Product failure and recall
Product failure is a critical business risk
In recent years it has become increasingly common to hear news of a product failure that has led to a product recall or remediation programme. Recent examples of how companies have been impacted by product failure include:
- A fault in the manufacturing process of car airbags has been link to 10 deaths and more than 100 injuries, which led to 14 different automakers recalling around 25 millions vehicles and resulted in the company declaring bankruptcy.
- One of the world’s largest producers of electronic devices faced a global recall of its newly released smartphone due to spontaneously combustible batteries. The failure wiped off an estimated $17 billion off the company’s market value.
- A multinational manufacture of home appliances recently recalled over half a million washing machines due to risk of fire. The failure is estimated to cost the company millions and cause server reputational damage.
Such incidents have the potential to cause severe financial, operational and reputational problems for an organisation as it manages the repercussions and remediation.
Consumer reactions and regulatory responses to a product failure can result in lost customer revenues and substantial reputational damage. News of the failure can spread extremely quickly on social media, and at the same time regulators’ expectations are increasing. As a result, effective and rapid situational response and crisis management need to be a strategic priority.
While companies deal with a certain level of recalls in the ordinary course of business, they may be less equipped to deal with the aftermath of a significant product failure.
Extraordinary challenges
Rapidly and effectively responding to a significant product failure can be challenging. Some of the common obstacles include:
- Lack of assigned responsibility and accountability regarding who owns different elements of the crisis response.
- Inability to execute an integrated, cross-functional recall effort.
- Lack of experienced, knowledgeable and available experts who can immediately assist with the recall.
- Inability to rapidly ramp up resource in call centre teams to respond to the surge in both customer and supplier inquiries.
- Difficulty obtaining the data and information required to organise the response e.g. requests for information from the regulator.
- Inability to accurately track and manage the costs or scope of the recall, due to system and data challenges.
These challenges highlight the complexities in managing the fallout of a significant product failure and rapid mobilisation of an effective recall or remediation operation.
Four pillars of effective product failure response
Taking definitive action within the first 48 hours is critical. In our experience, many companies are unprepared and lose time during this vital period. They focus on organising a remediation team and obtaining the necessary information for senior individuals to enable decision making and prevent further distribution of the affected product. Consequently, the product failure issue grows unabated. Below, we identify the four pillars of successful product failure response.
A holistic view of the ‘remediation system’ that clearly defines employee tasks and responsibilities. The detail in the remediation plan should strike a balance between having enough to be executed effectively whilst ensuring rapid execution is not impossible. Planning should cover recall in case this is necessary..
Companies should be able to:
- Assess the scope of a remediation.
- Track and document remediation/recall activity.
- Respond quickly and accurately to requests for data from the regulator or other external stakeholders.
- Track all costs and KPIs.
This requires robust information and project management platforms.
Tracking the flow of the product up- and downstream, to enable the identification of products requiring remediation/recall.
Upstream traceability can be a significant challenge due to the global nature and complexity of supply chains and procurement processes.
Clear, coherent and consistent communication internally (e.g. employee, board, etc.) and externally (e.g. customers, suppliers, investors, etc.) is an essential component of any recall plan. The remediation team must determine what should be communicated, to whom, how, and when.
How PwC can help
- Crisis response services
- Customer management
- Customer outreach
- Claims management solution
- Claims handling
- Crisis recovery services
- Project management
- Data capture
- Data analytics
- Disputes advisory
Crisis response services
We can set up and run a crisis ‘war room’ to lead your crisis response, or shore up your existing strategic and operational capacity when needed. We can help prepare or review your crisis response strategy, governance, crisis communications and stakeholder management plans. We can mobilise within hours to provide operational, regulatory and legal support, as well as technical analysis.
When to get in touch?
A product failure or recall situation can be extremely complex and highly disruptive. PwC has the expertise and capacity to rapidly scale up your response to limit the financial, regulatory, and reputational impact in such circumstances. To find out more about how we can help, please get in touch with our dedicated team.
How PwC has supported clients in crisis
- Manufacturer of building materials
- A global steel, copper and aluminium manufacturing company
- Manufacturer of building materials
Manufacturer of building materials
Nature of failure
Lack of compliance with product standards and regulations resulting from changes in the manufacturing process, complicated by loss of corporate knowledge.
How we helped
We used machine learning techniques across a significant volume of data to automatically classify operational behaviours and product specifications which, when analysed chronologically, would identify points of change. Techniques such as factorisation, 3D visualisation and classification models provided insight and support for the client to identify cases for remediation, allowing them to confidently respond to regulators.
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