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Product Recalls & Consumer Safety Worry Supply Chain Pros

You would expect to see government regulations, counterfeit parts, and shortened device lifecycles dominate a list of concerns that worry supply chain professionals. What's less likely to turn up on the same report are consumer safety issues and product recalls. However, a new study from independent distributor Smith & Associates shows these issues are on the top the list of priorities for many folks in the industry, too.

Asked to rank the top challenges confronted in regular supply chain forecasting and planning activities, 185 participants representing OEM, EMS, ODM, and distribution companies ranked consumer safety issues as a high-level concern, according to the survey.

Overall, those who participated in the Smith & Associates’ study indicated that the “issues of greatest concern, or of potential negative impact to respondents’ business,” were:

  • Component or device recalls
  • Consumer safety issues
  • Government regulations/legislation
  • Counterfeit parts
  • Reverse logistics
  • E-waste
  • Competitive/shortened device cycles

(See the Smith & Associates infographic below for more details or click this link for the graphic.)

Supply chain planning and forecasting concerns — including economic swings, demand fluctuation, supplier consolidation, margin pressures, and inventory management — vary slightly, depending on where a participant sits in the supply chain.

In general, consumer safety and recalls ranked as the two most important issues across all sectors. However, the report showed some variations on these themes. For example, consumer safety issues came in as the highest priority for ODMs, while distributors noted it was among their top three concerns.

Counterfeiting, which has been making headlines lately as more strict US government mandates attempt to address the issues, fell into the nervous-making category, just behind government regulation, the study noted. Neither of these issues is particularly surprising to see on the list. Recent legislation aimed at preventing — or at least reducing — the number of counterfeit or suspect parts entering the supply chain requires companies to report, track, and trace parts, which puts immediate and direct pressure on the bottom line.

It's natural that these two worries are cited in almost the same breath by those who participated in the study.

Likewise, I can see the price-benefit trade-off correlation with component or device recalls. Dealing with recalled items demands flexible supply chain practices. It also comes with a higher cost of ensuring that products are accounted for throughout a global supply chain, and that these are rapidly and properly handled. And, of course, e-waste, short lifecycles, and reverse logistics are things the electronics industry has been dealing with for years, more or less, but they still cause some stress and concern among businesses.

What I'm curious about, and what the study doesn't fully answer, is why consumer safety has come up as the most important issue this time around?

Is it tied to the anti-counterfeiting measures, where legislation has emphasized the “mission critical” nature of parts and systems used in airplanes and defense systems? Is it there some concern that there could be failures in the heaps of electronics devices being used and embedded in mobile platforms, healthcare equipment, or automobiles? Or is the reason that supply chain professionals — while they are being forced to find and deliver lower costs — have a heart and are concerned that the price-safety line is being crossed?

I would love to hear what you think is shifting this scale. Let me know in the comments section below.

Image courtesy of Smith & Associates

Image courtesy of Smith & Associates

26 comments on “Product Recalls & Consumer Safety Worry Supply Chain Pros

  1. SP
    May 17, 2013

    agreed consumer safety and product recalls must worry supply chains.The amount of time and money spent on recall would be huge but then if you dont recall and something goes wrong it will cost the company much more.

  2. Houngbo_Hospice
    May 18, 2013

    @SP,

    “if you dont recall and something goes wrong it will cost the company much more”

    It is as simple as that. Manufacturers should not gamble with customers safety when there is a risk of accident or potential damage to users/customers due to product malfunction. 

  3. _hm
    May 18, 2013

    It will be interesting know this product recall and consumer safety worry in two parts. First, is it desgin problem? If it is true, design must be corrected. This may be true due to extreme stress in time to market, lack of due deligence or design with not sufficient margin. This can be corrected by enhanceing product design and product test guidelines.

    Second, it may be supply chain parts quality problem. For this, again strict supply chain procedures and manufacturer and supplier screening will help. If it is problem with some set of components, product muast be recalled and designer must give proper new solution.

  4. ahdand
    May 18, 2013

    Im not sure why we have to worry that much about consumer security here. I do not see any big risk as such. 

  5. _hm
    May 19, 2013

    @Nimanta: That is perhaps the most important aspect of product and image of an organization.

    – If not safe, legal liability can run in million of dollars

    – If repeated often, country or industry can ban an organization or set of products for ever

    – Image of orgnization also get suffered. It affects other market segments

    – It is unethical to produce such product

    – Can you imagine situation where one of our family or friend has fatal or long term injury due to unsafe product?

     

  6. Mr. Roques
    May 19, 2013

    Recalls have to be the most terrifying news a CEO can get. It involves two sides : having to return money or a new product and the bad publicity it generates, which is even worse than the other.

  7. SP
    May 20, 2013

    @_hm, so much agreed. consumer safety must be the utmost concern and priority to the manufacturere. Some time back there was news that if you hold nokia phone close to ear with charger ON, it used to burst. In India low a cost car manufacturer had to recall some models when the cars were accidentally catching fire. It is ethical and by law responsibility of the manaufacturer to keep consumer safety at priority while designing and selling a product.

  8. elctrnx_lyf
    May 20, 2013

    The reason why consumer safety and recall are so critical because of the nature of the risk that business will face is very high interms of the financial loss or the good will of the company. So every company in supplychain worry about these two factors, especially the companies that actually manufacture products. The amount of money spent in a recall would be much higher than the development costs sometimes and overall there wil be big loss for the business if consumer safety is not taken into account from very initial stages of the prodcut design and development.

  9. Ariella
    May 20, 2013

    @elctnx_llyf yes, because one component built into other systems can have a huge ripple effect.

  10. Taimoor Zubar
    May 20, 2013

    @_hm: I think safety has serious long-term issues too when it comes to supply chain. A negative impression means a decline in the market share eventually leading to a disruption in production and planning. This may translate into a havoc for the company.

  11. Taimoor Zubar
    May 20, 2013

    The amount of money spent in a recall would be much higher than the development costs sometimes”

    @elctrnx_lyf: Yes, product recalls can be fairly expensive for the company and hence the need for proper inventory planning is there. If the demand is under the forecast, there's excess inventory to deal with which may gets obsolete and hence has to be recalled.

  12. Tom Murphy
    May 20, 2013

    elctrnx lyf has hit it on the head.  It costs enough to get the supply chain moving forward. When it moves in reverse due to a product recall, it can destroy small companies and shatter the outlook for the largest players.  The life cycle of small electronic devices like phones is only 12-18 months.  A recall alone can take longer than that.

  13. prabhakar_deosthali
    May 21, 2013

    I agree that the product recalls affect the company's reputation in the market, many times cost a fortune, put an extra load on the supply chain which has to work on the reverse logistics.

    But why should the supply chain pros be worried about this ? 

    For them it is just planning the reverse flow of materials or products .

    The people who should be worried about the recalls should be the designers and production people who are forced to go back to their drawing boards , dig out the actual defect from the reported failures in the field, work out alternate solutions – part replacement, design change etc.

    The supply chain pro's job is only to have proper systems set for such possibilities .

    Whereas  for avoidance of counterfeit parts becomes the key responsibility of supply chain pros,  in case of product recalls it becomes their secondary responsibility, in my opinion

  14. TomMurphy
    May 21, 2013

    Prabhakar: Supply Chain folks need to worry because if there is a consumer safety issue, the supply chain can stop dead.  Remember when Toyota has a major recall to replace brakes as a customer safety issue?   Remember what happend to its supply chain?  It went into convulsions.

    The same happens when a battery overheats in a phone or laptop.  Suddenly, everything in the supply chain is suspect, there is huge demand for replacements, and sales become almost unpredictable until the consumer regains faith in the product.

  15. Lavender
    May 22, 2013

    I have never thought about customer security before this article. But when it comes to the problem, it is a big problem. 

    As we can image, when the consumer electronics running counterfeit products enter into market and consumer's home, the risk will threat their lives. Many explosion in consumer electronics such as heater, charger are reported. 

  16. Eldredge
    May 22, 2013

    In general, consumer safety and recalls ranked as the two most important issues across all sectors.

    I can understand why comsuner safety and recalls would be high ranking concerns. They are often disruptive issues that can be difficult to predict in terms of timing,  cost impact, and impact on future sales.

  17. Tom Murphy
    May 22, 2013

    Eldredge: All good points, but you left the big one out — a bad part can burn down your house and kill your family.

  18. Lavender
    May 22, 2013

    Yes. Customers' life security is the top one concern which can not be handled just at the cost of money. 

  19. Eldredge
    May 23, 2013

    @Tom – Right – or cause your vehicle to accelerate out of control. I wasn't thinking of such catastrophic failures, but they can happen.

  20. William K.
    May 23, 2013

    One reason that I see for safety being listed so high is that the news media keeps trumpeting about anything that may possibly have the appearance of being unsafe. Panic sells papers, and gets newscast ratings, and all of those other marks that a product is selling well. And what better way to sell your news than to constantly trumpet every hazard, real or imagined? Rmember that old song from the eighty's, “Dirty Laundry”? it pointed out the truth, and the media has certainly not relaxed in the push for profits since then.

  21. ahdand
    May 24, 2013

    @Lily: That is strange since when you do something online, you should realize what to produce and what not to. That is security. 

  22. ahdand
    May 24, 2013

    @_hm: Very true mate. This is simply a sad situation.  

  23. Jennifer Baljko
    May 24, 2013

    _hm – this is exacty right. the potential fall-out  of an unsafe product is probably what people listing it as risk.

  24. Jennifer Baljko
    May 24, 2013

    prabhakar_deosthali – I see your point in saying that product recalls may not be a top concern falling on a supply chain professional's shoulders. But, really, it's everyone's responsibility from design, to sourcing, to manufacturing to sales/marketing… if anyone along this process sees a potential danger in a particular part of system, they need to make everyone aware of that and try to prevent it from getting into consumer's hands, or if it's out in the supply chain, being proactive in trying to get the products back.

  25. Jennifer Baljko
    May 24, 2013

    while @williamK makes a point about the media speading the fear, I think some of the driving force behind this stems from the awareness the industry now has about counterfeit parts and the legal obligation the industry now has in tracking and reporting these parts. This level awareness and understanding wasn't top of mind a couple years ago.

  26. itguyphil
    May 24, 2013

    As long as the vendor/manufacturer takes responsibility and actions to stop the safety issues, the brands may still maintain integrity.

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