Connected Supply Chain Show

Supply Chain in Reverse: When a Product Recall Hits, Transparency is Critical

Posted by Peter Edlund on Wed, Nov 16, 2016

Each month, hundreds of products are recalled. And while we’re all aware of the major recalls that have reached crisis proportions, like the Samsung Galaxy Note 7 or Takata airbags, every week there are dozens of recalls that don’t receive widespread media attention. Recalls regularly touch nearly every industry, from consumer products and automobiles to pharmaceuticals. The chances that a recall will hit your supply chain are high, and it’s important to be prepared.

When a recall happens, the stakes are high. And the need for a transparent supply chain where all participants can communicate directly with one another, identify where the defective products are at any point in the process, and receive up-to-date information instantly is critically important. Suppliers and retailers can’t afford to wait for paper communications, or risk errors from manually reentering data into a system.

During a recall, speed and efficiency are paramount, and can make the difference in restoring the company’s profits, brand and reputation, and mitigating its legal liability. Manual supply chain processes just can’t keep up with the speed product recalls demand.  Companies turn to technology such as enterprise resource planning, electronic data interchange, RFID, and transport technologies that provide the speed, flexibility, accuracy and clear resolutions that can help keep a smaller recall from turning into a larger crisis.

Look for Early Warning Signs to Prepare for the Unknown

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In the early stages of a recall, there may be warning signs, but no clear path to fixing the issue. There might be customer complaints, or larger-than-normal returns. There might be acknowledged problems from the manufacturer that appear to be manageable at the start. But often the potential size of the problem and ultimate impact is not known. So the ability to be flexible and to scale processes is critical. 

The supply chain has to be able to accommodate the unknown unknowns, those variables and issues that you don’t even know exist at the start. For example, suppliers need to quickly remove recalled products throughout the entire supply chain, which places additional strain on warehouse management systems to provide correct information on current inventory levels. Also removing products from stores can put stress on the company’s managed transportation if the trucks are unable to accommodate additional loads.

Standard Electronic Formats to React in Real-time 

Using a standard electronic format between business partners, such as EDI, can help create supply chain transparency. For example, using such standards for business-to-business integration (B2Bi) enables partners to share important information such as production and transportation plans, orders, inventory, and allocations allowing for complete visibility in the supply chain. This allows companies to be agile enough to handle a recall, even if the size and scope are unknown.

EDI enables all parties in the supply chain to have a full view of the products throughout the distribution process. By enabling information to be shared electronically, EDI permits suppliers, manufacturers, and retailers to receive and react to new information in real time. And it creates a data trail, making it easy to find information about particular orders, shipments, inventories, and status of operations at other hubs along the supply chain.

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Adhering to Recall Regulations in a Complex Environment

When a recall strikes, manufacturers not only have to worry about efficiently removing products from shelves, but complying with regulators. Recalls in many industries are regulated—such as the Drug Supply Chain Security Act for the pharmaceutical industry, and the Consumer Product Safety Improvement Act for consumer goods ¾ and the government provides strict guidelines about how the recall should be handled. This includes supplying adequate documentation. Manufacturers have to meet product tracing requirements and ensure that all defected goods are removed from the distribution chain. Companies are often required to show the chain of custody for the affected products to provide proof that integrity was maintained in order to conduct additional testing and analysis. 

Yet, the complexity of today’s supply chains means that this can be a momentous task, especially if the manufacturer’s standard processes require manual tracking and documentation. Utilizing lot tracking systems and warehouse management functionality, including radio frequency identification (RFID), bar coding, labels that can be scanned, and EDI, creates a smooth tracking process where all key personnel can access real time data on different products. This enables suppliers to track the defective goods, to know if they are in a warehouse, in transit to a retailer, or sitting on a store shelf. It also creates a data trail which makes documenting the removal process and chain of custody easy for regulatory reporting.

Implement Checks and Balances to Trigger Alerts

In fact, we used these tools to help one of our clients prepare for a possible recall. We worked with McKesson, a medical supplies, pharmaceutical and health services company, to implement technology that automated the process of assigning data base lot numbers to different items. With this system, in the event of a problem, McKesson could locate in real time exactly where each affected item was and remove it. Previously, the company was doing this process manually and managing it with spreadsheets, an inefficient method that could possibly lead to errors. The EDI system we installed stored the data to make it available to all players along the supply chain. It also implemented checks and balances to guarantee the products were tracked correctly. And it had built-in checks and balances. If a supplier did not put a lot number on a shipment, the goods wouldn’t be accepted at the distribution center. Instead, the system would trigger an alert, and a lot number would be issued in real time.

Recalls can put the supply chain into a tailspin. Running it in reverse for a product recall can be costly, and has the potential to significantly damage the supplier’s reputation, create significant costs, violate regulations. Speed and transparency are critical. Incorporating technologies, such as EDI, that automate the process and make it fully transparent can make a huge difference, ensure the company meets all regulatory requirements.

 Photo credit: CNN Money EDI: In-house vs Outsource Whitepaper

Topics: B2B integration, cloud EDI

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