Recalls to cost MNCs dear

In 2006, Dell recalled 4.1 million notebook computer batteries made by Sony because of overheating and fire risks. It was the largest recall in the company's history.

Then, Apple recalled 1.8 million iBook and PowerBook laptop batteries that were also made by Sony.

A couple of days ago, Nokia issued a 'product advisory' (the company does not call it a recall) for the BL-5C battery manufactured by Matsushita Battery Industrial. On the first day of the opening of its centre (August 16) for advice on the faulty batteries, Nokia India answered 20,000 calls and received 1.45 lakh SMSes , according to Devinder Kishore, director, marketing, customer and marketing operations.

A product recall is a request to return to the maker, a batch or an entire production run of a product, usually over safety concerns.

Whatever the term one may use, replacing a product highlights one aspect of the supply chain called "reverse logistics", which simply means the product distribution process is traced backward from the consumer to the manufacturer.

The logistics and information systems have to be in place to facilitate an efficient product recall.

In Nokia's case, Kishore says: "Our networking logistics is good, as Nokia has a good penetration in India. However, we have tied up with several courier services so that customers get products in time. The maximum time taken for delivery will be 10 days."

In Mattel's case, China makes nearly 80 per cent of the toys that come into the US, and is a leading exporter of products from electronics to apparel, to auto parts. One will have to, therefore, monitor the complex supply chain that links them to low-cost production facilities in China.

The cost of reverse logistics itself equals about half of one per cent of the US gross domestic product. In the US alone, the cost is an annual $100 billion. Third Party Logistics (3PL) providers (firms that provide outsourced or 'third party' logistics services to companies) see that up to 7 per cent of an enterprise's gross sales are captured by return costs.

Almost all reverse logistics contracts are customised. The 3PLs realise anywhere between 12-15 per cent of the profits on this business.

US-based Newgistics Inc, for instance, employs the Newgistics' intelligent returns management technology, used by leading retailers like Neiman Marcus, Aerosoles, J Crew and Road Runner Sports.

"With consumer safety and brand perception on the line, timely action and customer convenience are of the utmost importance," says Bill Razzouk, CEO of Newgistics.

Once a company has developed the product recall message in conjunction with the Consumer Products Safety Commission (CPSC), Newgistics works closely with the company to deliver customised recall information to impacted consumers via email or postcard communication.

In India, players like DHL India use 'reverse logistics' solutions for returns and parts management. AFL Chief Executive (Logistics), V V Rao, said Indian companies are increasingly looking at the reverse logistics business, though it isn't considered profitable. Indian players are now setting up distribution centres and warehouses for this purpose. For instance, AFL, which handles transportation for Ericsson, is taking the help of its service centre.

Another technology that helps with traceability is radio frequency identification (RFID).

It allows the supply chain market to streamline its information and assist with product recall.

By capturing information that is instantly processed and stored, everything needed to locate and facilitate a product recall is at the company's fingertips.

Long list

2006: Sony notebook batteries recall

August 2006: Dell recalls over 4 million notebook batteries, after a number of instances where the batteries, made by Sony, overheated or caught fire.
Most of the defective notebooks were sold in the US, however some 1 million faulty batteries could be found elsewhere in the world.

August 2006: Following Dell's battery recall, Apple Computer also recalls 1.8 million Sony notebook computer batteries. Similar to Dell, most of the notebooks were sold in the United States. However some 700,000 units could be found overseas.

September 2006: Matsushita (Panasonic) recalls 6,000 batteries.

September 2006: Toshiba recalls 340,000 batteries.

September 2006: IBM/Lenovo recalls 500,000 batteries.

October 2006: Hitachi recalls 16,000 batteries.

October 2006: Fujitsu recalls 338,000 batteries.

October 2006: Sharp recalls 28,000 batteries.

February 2007: Lenovo and Sanyo recall 200,000 batteries.

March 2007: Menu Foods and several other companies issue numerous pet food recalls.

March 2007: Ford Motor Company recalls new 2008 Super Duty after reported tailpipe fires in the diesel version.

April 2007: Nestle voluntarily recalled it's Caramel Kit Kat Chunky bars and KitKat Cookie Dough Chocolate bars due to some bits of hard plastic being found in it

June 2007: Foreign Tire Sales Inc told to recall tyres imported from Hangzhou Zhongce Rubber Co, of Hangzhou, China. The tyres were not made to safety standards to prevent tread separation, a problem that led to the nation's largest tyre recall in 2000 by Ford Motor Company.

Foreign Tire Sales Inc, is unable to comply with the recall since it has about 6 employees and doesn't have money to pay for a recall. Further, Hangzhou Zhongce Rubber doesn't have accountability for a recall since the company is based solely in China and sells in the US through third-party re-sellers.

July 13, 2007: Gerber recalled Organic Rice Cereal and Organic Oatmeal Cereal after a Tampa, Florida parent, Richard Andree, found approximately 30 hard chunks, some of which were a ½ inch long in the product.

August 14, 2007: Nokia recalled 46 Million BL-5C batteries after a primary investigation which revealed faulty manufactured batteries by Matsushita Electric Corporation which could explode after short circuit.

August 1, 2007: Mattel's Fisher-Price division recalls 1.5 million Chinese-made pre-school toys such as Dora the Explorer, Big Bird and Elmo after it was discovered they had been painted with lead-based paint

August 14, 2007: A second recall in two weeks by Mattel, this time for more than 9 million popular toys with potentially hazardous lead paint or magnets

(With inputs by Shivani Shinde and P R Sanjai)