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

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.

Customer management

Our dedicated customer management teams provide you with ‘burst capacity’ and/or longer term support for customer-facing functions.

Customer outreach

We can set up a service to contact and liaise with your customers directly.

Claims management solution

If the failure leads to a large number of customer claims for remediation, PwC’s claims management solution has been designed to be fully customisable and scalable to help you at your moment of need. It can be deployed either ‘on-premises’, hosted securely by PwC or hosted by you in-house.

Claims handling

We have trained and experienced staff who can step in to rapidly scale up your team to deal with customer challenges, to ensure regulatory compliance and to resolve issues and maintain relationships.

Crisis recovery services

When crisis hits, you need to know you’ve got the capacity, technology and resilience to cope. That’s where we come in. We can help you develop and implement a recovery plan.

Project management

Our senior crisis experts, experienced in managing large-scale and complex remediation exercises relating to product failure, means that you rapidly get clarity and control, giving you the confidence to make the right decisions.

Data capture

When an you are faced with a crisis or investigation, a successful outcome is dependent on your ability to access all relevant data. Identifying structured data sources in a complex environment calls for particular technical capabilities and technology tools. Our specialist team are experts in capturing data, from ERP systems to trading and point of sale systems.

Data analytics

When crisis hits you, understanding large and complex datasets can be difficult, yet a successful outcome is dependent on your ability to analyse and draw meaningful conclusions. Our skilled data scientists are experts in analytics and visual representation of data. Using the latest technology, we make your complex data easy to use and understand – ensuring that you can identify and distil key findings as quickly as possible.

Disputes advisory

We can help you evaluate your options around third party disputes and insurance claims in the wake of product failure, and work with you to consider potential outcomes and resolution mechanisms.

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.

A global steel, copper and aluminium manufacturing company

Nature of failure

Product quality falsification across dozens of products that are components to finished goods in many industries.

How we helped

PwC provided assistance with 1) identification and forensic collection of pertinent information for the regulatory inquiry and litigation; and 2) supply chain analysis to identify where a product was shipped to, as well as identify finished goods that could contain the client’s product.

Leveraging technologies such as graph analytics, PwC was able to quickly provide a view into the complex global supply chain of the organisation and help focus investigative efforts.

Manufacturer of building materials

Nature of failure

Civil and criminal litigation in relation to a safety incident caused by the quality of building materials made by the manufacturer.

How we helped

PwC conducted complex data analytics to identify and cleanse relevant information to the manufacturer. This included the testing and supply of the building materials to help the client understand what went wrong. This information included financial system data, shared drives, and emails, as well as non-traditional data sources such as plant manufacturing data.

PwC also helped the client to assess if the issues were widespread.