In certain industries, recall rates are high enough to be factored in as part of the business process. Recalls are particularly pertinent to automotive, food and medical industries costing companies billions of dollars. However, even the most diligent business operators are exposed to product recalls regardless of industry and whether you are a manufacturer.
Recalls can be caused by product issues or health and safety concerns, and they can be a costly affair for any affected business. On top of the costs of replacing the inventory stock and rectifying the issue at hand, a recall can affect other areas of your business as well. If you don’t have a contingency plan for this very expensive threat it could do irreversible damage to your company’s bottom line and reputation causing customers to lose confidence in a business permanently — not mention sanctions, hefty fines and in some cases criminal prosecution. For these reasons, we identify three effective ways to minimise the negative impacts of product recalls on your business.
1. Planning and preparation
If you fail to plan, you plan to fail. This platitude is unfortunately so true for when it comes to product recalls. Being prepared is crucial to limiting the damage to your business in the event of a product recall.
To this end, product traceability is key. This allows a business to isolate the problem and know what and where inventory stock is affected. The use of batch tracking will provide your business with vital information around the inventory stock related to every batch of your product. This can help immensely to ensure the recall goes smoothly, communicate the problem to key stakeholders and to reassure your customers. Any delay in announcing a recall or the failure to take prompt measures will not minimise negative impacts on your brand and can turn into a PR nightmare.
If your customers and key stakeholders see that you’ve communicated clearly and acted quickly, you can minimise the negative impacts of a recall upon the credibility of your brand and business. By doing so, you control the narrative as opposed to disgruntled customers or the media doing so instead and take greater charge of a recall crisis.
Recent statistics highlight how crucial swift and clear communication concerning a recall of products can be, where over 90% of consumers said that they believe how a company handles a recall indicates whether they care more about profits or customer safety. In the same study, more than 80% of customers indicated that they would be more inclined to purchase products from companies that they perceived had handled recalls in an honest and responsible way.
Utilising a reliable batch tracking system enables a business to respond in a prompt and professional way when a recall is actioned. Once you identify where the products or inventory stock are, your priority should be to inform your customers about the recall procedure and ensure their safety, so that you can limit any damage concerning the perception of the brand and business.
3. Reverse logistics
In a product recall, businesses need to retrieve all affected products, so you’ll need to be ready for all the returns coming in. When you’re planning the logistics around a recall, you’ll need a procedure. Think about where and how your customers will return the items and your refund process. Should they send the faulty products to your warehouse, or to your manufacturer? Perhaps your recall plan will depend on your supplier and their return procedures? By setting up a procedure for the recall process, you’ll be able to save time and money. Implementing batch tracking into your inventory management system will see your business better able to locate the affected batches and inform your customers of how to go about returning the recalled products. Since you’ll have a record of the affected batches, you can track your returned products as they come in and even follow up with customers who did not respond to your first recall notification, highly minimising negative impacts of a product recall.
Article by Melanie Chan in collaboration with our team of Unleashed Software inventory and business specialists. Melanie has been writing about inventory management for the past three years. When not writing about inventory management, you can find her eating her way through Auckland.