This page intentionally left blank Chapter 10 Managing Recalls: Before and After T oy recalls have certainly increased in recent years, and not surprisingly, nearly all of them have applied to toys made in China. This situation is a direct result of the Chinese economy opening to trade with the rest of the world, particularly Western nations. Like any fledgling economy, China faces a number of issues, such as lax industry regulations, poor working conditions in factories, burgeoning demand for skills to meet the demands of Western markets, and corruption, to mention only a few. Therefore, discussion of toy recalls (and of product recalls in general) has centered on problems that are endemic to China. However, focusing on issues in China or emerging economies alone can lead to incomplete answers and inadequate solutions. In order to understand product recalls, it is important to dig below the surface-level issues that are related to problems in China and other emerging economies. A critical examination of the toy recalls data in this book has revealed a number of issues that go beyond Chinese manufacturing problems: ● ● ● Toy recalls are increasing, but that scenario in itself should not be a cause for concern because the number of units recalled has not increased. Recalls of toys made in China are dramatically increasing, but the driving force behind this increase has been the even more dramatic increase in imports from China. The source of the problem may not be cost pressures because recalls are not limited to low-priced products; they cut across the price spectrum. In fact, in recent years, recalls occurred more frequently for high-priced toys than for low-priced ones. 114 ● ● ● ● ● NOT JUST CHINA A vast majority of toys were recalled due to inadequate designs the brand-owning companies provided to Chinese contract manufacturers, not to poor manufacturing by the latter. However, recalls due to manufacturing issues have increased in the last few years, largely driven by recalls of products containing excess lead. The recalls for lead shot up dramatically in 2007 and continued in 2008, but a number of the recalled products were on the market for years before they were recalled, pointing to the likely failure of organizations to deal with the institutional differences between the West and Asia, particularly China. Although recalls by manufacturers are at a historic high and are increasing, this increase is not so dramatic compared to the increase in recalls by retailers, who have begun to import directly from factories in China, but lack the necessary experience, skills, or organizational systems to prevent recalls. The time it takes to recall hazardous toys has been increasing in the last few years, perhaps due to a lack of organizational systems to identify the problems or a reluctance of companies to issue recalls. Toy recalls in the recent past have become more reactive than preventive, perhaps due to slower recalls and a lack of organizational systems. The CPSC has substantially increased the number of fines levied on companies that fail to report the problems with their products in a timely manner. While toy recalls are increasing, the time to recall is lengthening, and defective products are proving more hazardous to consumers, the remedy offered to consumers has been decreasing. As a result, there are fewer incentives for consumers to return the defective products. In short, the analysis in this book reveals that while China may be a factor in increased recalls, lack of organizational systems exacerbate the problem. As a result, recalls have not only increased but also have become less effective at protecting consumers. So the question to be asked is not whether China or companies are at fault. Rather, the question should be how we can improve the safety of toys and consumer products in general by decreasing the need for recalls and increasing the effectiveness of those recalls that do occur. The first step in improving toy safety is the responsibility of the manufacturing or importing companies, while the second must be shared between companies and other stakeholders. This chapter primarily focuses on the first step, suggesting that in order to reduce the kinds of situations that necessitate a recall, companies can do a number of things M A N AG I N G R E C A L L S : B E F O R E A N D A F T E R 115 before the toy-production phase, during the manufacturing process, and even after the products are sold. Together, these actions will not only help prevent recalls, but will also make them more effective when they are issued. The analysis in this book reveals that design flaws are the primary cause of many toy recalls. Further, problems during manufacturing also can lead to a number of product hazards, with certain safety issues emerging because of incorrect assembly by users or inadequate product instructions. In short, problems can occur at any stage of the toymaking process. Therefore, it is important to ensure that, at each stage of toy value chain, no slippages occur. Figure 10.1 presents some examples of potential missteps in the toy value chain, which are elaborated in the following sections. Preventing Recalls—Before Products Are Made Pre-production activities in the toy value chain must ensure that the design handed down to the manufacturing stage is safe, sound, and error-free. Such activities include selecting a toy design, developing a prototype, and testing the prototype. These three processes should focus on developing an exciting product but with a safe design. Thomas Watson, former CEO and Chairman of IBM, is known for saying that “good design is good business,” yet many companies still seem to be giving short shrift to design. Industry insiders indicate that only about 1 percent of American companies pay serious attention to design, and very few companies promote executives with design backgrounds to the upper echelons of the organization.1 Not surprisingly, product designs made by generalist manufacturing corporations won only 7 IDEA awards in 2007, whereas those made by specialist design firms won 14. In the previous four years (2003–2006), manufacturing corporations won 100 awards, while design firms won 128. We can see that, in the past, companies that specialize in design won about the same number of awards as those companies that design products as only one part of their operations. That the number of awards won by manufacturing companies appears to be decreasing perhaps indicates that these companies are paying less attention to design excellence.2 As the vast majority of recalls arise due to inadequate design, it is important that companies focus on designing safe toys. Unfortunately, in their haste to be first-to-market, many companies might fail to conduct due diligence on a product, thereby missing the chance to identify any design-related safety issues. Further, • Tension Between User Appeal and User Safety • Meeting Voluntary and Mandatory Standards Toy Design • Propensity to Rush to Market • Test Reports vs. Economic Prudence • Propensity to fail with different material • Actual Flaws vs. Reported Flaws • Test in Use • Design – Manufacturing • Domestic Standards vs. Export Market Coordination Standards • Unintended Presence of Dangerous Material • Consumer Expectations • Safety in Use • Understanding of instructions by users • Consumer Complaints Prototype Development Testing Manufacturing Quality Control Distribution & Sales Questions to Identify Potential Slippages • Would this toy be safe? • Have enough trials – does it have small been made to test parts, sharp edges, and improve the long strings, holes/gaps, prototype? or contains chemicals • Is this product that may be harmful? likely to fail or turn • Is the need to make dangerous with the toy fancy interfering somewhat different with the toy’s safety? material and workmanship? • Can the safety of this toy be increased with some modifications? • Would the toy hold up in use, abuse, and misuse situations? • Has this toy been made to the design specifications or not? • What are the most unexpected ways a child can play with this? • Has this toy used only prescribed material or has any material been changed? • Does the product meet mandatory and voluntary standards? • Does the fact that testers’ colleagues made the design and prototype influencing the error reporting? Figure 10.1 • Has this toy been tested in actual use or just in simulated-use situations? • Are the test reports taken seriously? Potential slippages in toymaking and addressing them • Does the toy contain any dangerous material such as lead paint, chemicals, or needles? • Does this toy break easily? If so, does it generate small parts, sharp edges, long strings, etc.? • Does the toy meet the • Is the material quality and safety used the same as that expectations of the prescribed in the design consumers? • If the toy was not specifications and/or • Do the users understand made per specifications, product prototype? the instructions of would it be caught in • Does the toy meet assembly and play? quality control? the health and safety • Are the users likely to standards of the assemble/use the toy export markets? differently? If so, does that pose a hazard? • Are users complaining about the product? Are there any incidents, injuries,deaths? M A N AG I N G R E C A L L S : B E F O R E A N D A F T E R 117 products are often reviewed and tested for safety within a simulated situation only, and this technique may not be sufficient to identify hazards that could arise during actual use. In order to satisfy the safety expectations of consumers and regulators, product designers must carefully consider every possible way that consumers might use the product.3 They must specifically focus on whether the product is likely to create hazards during its use. Hence, there are two critical factors for companies to consider when selecting a design: the safety of intended users and the standards and regulations that govern the toy. Inattention to either one can compromise the safety of the toy and lead to recalls. A consumer-focused design needs to take into account how consumers actually use the final product. This can be accomplished through ethnographic studies of consumers, that is, simply observing consumers as they use the products in their daily lives. Without such understanding, companies might make an otherwise very good product, but with certain problematic features. For example, LeapFrog recalled 186,000 units of playground activity centers because children’s arms were getting caught in the plastic tube at center of the toy, resulting in bruises and scratches. LeapFrog announced a recall of these products and provided a repair kit that closed the gaps and prevented children from putting their hands into the tube.4 Similarly, Regent Sports sold about 190,000 soccer goal nets in which the squares measured five inches on each side. It was found that children were placing their heads into these gaps, either accidentally or intentionally, which posed a risk of head and neck entrapment or even strangulation. Following two such incidents, including the death of a 20-month-old child who was found with his arm and neck tangled in the soccer goal net, the nets were recalled.5 As part of the recall program, Regent supplied nets in which the distance between knots was reduced to four inches. In these and other similar cases, the design features likely could have been modified and recalls averted if consumer use had been adequately studied and taken into account before the product was manufactured. In designing products, managers face a major challenge as they must make the product appealing to the user and, at the same time, make it safe to use. At times, it is not possible to strike a good balance between these two goals. Products with sharp features and frills tend to be attractive to consumers, particularly young children; however, they can also be dangerous because the sharp parts pose a laceration hazard and the frills might become detached and pose a choking hazard. 118 NOT JUST CHINA In addition to striking a balance between making a toy fancy and making it safe, toy designers must also ensure that their product meets all the mandatory and voluntary safety standards that govern the product. While this may sound easy to do, it can actually be quite complicated, since there are a number of regulations and standards to be taken into account. Adhering to such safety standards can be particularly challenging for retailers and distributors that do not actually design the product, but rather source the completed item from offshore locations where manufacturers may not have knowledge of the standards that govern the product within the export markets. Even for the most experienced toy companies, it is difficult to forecast which toy is likely to be successful. Therefore, companies increasingly rely on designs from inventors and entertainment companies. When a company purchases a design from an inventor, the development cycle gets shortened, and the company managers get much less time to reflect on the design than with an in-house design, for which many deliberations may occur before a design is finalized. Also, in the case of characters bought from entertainment companies, it may become challenging to ensure their safe construction while still retaining their original features. For example, Mattel’s Batman cars were designed with pointed wings to look like the actual Batmobile. But they had to be recalled as their sharp wings posed a laceration hazard. Although it is difficult to design a safe product, it is easiest and most efficient to consider safety issues at the design stage. Companies can reduce the possibilities of injury to children and the prospect of a recall by asking explicit questions aimed at ensuring that the toy meets the required standards and its safety has not been compromised in exchange for fancy features. Such questions could include whether the toy meets mandatory and voluntary standards; whether the toy has small parts, sharp edges, long strings, holes/gaps, or contains harmful chemicals; whether specific features that make the toy look authentic interfere with its safety; and whether simple modifications could increase the safety of the toy. Following the designing phase, the company must develop and test a prototype. In the prototype development stage, the factors that might contribute to missteps relate to the time available for prototype development and the propensity of the toy to fail or become dangerous if alternate materials are used. The toy industry is very competitive and other companies can introduce similar products. In such an environment, there is often a rush to bring ideas to market, especially in the case of toys that are based on movie characters, whose launch M A N AG I N G R E C A L L S : B E F O R E A N D A F T E R 119 must coincide with the movie’s release. The rush to get the toy to market may preclude proper testing. When a prototype is made, developers take a great deal of care and use high-quality materials. In addition, those developing the prototype are very highly skilled technicians. These factors may be absent, however, when the toy is eventually mass produced; for that reason, it is important to consider whether the toy is likely to fail if it is built with somewhat different raw materials or less-expert care. For example, the time between processes in a mass-production system may be forcibly reduced in favor of economic expediency. Consequently, parts of a toy may not be glued adequately or stitched properly. Such eventualities need to be considered at the prototype development stage. It is not always possible for companies to speculate on the possibility of a toy failing with different materials. For example, faced with several cases of chemical poisoning in children who chewed or swallowed their Bindeez/Aqua Dots toys, Moose Enterprises and its distributors around the world had to issue an immediate recall in November 2007. At that time, Moose Enterprises had no idea why its toys had turned deadly, but investigations eventually revealed that the manufacturer in Shenzhen, China, who made the toys for Moose Enterprises on a regular basis, had substituted one chemical (1,5-pentanediol) with another (1,4-butanediol). Apparently, both these chemicals were widely used in Shenzhen factories, given the large-scale manufacturing that occurs there. The latter chemical (1,4butanediol ) was cheaper but when ingested turned into a compound similar to gamma hydroxy butyrate (GHB). Commonly known as the fantasy or date-rape drug, GHB causes sedation and, in severe cases, coma or death. Following the development of a prototype, managers should take care to adequately test that item, and such tests should ideally be done in actual-use situations, performed by target users. Too many companies rely on actual people to test product appeal but then use dummies to test the safety features of products such as cribs. The use of dummies is unavoidable in certain cases, such as crash tests for car seats, for example, but in many instances, companies can spot potential dangers by using representative consumers to test the product usage in a more realistic setting.6 Even if companies are unable to change the product to address such flaws following the tests, they could at least provide clearer usage instructions and warnings. Testing the toy in actual-use conditions might also help companies to understand whether it could withstand normal use, abuse, 120 NOT JUST CHINA and misuse by children. Identifying some of the unusual ways in which children may use the toy or its parts can be very useful for a company. In one example, children who had access to the magnets used in toys did unexpected things, such as putting them in their ears. As a result, medical attention—including surgical intervention—was needed in several cases. These incidents, which were unearthed after the production of the subject toys, could have at least been visualized if the products had been tested in actual-use conditions. This would have helped companies to encase the magnets so that they could not become accessible to children, a design feature which toy companies adopted following the large-scale recalls of toys with magnets. Even more important than testing, however, is the responsibility of senior managers to listen to the concerns of the designers and the testing engineers. Reports from testing engineers are often downplayed or overlooked in favor of economic priorities or in the excitement of taking a new product to market. Graco, for example, produced a cradle in 1989 that did not have a restraint belt to prevent babies from sliding into a corner and suffocating, despite engineers’ recommendations to the contrary.7 As a result, when the product was bought and used by consumers, a number of injuries and several infant deaths occurred. Eventually, Graco recalled all 169,000 units sold. When designs are created in-house, companies may face another kind of challenge in identifying problems. Testing engineers may not report design problems if doing so could negatively affect their colleagues in the design department. While the testing engineers may not deliberately avoid reporting, they might be somewhat influenced by their relationships or they might downplay potential issues. Therefore, companies need to make sure that testing engineers completely and correctly report all observed flaws to the senior managers. In short, managers need to pay close attention to the safety features of a toy, particularly ensuring that fancy features do not impinge on the toy’s safety. In addition, companies should provide adequate time and resources for prototype development and testing. More importantly, reports from testing engineers should be heeded and incorporated into the final product. These steps will ensure that the manufacturers receive a sound design. In spite of these measures, there may still be evidence of toys that have not been produced as intended or as designed. Given that the manufacturing of toys often takes place halfway around the world, it is equally important to monitor the value chain activities after the toy design is handed over for manufacturing. M A N AG I N G R E C A L L S : B E F O R E A N D A F T E R 121 Preventing Recalls—As Products Are Made The steps discussed in the previous section were aimed at creating a sound design, but in order to ensure maximum product safety, it is equally important that the manufacturing is done according to that design. This requires close supervision and quality control during the manufacturing process. As designs are turned into finished toys, companies face three major challenges: first, they must ensure good coordination between design and manufacturing; second, they must ensure that the toys produced meet the standards of the export market; and third, they must eliminate the possibility of unintended materials being used in the final product. Each of these issues is worthy of some discussion here. In the old days, a firm designed, developed, and manufactured its own products, perhaps all under one roof, which resulted in close coordination between design and manufacturing. However, in the present environment, in which manufacturing takes place in a country halfway around the world by a different company, it is not easy to ensure that the product is manufactured according to design specifications and in the exact manner the designers envisaged. Although designers may develop a product, those who are engaged in its manufacturing actually spend more time with it and are more likely to notice potential problems with the final version. If there is no coordination between the design and manufacturing activities, those involved in manufacturing may simply ignore any problems they spot and let production roll. This scenario is especially likely if the manufacturers have no stake in the overall product or in the brand of the product. In order to achieve close coordination between the design and manufacturing parts of the value chain, companies must have specific systems and processes in place to ensure that the production process adheres strictly to the design specifications.These systems should provide a feedback loop between manufacturing and quality control and the corporate headquarters that are responsible for the design and overall safety of products. The spate of recalls due to paint with excess lead and other dangerous chemicals highlights these difficulties and points to the complexity of managing such lengthy supply chains. Not only geographic distance, but also the differences in management practices, regulatory standards, inputs used, and cultural norms make it difficult to ensure a strong link between design and manufacturing. As a result, many companies have resorted to the practice of engaging agents who possess specific knowledge of working in 122 NOT JUST CHINA the outsourcing country. The job of these agents is to “get the job done” for the brand companies according to the specifications given to them. But this can also result in serious slippages, as in the following example of the Aqua Dots recall. A company called Moose Enterprises developed Aqua Dots and then outsourced their production to a Chinese manufacturing company. When that company changed the toy’s ingredients, Moose Enterprises was unaware of the change. The source of this misstep was likely the company’s agent in Hong Kong, Duo Yuan Plastic Production Company, who in turn outsourced the production to Wangqi Product Factory. Apparently, Wangqi had submitted the production formulas and samples to Moose Enterprises’ agent, Duo Yuan, before mass production and had received no objection. It is possible that Duo Yuan did not notice the changes because their expertise was in arranging manufacturing and dealing with Chinese manufacturers, rather than in assessing the impact of formula changes. Or perhaps Duo Yuan simply did not bother to inform Moose about the change because the original material (1,5-pentanediol) was three or four times more expensive than the one used (1,4-butanediol), and so, from a cost standpoint, it was favourable to Duo Yuan. If Duo Yuan had informed Moose, the company would have asked Duo Yuan to use the material per design specifications, which would have cut into the profits of Duo Yuan. Notwithstanding the reasons for this failure of communication, it was Moose Enterprises that bore the brunt of the outrage that followed the recall of the Aqua Dots toys. Companies can avoid crisis situations like the Aqua Dots recall by coordinating closely with their manufacturers, vetting the suppliers of manufacturers, and monitoring the inputs. While this seems quite achievable, industry insiders suggest that very few brand-owning companies actually work closely with manufacturers and suppliers. In fact, a number of companies have outsourced both production and quality testing to the same manufacturers, a practice that can lead to large-scale systemic failures, as the lead recalls have already shown. For years, various suppliers were using paint with excessive lead in a number of products. This practice went largely undetected, perhaps because Western companies were unaware of how available and frequently used lead is in China and other developing countries. Not surprisingly, before the lead-related issues in toys began to surface, many companies, like Mattel, asked their contract manufacturers to test the final products to ensure that the paint used on toys was leadfree. Obviously, this system is flawed because contract manufacturers may not have the necessary incentives to meet the standards. This M A N AG I N G R E C A L L S : B E F O R E A N D A F T E R 123 system worked “smoothly” for years, but was eventually found to be flawed, as millions of completely untested products made by thousands of suppliers flooded the market. Considering the great potential for quality breakdowns between the design and manufacturing phases, it is important for firms to set up their own systems of inspection and conduct them more vigorously. Such inspections would likely identify cases such as missing screws, which resulted in a recall of bunk beds made in Brazil by The Land of Nod8 and toy pans made in China by Fisher-Price.9 Working closely with the manufacturers and their suppliers can help to avoid systemic problems such as those related to lead paint as well as other recalls that become necessary because the products have not been made according to their design specifications. However, it is very difficult for retailers and importers, who are less likely to have the required infrastructure or knowledge, to put such practices into play. Despite the financial and human resources required to monitor manufacturing overseas, there is no substitute for knowing the people, the material, and the norms of the place where the products are being made. Such knowledge can often be used to redesign the products and thus avoid future problems. For example, Indian artisans made toys with soft wood; as a result, finer parts, such as beaks of birds or ears of animals, would easily break off and pose a choking hazard for children. When the importers of these toys interacted with the artisans, the artisans nonchalantly mentioned that soft wood breaks easily and that the users should recognize that fact. For their part, the artisans had taken the nature of wood for granted, since their skill was in carving it, not in predicting its uses. The importers redesigned the toys to eliminate the small parts that were prone to breakage.10 Even the Aqua Dots toys were reintroduced to the market after they had been redesigned to be covered with Bitrex, which is a safe solution with an extremely bitter taste that dissuades children from placing the product in their mouths. The latter example reinforces the importance of taking manufacturing and user habits into account during the designing process.11 Between the design and manufacturing stages of a global supply chain, there are numerous opportunities for slippages. Firms can reduce the scope for these mistakes by creating third-party or selfowned monitoring systems and through increased inspections. These systems would help to ensure the integrity of the final product, making it as safe as possible for use. In addition, companies need to know the manufacturing context of their suppliers, which could help them to redesign products in ways that eliminate any existing hazards. 124 NOT JUST CHINA Preventing Recalls—After Products are Made and Sold The preceding discussion has pinpointed the need to develop a good design and ensure that production is completed according to that design’s specifications. An equally important step in consumer product safety is to communicate the instructions related to product assembly and usage. Managers face a number of challenges at this stage of the value chain, including meeting consumer expectations, ensuring safety by providing instructions that users can easily understand, and—more importantly—monitoring post-sale consumer complaints and taking quick preventive action in response. Managers experienced in marketing are most likely to have the appropriate knowledge to handle these activities. When it comes to preventing recalls, marketer might not be the first word that comes to mind. However, if companies want to be proactive about recalls, they need to make optimum use of the customer knowledge held by their marketing personnel. Undoubtedly, a company’s marketing staff has the closest contact with and richest knowledge about product users, and about the market itself, and this knowledge can be parlayed into the redesign of products in order to avoid misuse and danger. Also, companies can use marketing as a way to identify product defects before they turn into full-blown crises. Certainly, a recall made before any harm has occurred to consumers is less damaging to the reputation and the bottom line of the recalling company. Marketers are knowledgeable about the customers who use a given product, and they can tap into that knowledge to evaluate how the products might be used or abused. Also, marketers can assess whether local consumers will use the product in the intended manner. For example, TTK India is a leading manufacturer of pressure cookers and has sold millions of them in India. When TTK’s subsidiary, Manttra, imported these Indian-made pressure cookers for sale in the United States, the parent company soon learned of two incidents where hot contents had spilled out and caused minor burn injuries to the users. Manttra discovered that the incident had occurred because the cooker lids were not closed properly. It is common knowledge among Indian consumers, who regularly use pressure cookers, that the contents of the container will spill out if the pressure cooker’s lid is not closed properly. However, consumers in the United States were not as familiar with pressure cookers and did not have a similar degree of knowledge. Therefore, Manttra recalled 38,250 cookers and provided the consumers with a new replacement pressure valve M A N AG I N G R E C A L L S : B E F O R E A N D A F T E R 125 that would prevent opening of the lid until the temperature inside the cooker had dropped to a safe level.12 This feature has since been incorporated into the more recent designs of the cookers in order to make them safer. It is very common for younger children to use products that are designed for older children. On the face of it, if an injury to a young child occurs during the use of such products, the consumer is at fault. However, if a product is accessible to children and can pose danger to them, the CPSC and consumers would like the company making the product to eliminate that danger. For example, as discussed in chapter 8, Hasbro recalled nearly 255,000 tool bench toys because the two, 3-inch plastic nails supplied with the tool bench resulted in deaths of two small children, both aged less than two years. These children suffocated when the nails became lodged in their throats. The nails were not small parts and the toy tool bench was intended for use by children three years and older. Nevertheless, the toys were recalled because they were accessible to younger children and posed serious danger.13 As experts on consumer behavior, it is the marketers who have the knowledge to either foresee such usage or to know about such usage because of their close contact with customers. The importance of close consumer contact is underscored by the research finding that retailers identify problems and recall the products more quickly than those further removed from the customers, such as manufacturers and suppliers.14 In 2007, Sears issued a warning to consumers, asking them to remove the label on its Craftsman circular saws. The label on the upper blade guard of the saw became partially detached and interfered with the operation of the lower blade guard, exposing the saw’s blade and posing a laceration hazard.15 There were only two reported incidents, but Sears was able to act swiftly to announce a recall because it was close to the end customers. As discussed in chapter 5, Toys“R”Us recalled four thousand children’s craft sets after just two incidents because the instructions accompanying the set asked children to microwave the soap disks for ten minutes, instead of ten seconds.16 This simple typographical error, which resulted in a fire hazard, points to the importance of clear and accurate instructions for use of a given product. Instructions need to be both accurate and easy to understand. Product recalls that occur due to incorrect installation or assembly by consumers are quite common. By paying attention to instances of incorrect assembly, instead of ignoring them or blaming the 126 NOT JUST CHINA consumers, companies gain an opportunity to design a preventive mechanism, as in the aforementioned example of Aqua-Leisure, who improved the clarity of its assembly instructions by color-coding the snap-on clips for its pool ladder steps. When consumers are injured while using a product, it is always possible to at least partially attribute the incident to them. Such situations could take the form of incorrect assembly, improper use, use by unintended users, inadequate skill to use the product, or—in the case of children—lack of adequate parental supervision. However, even if the consumer was at fault or likely contributed to the incident, companies still need to carefully study all such incidents. Attention to consumer complaints and reports may reveal a pattern of errors that can in turn be used to design a safer product. Ultimately, ensuring that consumers correctly assemble and use a given product is just as important as designing a safe product and manufacturing it according to the design. Managers, particularly those involved with marketing, need to pay attention to actual usage of the product in order to visualize potential problems. Further, managers should also track consumer complaints to examine whether there is a pattern of problems that future designs could address and eliminate. Preventing Recalls through Better Knowledge Management Companies can prevent product recalls by ensuring that activities across the value chain are performed carefully. These activities primarily include designing a safe product, manufacturing the product according to its design specifications, and communicating the appropriate methods of product usage to consumers. In order to achieve these three goals, managers must mobilize the vast amount of knowledge available within and outside their organization, leveraging it to ensure safe products. Product quality can be enhanced by integrative knowledge management, which deals with not only the tacit and explicit dimensions of knowledge, but also with its internal-external dimensions.17 Explicit knowledge can be articulated and recorded in documents, drawings, and databases. In contrast, tacit knowledge cannot be fully articulated, but rather is revealed in actions by individuals in the course of organizational life. The knowledge that resides within a firm’s boundaries is internal knowledge, while the opposite—external knowledge—is held by suppliers, customers, competitors, and others. M A N AG I N G R E C A L L S : B E F O R E A N D A F T E R 127 A vast amount of knowledge is available to managers, and it can be mobilized to ensure product safety and prevent recalls. As presented in figure 10.2, this knowledge ranges from reports of design engineers within the company to shared understandings between the company and its suppliers. Explicit knowledge available within the company includes reports of design and testing engineers, as well as complaints received from consumers. The case of Graco, who made and sold cribs without a restraining belt—contrary to recommendations by design and testing engineers—serves as an excellent illustration of how failure to leverage internal knowledge can prove disastrous. Tacit Knowledge Explicit Knowledge Internal Knowledge External Knowledge • Reports of design engineers • Reports of testing engineers • Complaints received from customers • CPSC—Database on recalls to check patterns of problems, investigative reports of CPSC, top dangers outlined by CPSC • Reports published by consumer advocacy groups • Research studies published in medical and other healthcare related journals • Research studies by health and safety experts • Standards related to materials used in toys—legislations around the world • Reports and opinions of consumers on blogs (www.consumerist.com) • The concept of safety and acceptable risk— whether it is shared commonly across the organization in various functional areas and across geographical boundaries • Intuitive observations by design and testing engineers about product safety • Handling of unforeseen problems, reporting of issues • Whether the suppliers share the same concept of safety and acceptable risk as the organization • Whether the suppliers use the same material consistently during the product’s life cycle; if they change, how does the change affect the product? • Industry norms, culture, and relationships with suppliers—whether suppliers communicate openly and equally with the company • Supply chain practices in China • Guanxi and relationships, how they override documents and stated requirements • Value of spoken word and relationship over written words and contracts Figure 10.2 Product Safety and Knowledge Types in Toy Industry 128 NOT JUST CHINA In contrast, explicit knowledge that is available from outside the firm ranges from recall notices of the CPSC to standards governing the product and studies published in medical journals. To name one source, the CPSC database of nearly five thousand recalls is a useful source of information that can help companies to understand what kinds of problems result in recalls. Similarly, studies published in medical journals can often provide insights on how the products may be used in unexpected ways, thus injuring consumers. For example, nearly a decade before small powerful magnets were used in toys, cases of children ingesting magnets and requiring surgical attention were reported in Korea.18 This was soon followed by another case in the United States, as reported in The New England Journal of Medicine, wherein a 10-year-old girl had placed a pair of magnetic rings in her nose. These magnets stuck together in her nose and had to be removed through medical intervention.19 Another paper reported 24 such cases seen at one hospital in the United Kingdom, ranging from instances of children placing magnets in their ears to ingesting them.20 In earlier chapters, similar examples of children ingesting magnets and in turn requiring surgical intervention were discussed. If companies had used this knowledge, which was already available from the medical community, then the number of injuries and fatalities that preceded the magnetic toy recalls could certainly have been reduced, if not prevented altogether. Unlike the explicit knowledge that is available in documents and hence, searchable, tacit knowledge is not codifiable. In order to access tacit knowledge, companies must create a culture of openness in which employees can freely share their observations, even if those observations compromise the immediate financial interests of the organization. While it is difficult to access tacit knowledge within an organization, it is even harder to access it outside the organization. When the suppliers are not treated as equal partners or where cultural differences exist, tacit knowledge is extremely difficult to obtain. An example of this problem can be seen in the challenges that companies face in offshoring their manufacturing to Asian countries. It is highly uncommon for Asian partners and employees to express their thoughts openly, due largely to their culture and upbringing that emphasizes respect to authority and low self-concept due to historical reasons, such as colonization. Further, companies in emerging economies operate within a more informal regulatory culture, in which written contracts receive little weight. For example, if a manufacturing company in China is given a contract instructing that only lead-free paint should be used, that company is less likely than its U.S.-based M A N AG I N G R E C A L L S : B E F O R E A N D A F T E R 129 counterpart to pay attention to it. Instead, the Chinese manufacturer would be more likely to expect that if such requirement was supposed to be met, the brand-owning company would closely monitor the situation, since, in Asian countries, more emphasis is placed on interaction and less on the written words in contracts. If companies do not have tacit knowledge that allows them to understand such cultural nuances, they are likely to operate in the same way they do in the Western world, simply relying on a well-drafted contract. In sum, managers can reduce product recalls by leveraging the vast amount of knowledge available to them, both within and outside their companies. Any knowledge so leveraged can then be used to create better designs, to manufacture goods according to those designs, and to communicate the appropriate use of products to consumers. However, in order to enhance product safety and decrease product recalls, it is important that other stakeholders play their part as well. These stakeholders include regulators, researchers, and, more importantly, consumers themselves. In the next chapter, we discuss the steps that these stakeholders can take to increase product safety and reduce recalls. This page intentionally left blank Chapter 11 Managing Recalls: Everybody’s Business Since products are typically recalled because they present harm to consumers, the recent increase in product recalls should be a matter of concern for everyone, especially because the injuries and deaths defective products cause are bound to result in untold societal costs. In addition to physical injury, product defects lead to property damage, which can cause severe financial and psychological distress to consumers. Also, administering recalls and managing recall consequences can be very costly to companies, both financially and in terms of reputation. Certainly, company managers play a major role in the crusade to decrease recalls and increase consumer product safety, but there are other stakeholders as well who should be expected to take part in increasing consumer product safety. The stakeholders in product safety include researchers, consumers, regulators, consumer advocates, lawyers, politicians, and the media. While each has some influence on consumer product safety, researchers, regulators, and consumers in particular have direct opportunities to prevent recalls. In the following sections, we discuss these opportunities. Recalls and Researchers Researchers can play a major role in decreasing recalls and increasing consumer safety by studying recalls in order to generate knowledge that other stakeholders can use. Although recalls are not new, very limited research attention has been paid to this important phenomenon. The research that does exist is disparate and spread across multiple functional areas, which limits the ability of research findings to generate an integrated picture of recalls.1 PRODUCT RETURNS PROCESSING: AN EXAMINATION OF PRACTICES OF ... Stock, James R;Mulki, Jay P Journal of Business Logistics; 2009; 30, 1; ProQuest Central pg. 33 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.
Purchase answer to see full attachment