No Excuses – Product Recalls, Warranty Issues and Quality Issues Can Be Avoided

The case for deploying third-generation product quality management tools to better manage product performance


At the same time, we are now living in a "flat" world where products are designed, developed, manufactured and serviced anywhere, anytime. Today's economic environment has left many companies looking to reduce their capital and travel expenses (e.g., to check on their suppliers). As a result, many are now moving toward lower-cost software solutions, whether software-as-a-service (SaaS) or on-demand software or cloud computing. Adopting such solutions also promises to help companies protect their intellectual property (IP) rights. The IP issue has become more pronounced in recent years due to the great influx of fake and counterfeit products from countries like China into the United States. Some companies have also been "burned" by their dealings with suppliers in China. Others wonder how long it will take before their suppliers steal their design, start making their own product variants and begin competing against them on the open market. Such worries have some companies looking to bring manufacturing back to the United States or Mexico.

The Inevitable Problem

Regardless of why they happen, and despite the manufacturer's best efforts, problems are an inevitable part of the lifecycle of any product. In fact, much to the chagrin of the companies involved, problems occur frequently. Where most companies feel the pain of those problems is in their warranty reserves. These days warranty reserves should only be about 1.5 percent of a company's sales, but some companies pay as much as 5 percent. According to 2008 Securities and Exchange Commission (SEC) data, the total amount of warranty accruals reported by the top 100 warranty providers was a staggering $27 billion. The amount of claims paid was $28.6 billion.

Not only do companies feel the brunt of any problems from a financial perspective, but they also feel it from a public relations perspective as well. After all, warranty recalls very rarely go unnoticed or unpublicized. The recent peanut product recall is a prime example, but there are others. Microsoft, for example, launched the Xbox gaming system with unacceptably high failure rates and took a corresponding financial hit of more than $1 billion to fix the problems. Last year, Research In Motion (RIM) was forced to recall its Blackberry Bold product in Japan and only recently recalled its BlackBerry Bold 9000 smartphone due to a keypad overheating issue during recharging.

This past March, Maytag voluntarily recalled 1.6 million refrigerators due to an electrical problem that caused overheating, creating a fire hazard. Thus far, the problem has led to 16 incidents ranging from smoke damage to major kitchen damage. The apparent cause of the problem was an electrical failure in the relay component that turns on the refrigerator's compressor.

If a cell phone or a refrigerator doesn't work properly that's a bad thing, but what if the device not functioning properly were a pacemaker or a defibrillator? In the medical arena there is simply no room for error, but that's exactly the scenario Guidant faced in 2005 when it recalled pacemaker and defibrillator products.

Solutions Ahead

The cases identified above illustrate how quickly poor product quality can result in a tarnished image for a well-respected brand and why the right product quality management tool is so critical. First-generation product quality management solutions relied on manual data collection tabulated in Excel spreadsheets. Issues over latency, data cleansing and a lack of visibility made the collected data questionable at best. With second-generation solutions, companies built their own client-server software solutions, but they were not easily scaled and proved both difficult and costly to maintain. The key to avoiding situations like those detailed above is for companies to better manage their component suppliers and product quality throughout the lifecycle via the use of a third-generation product quality management solution that is on-demand and scalable (Figure 1). It must provide automated data collection and be backed by a powerful root-cause analysis engine that helps find and fix problems, predict and avoid problems, and improve and innovate the design, manufacturing and service processes.

Utilizing such a tool, companies like Maytag, Dell and others could have kept a closer watch on their component suppliers and on the quality of their products during design and manufacturing. More important, potential problems could have been found and fixed prior to shipping, when it was less costly and risky to do so.

Next-generation product quality management tools offer a number of compelling features, including:

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