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(originally published by Booz & Company)


Shortening the Time Line for a Recall

The type of product defect is also crucial to timing. Problems in manufacturing involve raw materials or the production process — for example, the use of toxic lead paint in some toys. Design flaws, in contrast, precede manufacturing, as in the case of a toy that comes with tiny magnets that children could pry loose and swallow. Design flaws were involved in 76 percent of the recalls, the authors found. And products with design flaws took, on average, about 130 more days to recall than those with manufacturing problems.

Defects in manufacturing may be quicker to trace, the authors note, because raw materials are generally provided by a single source, and the problems often affect several firms in the industry (as with lead paint). The broad nature of these problems sets global supply chains in motion and enables toy firms to identify the source of the problem among their contract manufacturers.

Design flaws, however, are more problematic. For toy companies, announcing a design defect not only involves pointing the finger at themselves; it could also expose the intellectual property of the designs to competitors.

Finally, in terms of a firm’s position along the supply chain, the authors found that toy companies initiated more than half of the recalls, but these took much longer to issue than those announced by retailers (who have a closer proximity to customers) and even distributors.

What should companies do to speed up announcements and reduce their risk?

To decrease the time it takes to recall products with structural flaws, the authors suggest that companies study competitor recalls, conduct product safety tests in real-world situations, and carefully track customer feedback. (Some of these steps will also help prevent future design defects.) Companies that are further away from the consumer, and that thus might face delays in uncovering defects, should set up organizational systems that counter this disadvantage.

And firms that favor a reactive strategy might still find it prudent, the authors advise, “to strengthen their control and inspection systems so that product defects are identified in-house rather than brought to the notice of the company by outsiders, following incidents of harm to consumers.”

As for being wary of investor reaction to preventive recalls, companies have to learn to take decisive action, the authors suggest. Otherwise, what might have been a preventive recall could wind up as a more painful reactive one.

Bottom Line:
As firms in many industries face the challenge of handling recalls, it is important for company leaders to understand how three key factors affect the time it takes to announce a recall: whether the company is following a preventive or reactive recall strategy, whether the defect is one of design or manufacture, and what the proximity of the recalling company is to consumers.

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