Product recall: what impact does this have on your production line?

Product non-compliance is one of the highest risks that your company can face. The scale of recalls is becoming more and more significant: production chains are more complex with globalisation, legislation is becoming increasingly global (European Consumers Product Safety and Market Surveillance Regulation, Consumer Product Safety Improvement Act in the United States, etc.) and technologies are more and more efficient in detecting production defects.

 
Requests for compensation in the event of product recall cost the manufacturing industry an average of €722,000, but can be as high as 10.5 million for the largest of these. And that is without taking into account the loss of profitability, productivity and reputation that follow a recall campaign.
With this article, identify the stakes and the consequences of a recall campaign on your production, and the measures to put in place in order to limit the risks:

1. Anticipate by foreseeing the traceability of your product
2. Manage your product return by organising a crisis unit
3.  Learn and improve once the crisis is over

1 - Anticipate by foreseeing the traceability of your product

To optimise the operation and the performance of your supply chain, it is necessary to carry out regular quality checks, and to trace your products at the various stages of manufacture. These checks should identify the malfunctions of your production lines, and should guarantee the compliance of the finished products to your customers' specifications.

Three conditions are essential to ensure a correct traceability:

•  Product identification at all stages of production: from the receipt of components to delivery to the customer
•  Product information management: acquisition, storage, operation and archiving
• Communication between stakeholders: suppliers, employees, and customers

IIt is recommendable to collect some information upstream and downstream of your production line, and not just internally. The following summary table shows you the different data to be kept up-to-date to be in compliance throughout the supply chain. This information will help you to prepare in the event of a product return campaign.

The effectiveness of your traceability system can only be verified by regular checks. Each check must show the non-compliant products that exist, and accurately track the number of products or pallets recalled and the time required for their recall. You can facilitate the management of the recalled batches by setting up a dedicated storage area.

For identification purposes, you can use a nomenclature that complies with the GS1 France coding standards for your sector. The identifier can be recorded directly on the product, its container, or any identification medium that will not be erased, or will not detach from the product.

For data recording, you can either use a spreadsheet (Excel, Numbers, Google Sheets, etc.), or a software solution. In the latter case, consider harmonising your system with those used by your suppliers and customers. These tools will need to be regularly audited to verify their suitability for your business.

2 –  Manage your product return by organising a crisis unit

What are the direct consequences of a recall campaign?

The notification of products having a safety risk can be made, either by consumers with the authorities of their regional department, or within the framework of the surveillance mission of the DGCCRF (General Directorate for Competition, Consumer Affairs, and Prevention of Fraud). Depending on the scale of the crisis and the sector affected, the DGCCRF and the government may take various measures against your company: segregation of products, suspension of sales, seizure or destruction of batches, etc.

Identifying the affected products and the malfunction in your production line will slow down your production rate, or even force you to close certain lines during the time needed to fix the problem. This investigation will impact many departments, including quality control and manufacturing.

It will also be necessary to coordinate with the customers from whom you have made the recall, and determine with them the necessary compensation for the damage suffered. If the items are simply damaged, can you repair them? Will you replace the defective products or simply refund the customer? In any event, you will have to use your internal resources.

The consequences of a recall campaign can be heavy for a company:

• Deterioration of the customer relationship and your brand image
• Cost of logistics transport to recover non-compliant products
• Reorganisation of product flows (differentiating between new items and replacement products)
•  Recycling or destruction of recovered products
• Production at a loss of replacement products
•  Impact of changes to the delivery schedule on delivery times

How to react to a product recall campaign?

When a non-compliance problem arises, it is necessary to act quickly, especially in this digital age. However, hasty decisions can cost you much more than the recall campaign itself. It will therefore be necessary to set up a crisis unit and to carry out training for this to be effective. According to the Product recall study: managing the impact of the new risk landscape, 70% of company recall plans are inadequate.

Ask yourself the right questions:

• What was the cause of the quality failure? How big and how serious is it?
• What information is available? Is it reliable?
• What are the actual and potential consequences?
• What are the necessary and available resources to contain the crisis?
• How are customers reacting to the crisis? And the media?

How to organise a recall campaign in 5 key steps :

1.  Planning: You must implement a recall plan with a clear definition of the roles and responsibilities of each person. Products must be traceable, and you must have carried out regular exercises to test your system
2.  Discovery: If a case of non-compliance appears, your company must act immediately and activate its recall plan
3.  Investigation: You may wish to use external consultants to find the malfunction of your production line. You decide yourself on the best solution.
4.  Communication: Your company must appoint a single contact to inform customers, intermediaries and the press. You must allow fast and reliable access to information about the crisis (press release, blog article, etc.), remain completely honest about the crisis, and do not limit your responsibility. Stick to the facts and do not forget to communicate the necessary information: product description, reasons for recall, how to segregate the product and what to do with it.
5.  Learning: You must make yourself aware of new non-compliance risks, and take the necessary organisational and technical measures.

3 - Learn and improve once the crisis is over

Recalling a product will disturb your supply chain and reduce your trading margins. However, managing the crisis is just as important as making sure your company gets back to production.

Feedback is necessary at several stages to draw concrete conclusions:

• Feedback immediately after the crisis (while the information is still fresh in the minds of the participants)
• Feedback a few weeks later (validating the lessons learned and setting up new methods)
•  Feedback several months later (assessing the real impact of the crisis and the opportunities that have emerged)

Many specialised firms and insurance companies can help you train your teams for crisis situations. Remember to test every facet of your production chain to identify weaknesses and correct them.

 Product defects are only one of the industrial problems which you can act upon. Other factors can be the cause malfunctions in your business. Take stock of your situation with our ebook, and improve the industrial performance of your company.

[1] PRODUCT RECALL : Managing the impact of the new risk landscape page 8