procedures is when there is no urgency or crisis at hand. Preparing such a plan also can be seen as important due diligence in the eyes of regulators.

Developing a Global Product Recall and Replacement Solution (GPRRS)

Having a Global Product Recall and Replacement Solution (GPRRS) helps a brand manufacturer manage and master all of the logistical and communication challenges of a product recall worldwide by tapping and utilizing end-to-end global capabilities, from communications and marketing to innovative database management and fulfillment.

1. Identify faulty product and notify customers

When a product that warrants a recall has found its way into the marketplace, a company must identify product units and supply chains affected and direct the first external communications to customers. It must also notify trade partners, trade press, and others including, in some instances, regulatory officials.

Ideally a manufacturer will want to recall and possibly replace 100% of the units known to be affected and 0% of the units known to be unaffected. Sorting through and differentiating affected from unaffected takes diligence and often depends upon the organization of a company's production documentation. For obvious reasons, where uncertainty exists, companies should err on the side of caution and make decisions based on the severity or the harm of the defect. At the same time, a manufacturer cannot afford to be too conservative – it will want to avoid, for example, having to recall millions of units if it is certain that only 50 units actually have a problem, unless, of course, public safety is in question.

Say 15 plants manufacture the same item. It becomes crucial to know when and where a few defective items originated. This kind of production information often is contained in trackable codes stamped on every single unit manufactured. Once affected units are identified, a GPRRS helps to identify the customers who have those units in their possession. Consider the information sources that should be incorporated into any GPRRS: the warranty registration database; the internal company database; supply chain information; and channel partner databases (agents, retailers, resellers, etc).

Each of these sources may include customer contact information vital to access for notification. In addition to interacting promptly with these specific gatekeepers of customer data, integrating data from these sources as appropriate to extend a targeted recall communication, a manufacturer also may wish to deliver a more strategic message to the larger universe of existing and potential customers, assuring them that the company is on top of the situation and demonstrating corporate responsibility. At the very least, however, a GPRRS needs to employ these channels to ensure customer awareness: direct mail customer notification letters with detailed instructions; e-mail customer notification messages with detailed instructions; and press releases with references to recall instructions.

2. Stop the supply chain flow of a recalled product

Concurrent with a manufacturer's notification efforts, it must keep any additional flawed units from finding their way to end-users' hands. A company should install a framework to remove affected items from distributor inventories as well as a company's own inventory, remove (and return) affected items from retail shelves, and institute quality control measures to verify proper removal of product.

3. Provide detailed instructions to the end user

Providing recall details can affect relations with consumers and business customers negatively or positively. The GPRRS should be designed to help ensure that this critical communication works to a manufacturer's advantage with its customers by reinforcing a commitment to quality and responsibility at a time when the flaw itself might call such commitment to question. Such commitments can appear hollow if the communication comes across as callous or disingenuous, or in "legalese," or in any tone that diminishes clarity.

Detailed, understandable instructions communicate how to return defective items and manage consumer expectations about next steps. Will the customer receive a refund, a replacement, or a repair? How long will it take to process? What if neither the defective unit nor a receipt is available to the customer? In what ways can customer confusion and inconvenience be minimized? How will the distribution channel be engaged in the recall process from an execution as well as a primary information source?

If retail partners are involved in the recall, a GPRRS helps a brand prepare with recall-related literature and signage at channel locations, as well as training for appropriate channel location personnel.

Another aspect of customer (and partner) communication is to establish or engage toll-free call and contact centers with highly trained representatives who can anticipate and answer likely questions. Communicating with customers worldwide can be a real challenge. Call centers need to be multilingual whether the recall's geographical footprint is national or global. Even when a recall is local, questions may originate anywhere the brand in question circulates. Contact centers worldwide need to be ready.

Similarly, a manufacturer needs to be ready with a multilingual Web site (or pages within a brand site) with extensive links to a company's information systems to capture important data and to process product recalls and replacements efficiently. Such systems incorporate matching capabilities to cross-reference recalled or replaced products against the company's database using serial numbers or some other identifiable tracking code.

Making the Customer Whole

Whether the recall involves repair or replacement, a comprehensive GPRRS has processes that work together efficiently and seamlessly in the eyes and experience of the customer.

A GPRRS helps maximize efficient operations by ensuring that the right product goes to the right locations. Defective units must be received and stored, and replacements may have to be shipped. Care must be taken in selecting warehouse locations to minimize shipping costs and delivery times. In the case of global recalls, having distribution operations in affected countries helps minimize customs issues as well as shipping costs. Finally, a GPRRS provides manufacturers with an effective fraud prevention system for protection against consumer and business customer fraud and abuse.

Special Considerations for Global Recalls

Logistical and communication challenges are compounded if the affected product is distributed internationally. Among them:

• Language: A GPRRS helps ensure that inbound and outbound communications account for the languages in which customers and partners speak. This applies to outgoing direct mail, e-mail, and press releases as well as interactive communication channels such as call centers and Web sites.
• Replacement products: A comprehensive GPRRS ensures that a configured replacement product conforms to international variations in specifications such as those of electrical and other systems.
• Inventory management: Rarely would a larger manufacturer want to distribute a replacement product directly from a single manufacturing point worldwide to end users in foreign markets. Additional shipping and insurance costs as well as the potential complications at customs offices make distribution expensive and problematic. A GPRRS optimizes global replacement logistics by placing distribution functions within the destination countries/geographical regions.

Any product recall has the potential to devastate brand equity and a company's bottom line. By properly preparing a Global Product Recall and Replacement Solution – and putting in place know-how, resources, and expertise to see such an effort through – a manufacturer can take a stressful situation and manage it well under fire. Recalls are complex and untimely, but they are unfortunately a part of business – and responsible companies plan for these occasions to protect their brands.

Reverse Logistics Magazine, Nov/Dec 2007