Product recalls are a regular occurrence, making the headlines on a monthly, even weekly basis. They affect not only the consumers of potentially harmful products, but also manufacturers, retailers, transportation providers, and others throughout the supply chain. However, with a reliable technology platform and transportation network, shippers can mitigate the impact of widespread issues across supply chain functions and get operations back on track more quickly.
Recalls can vary from a few thousand pounds of product to millions, and the impact can be widespread across supply chain functions. The three most common are:
- Shipper capacity. When goods are recalled, shippers need truck capacity to move products back to both company facilities and facilities that will dispose of harmful items. Typically this has a few immediate outcomes for shippers: they tap into contract capacity, which can force normal business to rely on higher-cost carriers on the routing guide or spot market; or, they source truck capacity directly from the spot market, and are in turn subject to the incremental costs associated with the short lead and urgent nature of the problem they are facing.
- Warehouse operations. When goods need to be sent back to origin facilities during recalls, it can have a potential negative impact on warehouses, as docks can be clogged from the influx of unexpected inbound volume. This could create an environment for increased detention costs on freight coming in and out of the facility, and can also necessitate overtime costs for warehouse resources.
- Inventory and work in process (WIP). If a recall issue involves inventory that hasn’t shipped yet or worse, inventory and WIP materials that impact production, this can send a ripple effect throughout the supply chain. Other facilities in the network may have to ramp up and supplement product, and/or suppliers must expedite raw materials to enable production of error-free goods. With this scenario there will most likely be the shipper capacity issue mentioned previously, as additional truck capacity must be sourced to accommodate the movement of these products and/or raw materials.
Leveraging technology to reduce the impact of recalls on the supply chain
Transportation management technology and a strong network can help lessen the damage caused by a recall. Typically, the first reaction from a shipper is to receive the bad product back as quickly as possible. Shippers can leverage tools like TMS spot markets for insight to scenario-based costing associated with facilitating recall returns. Customer service teams can help assess customer needs and tolerance, which can be balanced with rate data. Armed with market rate index, contracted rates and quotes on incremental costs, shippers can prioritize which loads to move first, and where to spend top dollar to return during these events.
Whether or not there is an opportunity to prioritize returns, a Transportation Management System (TMS) can help flag loads for later financial impact analysis. Financial reports can be run including or excluding flagged loads, and can help answer questions such as, “how would the month have been from a financial performance perspective if we didn’t have the recall?”
Improved visibility across your supply chain leads to better control and communication when recalls happen. Shippers with the ability to see where potential contaminated product is in the delivery process gain a critical advantage in mitigating cost and the public relations impact. The faster a shipper can identify which loads are impacted, the quicker stakeholders can communicate to external partners such as warehouses and carriers on which loads have been delivered, shipped, staged at a warehouse, or what is in inventory or WIP.
In the event of a recall – what’s the plan?
No one plans to have a product recall. But supply chain teams are wise to have a playbook for execution steps if an issue is found, in order to mitigate further negative impact. This includes tactical actions for each stage of delivery:
- Delivered product – TMS can alert customer service teams to which loads have been delivered to customers so they can be contacted regarding next steps for the damaged product they received.
- Shipped product – TMS/ERP can alert transportation teams to identify which loads are in-transit to customers so they can contact carriers on where to deliver contaminated items.
- Staged/Inventory – WMS can alert warehouse personnel to which loads are preparing to ship from the warehouse. This enables staff to halt shipments of bad product and prevents it from being delivered to customers.
- WIP- Proper materials management processes can track the flow of raw materials into production processes, down to identifying which products, orders, and shipments are impacted in the first three areas.
A product recall can take any company by surprise, but it is possible and wise to prepare for how to handle the situation should it occur. Having a plan in place for every stage is key. In addition, connectivity to an extensive transportation network provides an advantage in any scenario. Knowing how to react and being able to execute quickly will help to minimize disruption in your supply chain.
Matt Anderson is Director, Logistics as a Service at BluJay Solutions.