By Patrick Avenell
It’s the phone call that strikes fear into every supplier. A consumer has just been burnt using their toaster, a retailer is being abused for selling a faulty dishwasher, an advocacy group has found a flaw in your efficiency claims — and now the product in question has to be recalled.
A look at the ACCC’s dedicated product recall website shows that despite the ‘cheap and cheerful’ tag, it is not unknown or fly-by-night brands undertaking the most recalls, but rather established and respected brands, including, but certainly not limited to, LG Electronics, Dyson, Netgear and Sony, dominating these pages.
Whatever the reason for a recall, it is a costly and complicated exercise. According to a 2004 study by the Department of Finance the University of Melbourne, around 25 per cent of Australian businesses will not survive a recall.
This report further noted that in many of these cases, it was systemic deficiencies in the supplier’s business model that allowed a recall to escalate to a crisis, with the author Les Coleman saying that in hindsight this is often apparent.
To avoid a product recall causing unnecessary damage to a business, suppliers and retailers need to have a plan in place to deal with the aftermath, according to Marcel Sieira, general manager of business development at GS1 Australia, a not-for-profit standards organisation.
“A lot of the time, companies that get put into a recall situation may not necessarily have had enough opportunities to go through the end-to-end process of what they need to do, and it’s not just about removing product from the shelf — that’s a very important part — but it’s about ensuring that there is accurate and consistent communication throughout the entire chain, and in the case of retailers, also directly with consumers,” Sieira said.
So what should a product recall plan cover? For suppliers, Siera said it needed to cover how the issue will be communicated to retailers and consumers, how the product will be retrieved, how refunds or replacements will be delivered and how the regulator will be kept in the loop. Should a recall then take place, the plan should then be reviewed to highlight strengths and weaknesses.
For suppliers, Sieira said the two most important factors were communication and what he calls ‘traceability’. Retailers need to have clear and open lines of communication between their head offices and outlets (be they company owned or franchised), and between their distribution centres and warehouses.
If the product being recalled has been logged in an advanced and traceable logistics system, Sieira said retailers can then identify where all the affected products are and isolate them much earlier in the supply chain.
“Many companies experience a recall, but it doesn’t necessarily have to become a crisis,” Sieira said. “We’re trying to establish that a well-managed and executed recall doesn’t necessarily have to become a crisis because companies can still be in control of all of the activities they need to undertake if they plan it well.”
A version of this article was first published in Appliance Retailer magazine under the headline "Total recall, not total crisis".