The risks to business are becoming more diverse and increasing every day. One of the best known risks is a product recall. In fact, no company is safe from a product recall! Neither the small ones nor the multinational ones!
Despite the quality delivered and the efforts to perfect a product to the maximum, product recalls around the world continue to persist in our daily lives in an abrupt and unintentional manner.
Therefore, it seems crucial to first understand the context of a product recall to clarify its abrupt appearance and to examine its course to eliminate any ambiguity.
Product recall: Definition, features and process
What is a Product Recall?
A product recall: is the process of organising the return, replacement or repair of a product that was questioned as a result of a quality, manufacturing, technical, or safety defect affecting the health or safety of consumers.
Before delving into the subject in advance, many of us confuse a product recall with a product withdrawal. First of all, there is a slight difference between a product recall and a product withdrawal.
The difference between a product withdrawal and a product recall
Once the failure of certain parts or the non-conformity of a product's health or safety nomes has been highlighted, product recall or withdrawal comes into play in the life cycle of a good at very specific moments:
- Before marketing, on the shelves, in the shops' warehouses, a market withdrawal takes place on products not yet sold.
- The aim of a product recall is to remove the affected items before they are offered for sale to the consumer.
- Post-market, in shops, at consumers' homes: a product recall occurs to repair or replace an unreliable good.
- Purpose of a product recall: to bring back to the store non-conforming products already sold owned by end-users and have customers reimbursed in a predefined way (monetary refund, repair, replacement with a new one)
Companies tend to put a lot of emphasis on pre-study and pre-testing of products to ensure that they are "zero-defect" in the market. But the evolution of competitive quality as well as consumer expectations puts many products in question whether it is because of a real problem (technical defect, danger...) or a strategic problem (inferior quality compared to the competitor and or to the customers' expectations).
To deal with this sudden risk, you need to have at least a basic understanding of how a successful product recall works.
Product recall process
Indeed, when we say recall, we mean product recall campaign. The word "campaign" designates a set of operations carried out more precisely a process.
Before getting into the process description, let's keep in mind these two aspects that a product recall is:
- Is governed by law; it is a legal obligation before it is a managerial obligation regardless of the type of product sold. Regardless of the legal specifications of each country, any company that evades this obligation will be subject to legal action.
- Is a linear process, in most situations these steps differ in their conduct depending on the type of product, but can be communicated, operated, repeated and revised at the same time.
A product recall can be presented in 5 stages:
01. DETECTION OF RECALL REQUIREMENT:
This is not really a first step but it is the trigger point. Whether due to customer complaints, supplier quality control, inspection or other reasons, the discovery of a defect in a good forces the company into a product recall process.
First, an investigation must be launched in this direction, in order to discover the origin of defects or complaints in the first instance and take preventive and corrective measures in the second.
02. PRODUCT RECALL STRATEGY
Secondly, once the company has demonstrated the obligation of the product recall, the team nominated to manage the fact must develop a product recall strategy that includes:
- The risks to the company.
- The risks incurred by the client.
- An assessment of the scope of the recall.
- Identification of the target audience to be informed of the recall.
- Communication frameworks.
- How to inform consumers who are not easily identifiable.
- Establish a tracking system (traceability of the product to the consumer and distributor).
- The speed, timing and frequency of communication.
- Preparation of reports and papers relating to legal and regulatory requirements.
- Identify ways and means of dealing with the recall.
When developing the strategy, the company defines the primary axes, chooses the right moment to launch the product recall campaign and reports the fact to the responsible legal structure such as DGCCRF in France.
03. PRODUCT RECALL COMMUNICATION:
Thirdly, this is the time when the company must warn its consumers as well as its suppliers. The recall alert is on two levels
- Partner, supplier and distributor alerts: thanks to the monitoring system established during the strategy, the company defines any stakeholder who may intervene during the product life cycle. Thus, traceability helps to define the batch and characteristics of defective products and therefore the target suppliers to alert. In this way, the company can collect data from the end consumers of its suppliers in order 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: on the one hand, the known target; the one we have their names, addresses, telephone numbers and on the other hand, the unknown target those users who are passing through and we know absolutely nothing about them.
Because this target is somewhat vague, companies tend to prepare in-store posters, communicate about the recall on radio and send out mailings to reach the known target as well as the unknown. This communication presents the product: name, brand, bar code and describes the solution offered such as replacement, repair, refund or any other solution.
04. OPERATIONAL EXECUTION:
Finally, the company organises the operational process (the procedure for repair, reimbursement, replacement, etc.) of the product recall by calling on several teams: logistics, maintenance, compliance, repair, etc.
The operational process differs according to the type of product, the solution offered and the customer. Therefore, different operating modes apply between end consumers, distributors and partners.
Generally, the company tends to warn and remove its products from distributors' shelves first in order to limit the distribution of the unreliable product.
05. EFFICIENCY ASSESSMENT
Finally, the company must evaluate the entire process. In fact, the company responsible for the defective good must carry out the recall in a timely and efficient manner.
For this reason, feedback and reporting must be put in place on a recurring basis to guarantee the effectiveness of the process. The aim of this step is to ensure that corrective, control and re-compliance measures prevent the process from repeating or failing.
Evaluating effectiveness is a step that may seem obvious after a long process requiring a lot of resources, commitment and organization, but it remains the cornerstone of a product recall. Because neglecting this step can land the company in much worse trouble, a product recall can be considered among the most costly managerial processes.
Indeed, communication based on radio broadcasts and mailings and other processes can be very costly. Did you know that a product recall at SPANGHERO cost 500,000 euros? The expenses include the costs of the recalled products, the costs of crisis management as well as business losses. And these are not the only costs associated with a product recall, the logistics costs can be incredibly high.
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In fact, financial losses are not the only capital at risk. Also, "brand" capital encompasses customer satisfaction, brand image and partner trust puts the company in a weak position during a product recall.
In conclusion, we invite you to discuss an important question: "Is a recall a real threat or an opportunity?" which will be the subject of our next article.
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