No one wants to think about the possibility of a product recall. But those in the know say the key to surviving the crisis is to put a recall management plan in place before the worst happens.
Contributing Editor Toby Gooley is a writer and editor specializing in supply chain, logistics, and material handling, and a lecturer at MIT's Center for Transportation & Logistics. She previously was Senior Editor at DC VELOCITY and Editor of DCV's sister publication, CSCMP's Supply Chain Quarterly. Prior to joining AGiLE Business Media in 2007, she spent 20 years at Logistics Management magazine as Managing Editor and Senior Editor covering international trade and transportation. Prior to that she was an export traffic manager for 10 years. She holds a B.A. in Asian Studies from Cornell University.
Product recall. The words alone are enough to strike terror in the hearts of logistics and distribution managers. And who wouldn't quail at the prospect of having to retrieve and dispose of thousands (perhaps millions) of individual items—usually with little or no advance notice?
Even companies with reverse-logistics systems already in place may find product recalls daunting. After all, there's so much at stake: In addition to the cost of retrieving and repairing or destroying recalled items, companies may rack up millions of dollars in transportation, inventory, and other costs to replace faulty merchandise.
Most costly of all, perhaps, is the loss of customers' confidence. Just ask Topps Meat Co., which went out of business less than a week after recalling more than 21 million pounds of frozen beef. Or ask Mattel, which now faces a shareholder lawsuit over allegations that it mishandled recalls of unsafe toys.
The infrastructure, processes, and technology needed to protect your company's interests during a recall are complex. They take time to develop, test, and implement. If you wait until a "red alert" occurs, it will be too late. The only way to successfully manage one of these nerve-wracking situations is to launch a pre-emptive strike—putting a plan in place before the worst can happen.
Make a federal case of it
Before you put together an action plan, there's research to be done. "One of the most important things to recognize is that there are very defined disciplines and procedures that need to be followed," says Tom Giovingo, executive vice president of Fidelitone Logistics, which handles recalls for automotive and other manufacturers. "You need to make sure you have fully explored all the requirements and procedures."
Recall dos and don'ts
Here's some practical advice from those in the know:
Jack Walsh, Videojet Technologies Inc.: Keep your product and customer database accurate and up to date. Pay attention to how the product code needs to be read downstream. Don't just put a code on the package; make sure it will serve a purpose and that it will be readable by the time it gets to the consumer level.
Despina Keegan, JPMorgan Chase Global Trade Services: Act quickly when a crisis does arise, and show the federal agency regulating your product that you didn't sit on the information. Your paramount goal should be consumer protection. That's what will help maintain your reputation with customers and protect your brand.
Tom Giovingo, Fidelitone Logistics: Recalls are not the time to be conservative and cautious. If you're unsure of your potential exposure, bring it all back. Step up to the plate and do what you need to do to make it right. You can't put a price on potential lost sales.
Kevin Brady, Satellite Logistics: Most state regulations make the manufacturer responsible for proper disposal of products. Make sure your recalled products don't end up being resold on the gray market and that you can accurately document disposal for regulators.
Krish Mantripragada and Sven Denecken, SAP: Not all suppliers are able to deploy an automated solution to manage the recall process effectively. By using existing automation to deploy standard, template best practices, they can achieve some level of quality-control compliance in manufacturing, logistics, and distribution.
Many of those requirements come straight from the U.S. government's playbook. The Food and Drug Administration, National Highway Traffic Safety Administration, Consumer Product Safety Commission, and several other agencies get involved in recalls. Each has its own rules—and if you don't follow them, you could be in violation of federal law.
If you're unfamiliar with those rules, help is available. Six federal agencies have launched www.recalls.gov, a Web site that consolidates news about recalls by product category and provides links to more detailed information.
Product recalls aren't a U.S.-only problem, of course. "Any company doing business in any market across the globe has to know the rules and regulations that apply in that market. You have to be proactive in knowing the rules for all recalls, whether domestic or international," says Despina Keegan, a senior trade adviser in JPMorgan Chase's Global Trade Services group.
Plug up the holes
Knowing the rules up front lets you design processes with regulatory compliance in mind, says Giovingo. For example, the sorting process has to be paired with careful documentation because manufacturers must report to government agencies how many pieces were received during a recall, and of those, how many were deemed to be suspect or bad.
Effective recall management also depends on making sure now that you have the information you'll need later on. It makes perfect sense: You won't be able to identify the source of a problem if you haven't been tracking the origin and disposition of raw materials all along. And you won't be able to retrieve individual items if you don't know exactly where each one went.
Many companies have a basic system for identifying lot or batch numbers and for tracking cases or pallets, but they may not know precisely who the end customer is for a specific item or what ingredients went into which batch, observes Jack Walsh, director of sales for brand-protection solutions at Videojet Technologies Inc., a provider of marking solutions. Without that level of visibility, they may have no choice but to recall an entire product line just to be safe. "Those are the 'black holes' of the chain of custody," he says. "There's a cost associated with plugging those holes; people have to balance that against the risk and cost of having to conduct a massive recall compared to a specific recall."
The technology to plug those holes does exist. There are systems and software that can identify the sources of raw materials and track them before and during manufacture. Others label or mark goods in a way that will be useful during a recall, enabling tracking of individual orders, lots or batches, and stock-keeping units (SKUs) all the way from manufacturing to the end consumer and back again.
Some systems used for managing recalls are so sophisticated that they can pinpoint an item's exact location hour by hour. Tim Konrad, president of GENCO Supply Chain Solutions' reverse logistics unit, tells this illustrative tale: A consumer who returned a suitcase for repair later realized that she had left a jewelry case with a wedding ring inside. Using bar codes assigned to the suitcase and to the pallet on which it was strapped, GENCO was able to track the pallet and find out where the suitcase went, when it arrived at the processing center, and where it was located inside the facility. Voilà: One wedding ring returned to a grateful owner.
The ring episode shows the value of creating software-enabled associations between each link in the chain of custody. Another example: By associating the lot numbers on medicine bottles with the bar codes or RFID tags on cases and pallets, a manufacturer could trace individual bottles to a specific customer order and a particular delivery location.
An effective recall system should use such associations to collect, process, and share relevant information among multiple sources, says Sven Denecken, vice president of ERP market strategy for SAP. Connecting material tracking with regulatory restrictions helps to ensure compliance. It also helps to create the audit trails required by regulatory agencies as proof that potentially dangerous products have been properly destroyed or neutralized, he says.
One of the most important of those connections is the one between operations and finance; without it, you can't accurately determine the financial implications of a recall, says Krish Mantripragada, SAP's head of solutions management for RFID and supply chain management. That's especially clear when taxes and import duties are involved, notes Kevin Brady, president of beverage industry specialist Satellite Logistics. When alcoholic beverages have been recalled and destroyed, for instance, companies can file for a rebate of the excise tax—but only if the relationship between the product that was destroyed and the taxes already paid on that specific product lot can be accurately documented.
Protect yourself
The final area to consider in your plan is the recall equivalent of the "last mile": Once you have the faulty items back in hand, what will you do with them? The choices regarding product disposition, also known as material recovery, range from repair and resale to recycling of salvageable parts and materials to the total destruction required for regulated materials.
Protecting your company's brand undoubtedly will factor into that decision. "If you're a name brand with a billiondollar marquee, you want discretion when it comes to material recovery," Brady says.
Whatever course you choose, it should be part of a comprehensive, detailed plan that lays the groundwork for handling a recall long before such an event occurs. "You want to be all dressed up and ready to go instead of scrambling," Giovingo says. "Anybody who's been in that kind of negative situation is definitely thankful they took the time to prepare beforehand."
an ounce of prevention
Most of the recalls in the news recently have involved imports from China. Is it possible to prevent quality problems if you're located here and the factory is over there? "Maybe not 100 percent, but you can get pretty close," says Despina Keegan, a legal expert and senior trade adviser for JPMorgan Chase's Global Trade Services group. She advises her clients to be specific about product quality and testing requirements in contracts with suppliers. She also recommends making both scheduled and unannounced visits to check on production: "You can't rely on the product samples you got when you started doing business with a supplier," she says.
Verifying product quality requires a significant commitment. "You have to have systems in place just like we've seen for supply chain security and for checking that working conditions are safe and no child labor is being used," Keegan says.
Knowing exactly who the supplier is can be challenging in China, where layers of subcontractors are common and manufacturing "towns" are swiftly springing up throughout the country. Investigate carefully, remain vigilant, and regularly re-evaluate—and that goes not only for new suppliers and venues but also for long-standing relationships, she adds. The bottom line: "If you can't verify who you're doing business with, you don't have the resources to do it, or you're not allowed to do it, then you have no business doing business there."
The fault may not always be with the supplier, however. Research by professors Hari Bapuji of the University of Manitoba and Paul Beamish of the University of West London (Ontario) found that product design was the most common cause of recalls. Of the 550 toy recalls since 1988, 420 (76.4 percent) could be attributed to design flaws. Only 54 (9.8 percent) of the recalls were attributable to defects such as poor craftsmanship, overheating batteries, lead paint, and inappropriate raw materials.
Importers of Chinese goods may be setting themselves up for failure by focusing on making a product to certain specifications as cheaply as possible, says Sven Denecken, SAP's vice president for ERP market strategy. "They tend to look at it from a money perspective and from the perspective of ensuring that they always get the product on time," he observes. "They are not taking into account the possibility that one kind of supply is cheaper but it could cause product problems later on."
E-commerce activity remains robust, but a growing number of consumers are reintegrating physical stores into their shopping journeys in 2024, emphasizing the need for retailers to focus on omnichannel business strategies. That’s according to an e-commerce study from Ryder System, Inc., released this week.
Ryder surveyed more than 1,300 consumers for its 2024 E-Commerce Consumer Study and found that 61% of consumers shop in-store “because they enjoy the experience,” a 21% increase compared to results from Ryder’s 2023 survey on the same subject. The current survey also found that 35% shop in-store because they don’t want to wait for online orders in the mail (up 4% from last year), and 15% say they shop in-store to avoid package theft (up 8% from last year).
“Retail and e-commerce continue to evolve,” Jeff Wolpov, Ryder’s senior vice president of e-commerce, said in a statement announcing the survey’s findings. “The emergence of e-commerce and growth of omnichannel fulfillment, particularly over the past four years, has altered consumer expectations and behavior dramatically and will continue to do so as time and technology allow.
“This latest study demonstrates that, while consumers maintain a robust
appetite for e-commerce, they are simultaneously embracing in-person shopping, presenting an impetus for merchants to refine their omnichannel strategies.”
Other findings include:
• Apparel and cosmetics shoppers show growing attraction to buying in-store. When purchasing apparel and cosmetics, shoppers are more inclined to make purchases in a physical location than they were last year, according to Ryder. Forty-one percent of shoppers who buy cosmetics said they prefer to do so either in a brand’s physical retail location or a department/convenience store (+9%). As for apparel shoppers, 54% said they prefer to buy clothing in those same brick-and-mortar locations (+9%).
• More customers prefer returning online purchases in physical stores. Fifty-five percent of shoppers (+15%) now say they would rather return online purchases in-store–the first time since early 2020 the preference to Buy Online Return In-Store (BORIS) has outweighed returning via mail, according to the survey. Forty percent of shoppers said they often make additional purchases when picking up or returning online purchases in-store (+2%).
• Consumers are extremely reliant on mobile devices when shopping in-store. This year’s survey reveals that 77% of consumers search for items on their mobile devices while in a store, Ryder said. Sixty-nine percent said they compare prices with items in nearby stores, 58% check availability at other stores, 31% want to learn more about a product, and 17% want to see other items frequently purchased with a product they’re considering.
Ryder said the findings also underscore the importance of investing in technology solutions that allow companies to provide customers with flexible purchasing options.
“Omnichannel strength is not a fad; it is a strategic necessity for e-commerce and retail businesses to stay competitive and achieve sustainable success in 2024 and beyond,” Wolpov also said. “The findings from this year’s study underscore what we know our customers are experiencing, which is the positive impact of integrating supply chain technology solutions across their sales channels, enabling them to provide their customers with flexible, convenient options to personalize their experience and heighten customer satisfaction.”
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
Krish Nathan is the Americas CEO for SDI Element Logic, a provider of turnkey automation solutions and sortation systems. Nathan joined SDI Industries in 2000 and honed his project management and engineering expertise in developing and delivering complex material handling solutions. In 2014, he was appointed CEO, and in 2022, he led the search for a strategic partner that could expand SDI’s capabilities. This culminated in the acquisition of SDI by Element Logic, with SDI becoming the Americas branch of the company.
A native of the U.K., Nathan received his bachelor’s degree in manufacturing engineering from Coventry University and has studied executive leadership at Cranfield University.
Q: How would you describe the current state of the supply chain industry?
A: We see the supply chain industry as very dynamic and exciting, both from a growth perspective and from an innovation perspective. The pandemic hangover is still impacting decisions to nearshore, and that has resulted in a spike in business for us in both the USA and Mexico. Adding new technology to our portfolio has been a significant contributor to our continued expansion.
Q: Distributors were making huge tech investments during the pandemic simply to keep up with soaring consumer demand. How have things changed since then?
A: The consumer demand for e-commerce certainly appears to have cooled since the pandemic high, but our clients continue to see steady growth. Growth, combined with low unemployment and high labor costs, continues to make automation a good investment for many companies.
Q: Robotics are still in high demand for material handling applications. What are some of the benefits of these systems?
A: As an organization, we are investing heavily in software that will allow Element Logic to offer solutions for robotic picking that are hardware-agnostic. We have had success deploying unit picking for order fulfillment solutions and unit placing of items onto tray-based sorters.
From a benefit point of view, we’ve seen the consistency of a given operation improve. For example, the placement accuracy of a product onto a tray is far higher from a robotic arm than from a person. In order fulfillment applications, two of the biggest benefits are reliability and hours of operation. The robots don't call in sick, and they are happy to work 22 hours a day!
Q: SDI Element Logic offers a wide range of automated solutions, including automated storage and sortation equipment. What criteria should distributors use to determine what type of system is right for them?
A: There are a significant number of factors to consider when thinking about automation. In my experience, automation pays for itself in three key ways: It saves space, it increases the efficiency of labor, and it improves accuracy. So evaluating which of these will be [most] beneficial and quantifying the associated savings will lead to a “right sized” investment in technology.
Another important factor to consider is product mix. With a small SKU (stock-keeping unit) base, often automation doesn’t make sense. And with a huge SKU base, there will be products that don’t lend themselves to automation.
With any significant investment, you need to partner with an organization that has deep experience with the technologies that are being considered and … in-depth knowledge of the process that is being automated.
Q: How can a goods-to-person system reduce the amount of labor needed to fill orders?
A: In most order picking operations, there is a considerable amount of walking between pick faces to find the SKUs associated with a given order or set of orders. Goods-to-person eliminates the walking and allows the operator to just pick. I have seen studies that [show] that 75% of the time [required] to assemble an order in a manual picking environment is walking or “non-picking” time. So eliminating walking will reduce the amount of labor needed.
The goods-to-person approach also fits perfectly with robotic picking, so even the actual picking aspect of order assembly can be automated in some instances. For these reasons, [automation offers] a significant opportunity to reduce the labor needed to fulfill a customer order.
Q: If you could pick one thing a company should do to improve its distribution center operations, what would it be?
A: Evaluate. Evaluate the opportunities for improving by considering automation. In my experience, the challenge most companies have is recognizing that automation is an alternative. The barrier to entry is far lower than most people think!
Toyota Material Handling and its nationwide network of dealers showcased their commitment to improving their local communities during the company’s annual “Lift the Community Day.” Since 2021, Toyota associates have participated in an annual day-long philanthropic event held near Toyota’s Columbus, Indiana, headquarters. This year, the initiative expanded to include participation from Toyota’s dealers, increasing the impact on communities throughout the U.S. A total of 324 Toyota associates completed 2,300 hours of community service during this year’s event.
The PMMI Foundation, the charitable arm of PMMI, The Association for Packaging and Processing Technologies, awarded nearly $200,000 in scholarships to students pursuing careers in the packaging and processing industry. Each year, the PMMI Foundation provides academic scholarships to students studying packaging, food processing, and engineering to underscore its commitment to the future of the packaging and processing industry.
Truck leasing and fleet management services provider Fleet Advantage hosted its “Kids Around the Corner Foundation” back-to-school backpack drive in July. During the event, company associates assembled 200 backpacks filled with essential school supplies for high school-age students. The backpacks were then delivered to Henderson Behavioral Health’s Youth & Family Services location in Tamarac, Florida.
For the past seven years, third-party logistics service specialist ODW Logistics has provided logistics support for the Pelotonia Ride Weekend, a campaign to raise funds for cancer research at The Ohio State University’s Comprehensive Cancer Center–Arthur G. James Cancer Hospital and Richard J. Solove Research Institute. As in the past, ODW provided inventory management services and transportation for the riders’ bicycles at this year’s event. In all, some 7,000 riders and 3,000 volunteers participated in the ride weekend.
After years in the military, service members and their spouses can find the transition to civilian life difficult. For many, a valuable support on that journey is the U.S. Department of Defense (DOD) SkillBridge program. During their final 180 days of service, participants in the program are connected with companies that provide them with civilian work experience and training. There is no cost to those companies while the service member continues receiving military compensation and benefits.
Both sides benefit from the program. “We’re proud to work with SkillBridge to give back to our military veterans for the bravery and sacrifices they’ve made for all of us,” Troy Pederson, director of training and development at LiftOne, a Hyster-Yale dealer and established SkillBridge employer, said in a release. “In the last year, we’ve helped 10 SkillBridge interns transition from military to civilian life, and the value and positive impact of the program can’t be overstated. At LiftOne, we’ve gained so much from the experience and diverse mix of technical and leadership skills of our SkillBridge candidates.”