The risks threatening companies are diversifying and increasing every day. One of the most known risks is a product recall. Actually, no company is immune to a recall! Neither the small ones nor the multinational ones!
Despite the quality delivered and the efforts to improve a product, recalls around the world continue to persist in our daily lives in an abrupt and involuntary manner.
Therefore, it seems crucial to understand, the context of a product recall to clarify its abrupt appearance and to examine its process.
Product recall: definition, characteristics, and process
What is a product recall?
A product recall: is the process of organizing the return, replacement, or repair of a product that was called « defective » due to manufacturing, technical defect, or any other defect affecting safety or consumers’ health.
Before going in-depth in the subject, many of us confuse the product recall with the withdrawal. It should be noted that there is a slight difference between a product recall and a withdrawal. In the next paragraph, we shall discuss the difference between both of the concepts.
Difference between a withdrawal and a product recall
After the identification of certain parts’ failure or non-conformity of health or safety standards in a product, the withdrawal or the product recall is imposed in very precise moments:
- Before merchandising: on the shelves, in-store warehouses. A market withdrawal occurs on products that are not yet sold.
- The objective of a product withdrawal: to remove the objects concerned before the sale to the consumer.
- After merchandising; in stores, on the market, in the possession of a final consumer. A recall occurs to repair or replace an unreliable product.
- The objective of a product recall: report non-compliant products already sold or owned by end-users to the store to offer them reimbursement.
Businesses attach great importance to pre-study and pre-test of their products to ensure that they are “zero defect” on the market. But the evolution of competitive quality, as well as the consumers’ expectations, puts a lot of products into question.
To deal with this sudden risk, you must have at least a basic knowledge of the sequence of a successful product recall.
Product recall process
Indeed, a product recall means a product recall campaign. The word “campaign” refers to a set of operations more precisely a process.
Before going into the description of the process, let’s keep in mind these two aspects about a product recall:
- It is governed by law; it is a legal obligation before being a managerial obligation regardless of the product sold. Whatever the legal specifications of each country, any company that dodges this obligation will be a subject of legal action.
- it is a linear process, in most situations, these stages differ in their conduct depending on the type of the product, but can be communicated, operated, repeated, and revised at the same time. A product recall is governed by law; it is a legal obligation before being a managerial obligation regardless of the product sold. Whatever the legal specifications of each country, any company that dodges this obligation will be a subject of legal action.
A product recall can be presented in 5 steps:
01. Detection of the need for recall:
Whether it is due to customer complaints, quality control, inspection, or others, the detection of an anomaly in a product obliges the company to enter into a product recall process.
Firstly, an investigation must be launched in this direction, in order to discover the origin of the faults or complaints first and to take preventive and corrective measures secondly.
02. Development of product recall strategy:
Second, once the company has demonstrated the obligation of this fact, the team nominated to manage the process must develop a product recall strategy that includes:
- Risks run by the company
- Risks run by the client
- Recall scope’s assessment
- Identification of the target who must be informed of the recall
- Communication frameworks
- Identification of the communication method that informs consumers who are not easily identifiable
- Establish a monitoring system (product traceability to the consumer and the distributor)
- Speed, date, and frequency of communication
- Preparation of reports and papers relating to legislative and regulatory requirements.
- Identification of methods and solutions to deal with the recall
- Identification of methods and solutions to deal with the recall
By developing the strategy, the company defines the primary axes of the product recall, chooses the right time to launch the campaign, and reports the fact to the responsible legal structure such as DGCCRF in France.
03. Communication of the product recall:
Third, This is the stage where the company must warn its consumers as well as its suppliers. The recall alert is carried out on two levels
- Partner, supplier, and distributor alert thanks to the monitoring system established during the strategy, the company defines any stakeholder that may intervene during the product life cycle. Traceability helps to define the batch and characteristics of defective products, therefore the target of suppliers to be alerted. And so, the company can collect data on the end consumers from its suppliers to warn them.
- Consumer alerts: depending on the type of product, end consumers remain the most important target of a product recall because generally, it is their health, safety, or even lives that are threatened.
This target can be split into two:
- the known target that the business has their names, addresses, telephone numbers.
- the unknown target those users who were just passing through when buying the product and we know absolutely nothing about them.
Therefore, companies tend to prepare store posters, communicate on the recall during radio broadcasts, and send postal mail to reach the known and unknown target. This communication presents the product: name, brand, barcode, and describes the solution offered, whether replacement, repair, reimbursement, or any other solution.
04. Operational execution:
Following the solutions proposed during the communication of the product recall, the company organizes the operational path (the repair procedure, reimbursement, replacement, etc.) by calling on several teams: logistics, maintenance, upgrading, repair…
The operational process differs according to the type of the product, the proposed solution, and the client. In this context, there are still some differences in operating mode between end consumers, distributors, and partners. Generally, the company tends to warn and remove its products from the shelves of distributors first to limit the merchandising of the defective product.
05. Evaluation of effectiveness
Finally, the company must evaluate the entire process. In fact, the company responsible for the defective merchandise must complete the recall in a timely and efficient manner.
This is why control and reporting must be set up in a recurring manner to guarantee the effectiveness of the process. The objective of this step is to make sure that the corrective, control, and compliance measures prevent the repetition or failure of the process.
Evaluating effectiveness is a step that seems to be obvious after a long process requiring a lot of resources, commitment, and organization, but remains the cornerstone of a product recall. Because bypassing this step, the company can fall into a non-compliance that was not taken into account during the strategy and can generate much worse and too costly risks.
A recall can be considered among the most costly managerial processes. Radio communication, mail sending, and other methods can be very expensive.
Did you know that a product recall at SPANGHERO cost 500,000 euros? Expenses include charges for recalled products, costs related to crisis management, and operating losses. All of that, without even mentioning the logistics costs, which can be incredibly huge.
Conclusion
In fact, financial losses are not the only capital at risk. “Brand” capital, including customer satisfaction, brand image, and partner trust, puts the company in a weak position while a such a critical period.
In conclusion, we find it crucial to discuss an important question “is a product recall a real threat or an opportunity?” Which will be the subject of our next article.