If the world ran like Dunder Mifflin Paper Company from The Office, product recalls would be limited to obscene watermarks on 24-pound cream-butter stock paper. Unfortunately, recalls are not usually caused by disgruntled employees on the line, but by larger issues in the supply chain.
Many studies have shown an upward trend in recalls across multiple industries. Recalls receive varying degrees of public attention, with the impact of failure being the primary determinant. A report on FDA medical-device recalls between 2013and 2018 shows a steady increase in both Class II and overall device recalls.
Recalls cost the food industry billions annually, not only from logistic point but arguably more importantly from reputation damage. A 2019 Time article showed US food recalls increased by 10% between 2013 and 2018, with a peak of 905 in 2016. Class I recalls of meat and poultry rose by 83% during the same time. The auto industry also recorded the highest number of recalls in the US in 2018, with 341 light-vehicle recall safety campaigns and 28 million vehicles affected.
What is fueling automotive recalls?
Many factors are contributing to this, with the biggest three being:
- The complexity of cars is increasing, particularly as software and electronics operate more of the systems, increasing the chances of a systems failure.
- Car parts are increasingly designed to fit multiple brands and models, so when one part fails it affects more than just one type of car.
Some manufacturers have moved to streamline costs and increase profitability and, as a result, have reduced quality assurance budgets by up to 50% since 2008.
The National Highway Traffic Safety Administration (NHTSA) itself is limited in both authority and resources. In a 2015 interview with Consumer Reports, Mark Rosekind, head of NHTSA, claimed he had only seven to nine people to investigate the 77,000 safety complaints raised in 2014 and 16 investigators for defect investigations.
The benefits of a proactive recall strategy
Some companies continue to under appreciate the total value of a proactive and finely tuned recall process. A Harvard Business Review study assessed the strategies and results of several companies and found that, when product recalls are handled properly, a company can not only minimize damage but also find opportunities to reap unexpected benefits.
For example, Saturn had responded proactively, diligently, and with a personal touch to a front-seat recline recall. It voluntarily recalled almost 1,500 cars and contacted all customers via an overnight delivery service. It then launched an advertisement that featured a Saturn representative flying to Alaska with a replacement seat to demonstrate its commitment to the customer.
Black & Decker is another example of acting swiftly in response to a recall and experiencing positive business impacts. Its near-immediate commitment to a 100% return rate on a product that could catch fire and its diligence in achieving it could be a case study in customer relations done right. Not surprisingly,
subsequent customer research confirmed its high-touch and targeted recall campaign generated customer goodwill.
The recall to action
Product recalls will continue to be an ongoing and significant threat to brand value and company performance. Most importantly, a company’s ability to respond well to a product recall can turn a potentially terrible outcome into a better customer experience.
Brands must be ready to react and communicate when recalls happen but, all too frequently, recalls are managed with highly manual processes and spreadsheets. This is no longer a viable approach in 2020.
So, what can companies do? They must first understand the challenges, assess possible solutions, and then plan for a better-managed future. I will cover those topics in the next three blog posts in this series. Stay tuned.