Wednesday, July 23, 2008

Handling a Product Recall

As a product manager, I had to face an unpleasant experience of a product recall. A customer had discovered a defect in the current product, and the company had to deal with the situation. The product in questions is an enterprise software used to manage IT infrastructure. In that sense, we were lucky that it was a software bug, and we could quickly control the damage by advising all customers not to install the latest version of the software and quickly followed it up with releasing the corrected version of the software and the issue was quickly resolved. Dealing with this product recall issue, led me to write this article on how to mange a product recall.

Product recall

If a company has many products and stays in business for quite some time, then it will have to deal with product recall. A product recall is often a result of quality test slippage or design oversight. In most cases, it is the customers who will notice the defective product - and notify the company - and that becomes a moment-of-truth. All the past success, the brand reputation and the future success are at stake. Product managers will have to strike out the correct balance between cost control and brand damage.

A product recall is every company's nightmare. For a product manager, it is a very distasteful task - but a very challenging one. Handling a product recall: deciding and executing it successfully give a true measure of a product manager. The challenges involved are tremendous - especially when there are multiple forces influencing the decision.

A product recall is a public admission of quality failure: i.e, the company failed to deliver on the promise done to customers. If done correctly, customers will admire the company for its honesty and sincerity - which will in turn build a stronger image. But if the recall is badly handled, customers will lose trust with the company & its products - thus losing on market share & future sales.

In many ways, a product recall is a wake up call for the company. Often times a product recall happens because there were several missteps in the past and it is time to correct them. It is a call for the company to review & change its internal processes. Product recall also allows the company to reset customer expectations, reset product reputations and if handled correctly, it gives a new start for the product.

The success of any product recall program will depend on how faces the problem, how promptly and decisively executes the recall. The customer will have little patience - when a defect is discovered, so the speed in which the recall is handled & how the company make the customer feel comfortable is vital for the success of the program.

Dealing from a customer point of view

Once a product defect has been found out, a recall must be handled from the customer point of view in order to protect the brand value & reputation. Shareholders and company profitability may suffer in the short run.

From a customer point of view, a product recall has seven steps:

  1. Contact: Contact each customer individually.( The means to contact the customer may vary based on the number of customers)
  2. Explanation: Provide clear explanation of the product defect & the problem.
  3. Actions required: Tell the customer what actions he needs to take. How to identify if the customer has a defective part and what actions are required from the customer.
  4. Procedures: Establish the procedure for product exchange. This will involve dealers, retailers, salesmen, service providers, service personnel etc. This also involves the distribution chain to be in place to collect & ship the defective product - and also to distribute the replacement part.
  5. Acknowledgment: Record an acknowledgment of the replacement from the customer.
  6. Compensation: Provide compensation for the loss/damage incurred by the customer on account of the defective product. In many times, companies provide a voucher - a discount for future purchase.
  7. Closure: Set timelines for closing the recall & ensure that the product recall met its objectives in terms of numbers.

This is a general framework, it can be modified to meet the requirements of the specific product.

Internally, there are several things a product manager should do when dealing with a product recall. The first of which is do decide if a product recall is necessary.

Making a recall decision

When ever a defect is found at the customer site - or when a customer makes a complaint, the first step should be resolve the customer problem. But determining if a product recall is necessary is very challenging. There are no standard procedures or process to make that decision in most cases. The decision is easy only when there is a safety related issue or when the product fails certain regulatory compliance. But most product defects found by the customer falls outside these categories and that create a tough challenge. The challenge here is to manage the customer perceptions - and that needs to be handled swiftly and effectively. At the end, the customer must either be convinced that there is no product defect ( or there is a quick & simple work around ). Or the company must be convinced that there is a need for a recall.

If the customer is not convinced, then the company reputation is at risk.

An unsatisfied customer can come down heavily on the company & can adversely affect the company's reputation. (see Dell Quality Control Issues Not Going Away: Dell stumbled badly in 2007 with quality issues and the company refused to recall its products & own up its responsibility. Also see: It's Bad to Worse at Dell ). In case of Dell - in today's connected world, even one customer problem can cause severe damage to company's reputation. (see: )

At this point product management should take over the customer issue & start a methodical process to see if the situation warrants a recall. The process includes the following:

  • Check for Safety aspects: Ensure that the problem being reported does not have the potential to cause damage or physically hurt the user/customer
  • Check if there are bad component(s): See if the inputs/parts to your product had any defective parts or known quality issues.
  • Check if the product's performance violates the openly published data: See if the product does not comply with the published performance or with the contractual performance information.
  • Check if there was any known process issues: Check if there any process related issues during the manufacturing of the product in question. Sometimes process related issues during production - may have resulted in flaws being discovered at customer site.
  • Check for hidden/latent flaws: There are times when inside people would know that the product has a hidden defect or there is a possibility of failure after some usage. Many times, insiders - employees either at manufacturing, QA or design engineers would be aware of a latent flaw, but they had not raised an alarm - because they thought that the problem would never occur at the customer site.

    "There is a one-in-million chance that this will fail, so we decided to pass the product" A good example of this will Intel's Pentium bug. Intel engineers knew of the problem, but decided to ignore it.

    Ford's knew about the stability problem with Ford Explorer SUV for a long time. (see: )

    If any of the above conditions turns out to be true, then you are looking at a potential product recall.

Handling a Product Recall

Once the decision to recall a product is made, there are lot of next steps to be implemented immediately. The actual steps may vary from organization to organization, but at a high level - it has to include the following:

  1. Notify the organization and all stake holders (including dealers, distributors & associated third party people of the impending product recall.
  2. Communicate to all customers of the defect - in order to prevent damages & potential liabilities.
  3. Create a recall management center to speedup decisions
  4. Hold up production if needed
  5. Update QA/Quality assurance process.

Do not drag the issue or delay a recall

The most important point that every product manager should remember is to never drag or delay a recall decision. Dragging on the issue or denying the issue will severely harm company's reputation. Denying defects will only make the customer more agitated - and this will lead to increased legal hurdles, damaged brand reputations & lower sales.

Ford & Firestone denied any defects for a long time (see: ) and in the end Ford had to pay huge sums of money.

Closing Thoughts

Product recall is one of the tough decisions to make and execute. It takes guts, skill and leadership to pull off a successful recall. A successful product recall is the one which enhances the company's reputation and brand image. However, frequent recalls will damage the company reputation. On the other hand stonewalling a recall demand by customers will immensely hurt the company's image and future sales.

One must always remember that a product recall is mainly due to quality testing failures - so it is always better to invest more in quality testing & improvement programs rather than shortchanging on quality & using a recall later. So treat a product recall as a blemish on the internal quality control process - and that should not be repeated.


Innocent Warrior said...

Excellent article!!!

pick said...

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