Product Recalls: Marketing Failure and Implications


By

Prof. R.K.Gupta
Senior Consultant & Professor
Aravali Institute of Management
Jodhpur
E-mail:
rkgupta@rkgupta.in / cityju@rediffmail.com
 


Product recall:

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 or design defects or labeling errors that we will see in below list of cases compiled for diverse companies and product categories.

The issues:
Product recalls are not uncommon phenomenon as evident from below given compilation and best of the companies and brand leaders are involved in this from time to time. When there is too much outsourcing to lower costs so that US CEOs can play golf and show company efficiency to shareholders, it gets worse.

1. Do product recalls relate to negligence on part of manufacturers in supply of goods? Do they damage Brand image or enforce it by effective and quick replacement of defective product/ repair? We may also call it damage control.

2. The decisions have to be taken fast on receiving a significant number of initial complaints about safety concerned defects common to all users or accidents that might have taken place or there is serious design or component problem in product which may create problem for image of company and drag them into litigations for costly settlements. Consumers' life may be at risk.

3. What about failure of service provider like lawyers, doctors and others (Called service failure and service recovery processes), because in this case recall is not possible.    

4. What local governments do about this issue and what are laws in various parts of world –(We shall take only USA and India in this article) about these issues of product defects and safety concerns-specially for drugs, children products, automobiles, home gadgets  and food items. Of course in any product, safety concern may exist like clothing or even bibs used for children.

5. What are consequences of defective product supplies and its cost of calling back?

6.   WTO agreement has a chapter relating to Sanitary and Phyto-Sanitary (related to plant material sources) conditions for imported food and other related items, which is being criticized by India and many other developing countries as non-tariff barriers. But recent incidents seem to justify such controls especially in food products, drugs and electric goods and even textiles (inflammable skirts scandal that took place a few years back exported from India to USA buyer) and those that come in body contact like Toy paints or decorative items and cosmetics, of course.

7.   How the product recalls can be handled and is it possible to build in a system for possible product recalls like that for disaster management systems and Information system crashes in companies? How companies can ensure quick and safe recalls and ensure traceability of goods down the channel of distribution, the response time to recall and the reverse logistics for customers returning goods and getting refund or replacementCustomers may ask for damages in courts (USA). The delay may be fatal for consumers in certain products like electric appliances, automobiles and food items/medicines.

The recalls do have financial implications for companies and some may get doomed even.

8. Why these product quality failures (technical, functional or ingredients quality) occur and are these avoidable by process control models and advances quality control systems? Many failures are accounted for by poor design and ignoring safety aspects, like sharp corners in toys or loose parts or buttons on children garments which can be swallowed by kids.

Generally speaking Companies recall products when defects seem to have safety concerns for customers and affect large number of customers. Otherwise normal warranty procedures are adequate as part of standard marketing practice. Thus recalls are more of preventive in nature and to pre-empt costly litigations and financial and goodwill losses.

The story of Product recalls:

My first encounter with product recall in market was when I was undergoing my MBA summer training at Glaxo Laboratories, now Glaxo Smithkline Beecham (GSK), Mumbai at their Worli, plant. Glaxo had a unit at Aligarh (U.P) to make Baby powder/foods like Farex (Remember the then famous 'bony bony baby –Farex baby' radio jingle? Later Aftab Shivdasani, now film star, had modeled as farex baby).This brand is now with Wochardt. Wockhardt acquired Dumex India; Protinex & Farex (News item dated July 1, 2006). Before that Heinz (USA food Giant) bought it from Glaxo 11 years back when Glaxo globally moved out from food business.

Due to some problem in composition of powder then in some batches , the product was recalled from market and I witnessed a flurry of activities by Glaxo staff , the effort being colossal even in those times (1977) of smaller sales volumes to contact various drug stores and other stores that marketed baby food and allied items. There were no faxes, TVs in small cities and emails (internet); phones were only in D.O.T monopoly and sluggish.

This process of recalling products from sales channel partners or consumers may be called Reverse logistics (read my paper on this on indianmba.com) and costs are enormous. To call back widely distributed consumer products like battery cells, toys, and baby powder is quite cumbersome and expensive with time shortage ( One can't wait for disaster to happen).

Frankly speaking I was wondering if there was no immediate threat to life of babies, why Glaxo had gone to such a length and did all efforts to call back product from markets and of course it had no alternate use except for making a bonfire, may be. But the Glaxo brand made deep impression on me as a socially responsible, ethical and professionally managed company. Remember there were no Consumer Protection laws then and concept of Corporate Social Responsibility and Corporate Governance did not exist in India, at least. It was License Raj in full swing and most of goods were in short supply.

Things have not improved since then and product recalls continue unabated across a cross section of industry and products by best of companies.

Let us have close look at some past and current cases of product recalls. These recalls are either for replacement or refund (return) or simply for repair or replacement of defective part(s) from product that is not meeting standards or is unsafe. Very recently following product recalls have taken place (at the time of writing this article):

USA/Globally-

Mattel Inc. toys, manufactured for them by a Foshan based Chinese company (the owner, Zhang Shuhong has already committed suicide (August 14, 2007 news item) for small detachable and swallow-able magnet in toys and lead (in paint) health hazards allegedly in some other toys. The recall runs into millions of toys.

The U.S. Consumer Product Safety Commission has issued more warnings, this time recalling thousands of SpongeBob SquarePants journals, various spinning tops and children's jewelry, following Mattel episode.

A class-action lawsuit has already been filed against Mattel related to its recent recall of more than 1 million lead-tainted toys.

Nokia- Mobile phone batteries BL-5C (manufactured in China but for Matsushita, Japan) have been recalled for getting overheated and bursting during charging- Although most of mobile sets heat up while in use for a longer period continuously-this is yet to be addressed by mobile manufacturers who are busy reducing instrument size. Another issue related to safety in Mobile hand sets is micro/radio wave emissions that emanate from handsets and being doubted as health hazard (no conclusive studies are yet available). In perhaps the largest product recall in India, mobile giant Nokia recalled 46 million batteries pursuant to customer complaints across the globe.

A couple of days ago, Nokia issued a 'product advisory' (the company does not call it a recall) for these BL-5C batteries having certain period of manufacturing. 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.

Other product recall cases in recent past:

In another case Toyota (Japanese) had to recall 500 thousand Tundra light trucks for some steering system defect that caused serious accidents. (Can one imagine the gigantic task?)

Robert Bosch Tool Corp. and the Consumer Product Safety Commission (CPSC) USA recently announced a recall of more than 800,000 Skil-brand power circular saws due to laceration risk.

For the second time this year, toymaker 'Hasbro' has issued a recall for about 1 million Easy-Bake Ovens (children's Gizmo)after receiving complaints that young children were getting their hands or fingers stuck in the oven's opening, causing serious burns.

The U.S. Consumer Product Safety Commission and Hasbro received about 249 complaints of children getting their hands stuck, 77 of them reporting burns.

Cadbury was recently fined $2 Million in Salmonella case (a Typhoid bacterium and potential bio weapon)

Atico International (USA) recalled about 392,000 coffeemakers sold exclusively at Walgreen because they pose a fire hazard. The manufacturer said it has received 14 reports of electrical failure and six reports in which the coffeemaker ignited. So far, no injuries have been reported. Signature Gourmet and Kitchen Gourmet coffeemakers can ignite due to an electrical failure and may cause a fire.

IBM and computer maker Lenovo announced in September 2006, a recall of 526,000 laptop batteries worldwide made by Sony Corp. because of a fire risk. The recall affects the lithium-ion batteries found on the ThinkPad Notebook line of laptops, which were sold by both IBM and Lenovo. Sony Corporation also announced it would initiate a global replacement program of the company's lithium-ion batteries but did not provide any details of the program.

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.

Maytag Corp. has recalled 636,000 Hoover Self-Propelled Upright Vacuums due to a defective on-off switch , according to the US Consumer Product Safety Commission. The CPSC said Maytag (Research) has received 249 reports of vacuums overheating -- which caused the handle area to smoke, melt or catch fire -- due to the switch problem. One minor burn injury requiring no medical attention was reported.

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.

Merck & Co. reported its worst annual profit since 1998 after pulling Vioxx off the market late last year and boosted the amount it set aside for lawsuits over the recall of the once popular painkiller (this is sold in India too). Merck added $604 million in the fourth quarter to the $71 million it had previously set aside to cover litigation related to Vioxx, the company said. Merck officials also said they believe that losses related to the drug are behind it, news that ignited a rally in the drug maker's beaten-up stock (shares).

Old Navy has agreed to voluntarily recall about 666,000 children's coats and fleece pullovers because the zipper pull could present a choking hazard, the Consumer Product Safety Commission announced Tuesday. The company received 13 reports of the zipper pull detaching. No children have been injured, although there has been one report of the zipper pull being found in a child's mouth, the agency said. The recall involves seven different styles of outerwear tops, including a fur-trimmed coat, pullover fleece wear and fleece jumpers with a hood. The garments being recalled have a clear, oval-shaped zipper pull and were sold in sizes 6 months to 4T.

Clover is a popular brand of dairy spread in the United Kingdom, produced by the Dairy Crest group. It resembles butterfat but is easier to spread when cold. The brand was launched in 1983 and the company claims that it is used in over 5 million households. It is made near Telford.

Over 2 million tubs of Clover spread were recalled by Dairy Crest in a recall announced on Saturday, 26 May 2007. All Clover spread products of all sizes have been recalled by Dairy Crest and refunds to consumers have been offered on all products with a lid date of 10 August 2007. The recall as announced by Dairy Crest. The cause is the occurrence of an unknown sourced mold (a kind of fungus) in product.

Pfizer recalled Benadryl products to correct labeling error. Pfizer initiated a voluntary recall from store shelves of Benadryl Allergy & Sinus Fastmeltä and Benadryl Children's Allergy/Cold Fastmelt tablets on june 02, 2001.

The Automobile Industry Safety issues are one big reason of  product recalls:

FORD cars recalled finally: Two years after his wife of 34 years died in a fire, an Iowa man continues to maintain that the blaze was started by a faulty cruise control switch under the hood of her 1996 Ford F-150 pickup truck -- while it was parked in the garage attached to his home.

Although Ford had denied -- and continues to deny -- the switch started the fire that killed 74-year-old Dolly Mohlis in 2005, The Company settled a lawsuit brought against it by Earl Mohlis. And it issued a recall of an estimated 3.6 million vehicles -- bringing the total recalled over the past decade to more than 10 million -- every single car and truck built with a similar cruise control switch.

The famous General Motors Controversy:

General Motor's model Chevrolet 'Corvair' was nicknamed 'unsafe at any speed' after Ralph Nader's publication in 1965, the author who fought dangerous battle with GM but ultimately won. He was intimidated to remain silent. Automobiles in fact is one industry that had and has several safety concerns like Tire and suspension designs, gear shifting system pattern, air bags ( introduced in 90s in USA finally), front bumper and crash resistance of its body and chassis. Large numbers of people die in defective design cars, equally poor maintenance and negligence in India and other countries, even USA. The automobile industry being powerful giant have successfully managed to scuttle several such issues for decades. Ralph Nader's contribution in his even named book cannot be undermined.

Peltzman Effect

The impact of the safety regulations that spawned because of the book became the basis of a paper by economist Sam Peltzman. The conclusions of this paper—that the regulations actually caused additional deaths—became known as the Peltzman Effect. Peltzman argued that because regulation made cars safer, getting into an accident became cheaper (it was less risky) and so it happened more. Driver and passenger deaths changed little after the regulations were in place, but pedestrian deaths increased, probably because there was no improvement to car safety with respect to those outside the vehicle.

Peltzman also argued that car safety was already improving, though at a slow rate, since the invention of the car. These improvements tended to be minor but had a huge impact in improving safety (such as a rearview mirror mounted on the outside of the car and automatically canceling turn signals) (Courtesy CNN.com)

Indian Scenario

1.As far as India is concerned , In 1994 Maruti Udyog  recalled Maruti 800 cars due to some problem in front axle components which endangered customer safety on road ( for axle replacement only, of course). In case of cars it is relatively easy to do that as customers are in finite numbers and their database is available with dealers/company. Maruti incidentally was in a collaborative sector with Suzuki Japan, which now fully owns the company.

2.The MDH (Mahashian Di Hatti Limited) brand name is very well known throughout India. It is an exporter too.The products sold under the brand name include single spices (such as chilli, coriander and turmeric) as well as blended spice mixtures.The Food Standards Agency of UK recently announced withdrawal of MDH Sambar Masala due to its contamination with Sudan I (an diazo-conjugate dye with a chemical formula of 1-phenylazo-2-naphthol. Sudan I is a powdered substance with an orange-red appearance. The additive is mainly used to colour waxes, oils, petrol, solvents and polishes. Sudan I has also been adopted for colouring various foodstuffs, including particular brands of curry powder and chili powder, although the use of Sudan I in foods is now banned in many countries due to inconclusive reports on its possible health risks. But it still is used as a coloring for cotton refuse used in chemistry experiments.

3.Soft drinks & Pesticides Controversy

A couple of years back there was tremendous rage in India generated due to a Delhi based research lab's report that all MNC and Indian company made soft drinks had pesticides contents far more than internationally accepted standards. The basic cause was contaminated water in India with pesticides used indiscriminately. But that could not give excuse to producers to pass off contaminated drinks.

4 .At almost same time came controvertial report about worms being found in Cadbury chocolates in Mumbai.It is not known finally what these companies in india ( MNCs) did to react to the situation but storm had settled down, but not without long term effects on credibility of soft drinks as safe products, these being  banned in most of educational institutes canteens and lacs of bottles were smashed by enraged protestants in various parts of country and debate took a nasty turn for MNCs ,their role  in  Local markets and business ethics. Of course MNCs ( foreign MNcs ) having big tag brands and international standards are expected to offer better quality products in countries like India and reaction is bound to be more serious when such defects pass on into consumers' hands.

5. Now compare above with our good old Bajaj or Vespa scooters in 1970s that had auto- locking problem of the handle bar steering lock, which caused several accidents. Company kept selling these products for long time before it could solve the problem; forget about recalling product or stopping sales. The same scooter had problem of unbalanced engine mounted on one side from centre and the poor carburetor design forcing users to tilt the scooter to kick start successfully. In fact this became butt of many jokes and actually a familiar feature to recognize Vespa/Bajaj scooter. Later, the company attempted to introduce a centrally mounted engine after LML, Kanpur (Lohia Machines Ltd) launched latest scooter in India in collaboration with same company in Italy. Bajaj Auto could jolly well take excuse of technology not available or blaming on its collaborator but matter of business ethics and social responsibility do figure in such cases.

This case is illustrated to clarify meaning of product recall. While locking of steering handlebar lock is certainly a case for recall and repair or refund, the other defects were product's poor design qualities, but not case for a recall.

6. The Jodhpur Bar Association has, according to a recent report, disposed only less than 50 cases out of more than 600 complaints received against lawyers for malpractices but let off most of even those who were proceeded against. Same is scene every where be it Delhi, Chandigarh or Chennai. This is case of service product failure and ethical and legal issues involved as far as conduct of noble profession as of a lawyer is concerned and sure needs handling with firm hand. The credibility of lawyers anyway ranks almost to bottom just above salesmen and below advertising professionals (according to a recent survey in USA). But here service defect is issue and control on legal profession. Same applies to fleecing of patients by hospitals (Medical insurance policy has gone costly in India from this month August 2007 by almost 100%). But these are not cases for recall (Source: Rajasthan Patrika 25th august 2007)

Recall have some definite situations where unknowingly or by process failure faulty product or packaging and labeling goes to market or the safety related aspect is known only after product is sold off to consumers and put to use.

Imported goods Issues and laws:

The Food and Drug Administration (USA) says it will, for the first time, test ingredients imported for use in the human food supply in connection with the nationwide pet food recall (Chinese made) that has killed, by some estimates, thousands of pets.

In addition, the FDA announced plans to expand testing of the animal food supply after hogs on farms in three States were quarantined after testing positive for the substance at the center of the recall, the toxic agent melamine. Wheat gluten, corn gluten, corn meal, rice bran and rice protein are among the imported products being tested in both the animal and human food supply.

Several incidents of Chinese made goods in USA may give serious beating to leadership position to China as manufacturing hub. A Chinese delgation is on way to USA to discuss food and product safety issues.

So, Do all countries need some police or investigating agency to watch imported goods? But what about out plethora of inspecting agencies in India about product and health safety and several Acts enacted nationally and internationally? We will just see below what legal actions GOI has taken for imports.

The logistics of recalls

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 and obviously more painful then normal distribution forward.

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 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 centers and warehouses for this purpose. For instance, AFL, which handles transportation for Ericsson, is taking the help of its service centre.

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 customized. The 3PLs realize anywhere between 12-15 per cent of the profits on this business.

Another technology that helps with traceability is radio frequency identification (RFID) chips. Under implementation by Wal-Mart but being a disputed action whether it will benefit them at such exorbitant cost.

Role of media is very important besides NGOs and consumer safety organizations; and of course Consumer Forums set up under COPRA.

"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 customized recall information to impacted consumers via email or postcard communication.

Developers at Infosys' .NET Centre of Excellence (COE) have developed two proof-of-concept applications for the Retailing and Financial service industries. These are the Order processing and Product Recall application and the 'Straight-Through-Processing' product.

The Order processing and Product Recall application leverages Web services, mobile devices and seamless multi-channel integration. It showcases the benefits of data synchronization, automation of key business processes and perishable foods retail value chain integration in driving business efficiencies and customer satisfaction.

Plan for avoiding recall in Pharma products-an example:

Pharmaceutical giant GlaxoSmithKline is all set to introduce its new drug across multiple geographies. For a company with significant product line proliferation like GSK, the regulatory compliance aspect of packaging and labeling for specific geography can become a significant cost as well as a potential liability. Even an insignificant artwork error could easily force a product recall. For the statistically minded, each recall typically costs between $1 million and $4 million, and it is said that in large pharmaceutical companies there may be 20,000 artwork changes per year on packages. At Nipuna Services' artwork facility in Hyderabad, a bunch of employees elaborate on dosage, schedule, composition and other information on GSK's medicine packs.

Product recall and Product Liability:

Insurance cover is one such action for companies for product liabilities. Here is an example of a policy offered by ICICI Lombard (India).

ICICI Lombard-Product liability Insurance-What it has to say?

Safety and reliability of products are an important concern to consumers, sellers & manufacturers. Faulty products can be hazardous for the consumers' health & property. The manufacturer/ seller of faulty product could be held liable for such damages, exposing themselves to financial losses.
Product liability insurance protects the companies exposed to above risk by financially assisting policyholders in such situations. (Code: Misc 15).

Scope of cover:
This Policy broadly covers:

Legal liability of the Insured towards damages to the third party arising due to faulty products manufactured / sold by the insured, liability with respect to:

* Accidental death
* Bodily injury or disease
* Loss or damage to property

Legal costs and expenses incurred with the prior consent of the Insurer and within the limit of indemnity.

Significant Exclusions:

This Policy does not cover liability arising out of or in connection with:

* Product efficacy * Product recall * Product guarantee * Pure financial loss
* Terrorism, war & SRCC * Any professional services deficiency
* Personal injuries such as libel, slander * Fines, penalties and punitive or exemplary damages.

(Tata-AIG has also come out with product contamination liability policy).

Indian Laws: Food Safety and Standards Act: 

Let's look at some hazards stories in food and medicines:

Food-borne illnesses are present in all parts of the world, and extract an enormous toll in terms of human suffering. Contaminated food contributes 1.5 billion cases of diarrhea in children each year, which means more than 3 million premature deaths, according to the World Health Organization (WHO).Accidental or intentional adulteration of food by toxic substances can also result in serious public health incidents. In 1981-82, in Spain, contaminated rapeseed oil killed more than 2000 people and caused disabling injuries to another 20,000.In China, in 2002 more than 200 children were sickened and 38 died when rat poison was used to intentionally contaminate bakery products. Mustard oil contamination killed 60 and sickened 300 people in India in 1998.

Therefore legislation providing for food safety assumes great national importance and must be framed with due care. Constitution principles, especially those protecting the right to life, must not be contravened.   

The health hazard aspect of food legislation should not eclipse other rationale behind it. Significantly, it affects livelihoods.

  • More than 70% of Indians depend on agriculture (which also accounts for 35% of India's GDP.
  • The small scale operators or the 'unorganized sector' which is directly affected by it accounts for 48% of the Indian food processing industry by one estimate.
  • The Confederation of Indian Industry (CII) has estimated that the food processing sector employs 9 million persons.

Food Safety legislation has the power to destroy the livelihood of these persons, who are most often part of the weakest sections of society

On at least two counts, the Food Safety and Standards Act deserve serious consideration. The Act needs to be examined in relation to the Constitutional spirit, but for that brief introduction about what it seeks to do and how the black letter will find implementation, is necessary.

The new legislation: salient features

  • The Food Safety and Standards Act is an 'integrated food law,' designed to avoid the previously existing multiplicity of legislation. It replaces all previous laws relating to food.
  • It creates a specialized bureaucracy to administer its provisions headed by the Food Safety and Standards Authority.
  • The Act defines food in a broad manner, as "any substance whether processed, partially processed or unprocessed".
  • The Act applies to both large and small operators defining a food business as "any undertaking, whether for profit or not and whether public or private, carrying out any of the activities related to any stage of manufacture, processing, packaging, storage, transportation, distribution of food or import" of food.
  • The penalties provided are mostly in the nature of fines and trial by special courts in case of serious offences.
  • The Act contains a provision under Section 69 (power to compound offences), which empowers Designated Officers to impose a fine of up to Rs 1 lakh on petty manufacturers, hawkers, retailers etc. if they have a "reasonable belief" that an offence has been committed.
  • There is provision for compulsory registration for every food retailer, hawker, itinerant vendor and temporary stallholder under regulations made by the Act.

Country has been divided under 5 Zones with HO at Delhi.

Consumer Protection Act India (COPRA) enacted in 1986 –provides faster relief to customer by envisaging summary presentations before the Forum, deficiency in service clause, defective product return or refund, right to information and customer education on consumer rights.

The three tier system is at District level, State appeal level and then National Commission.

It is fast legislation in separate courts established and has empowered customers quite a lot. Recent amendments have given powers to Forum President to arrest the defaulting supplier to its award. Several NGOs are active in India as also consumer websites.

On Imports safety:  Government has amended laws to enforce discipline in liberalized import regime under IMPEX policy and also to keep a check vis a vis other legislating countries

An excerpt from one such notification:

MINISTRY OF COMMERCE & INDUSTRY
DEPARTMENT OF COMMERCE

NOTIFICATION NO.-44, (RE-2000)/1997-2002
NEW DELHI:  24TH NOVEMBER, 2000

2. The following shall be added after paragraph 4 of Chapter 1A: General notes regarding import policy, of ITC (HS) Classifications of Export and Import Items, 1997-2002:

4. All such packaged products, which are subject to provisions of the Standards of Weights and Measures (Packaged Commodities) Rules, 1977 when produced/packed/sold in domestic market, shall be subject to compliance of all the provisions of the said rules, when imported into India.  The compliance of these shall be ensured before the import consignment of such commodities is cleared by Customs for home consumption.  All prepackaged commodities, imported into India, shall in particular carry the following declarations:

(a) Name and address of the importer;

(b) Generic or common name of the commodity packed;

(c) Net quantity in terms of standard unit of weights and measures.  If the net quantity in the imported package is given in any other unit, its equivalent in terms of standard units shall be declared by the importer;

(d) Month and year of packing in which the commodity is manufactured or packed or imported;

(e) Maximum retail sale price at which the commodity in packaged form may be sold to the ultimate consumer.  This price shall include all taxes local or otherwise, freight, transport charges, commission payable to dealers and all charges towards advertising, delivery, packing, forwarding and the like as the case may be.

5. A new Appendix V to Schedule 1 of ITC (HS) Classifications of Export and Import Items, 1997-2002, shall   annexed as per annexure 'A' of this Notification. ( 131 items existed  as on date of notification)

6. Import of all the products as per Appendix V to Schedule 1 of the ITC (IIS) Classifications of Export and Import Items 1997-2002, shall be subject to compliance of the mandatory Indian Quality Standards as mentioned in  column 2 of the said   Annexure, which are also applicable to domestic goods.  For compliance of this requirement, all manufacturers/exporters of   these products to India shall be required to register themselves with Bureau of Indian Standards (BIS)."

This is issued in Public Interest.

RFID technology : For traceability and better hand ling of products in stores and supply chain

Pantaloon's experiment with RFID

Pantaloon's RFID pilot project is helping the company save time and improve the accuracy of merchandise movement, writes Vinutha V.

Pantaloon went in for RFID for its simplicity of tagging, efficacy of use, product buffering, ability to keep track of over-produced items, and ability to monitor product-line lead time at the warehouse and fast-moving product-lines. The company selected a few lines of apparel, primarily shirts and trousers, for its RFID pilot. The RFID application developed by Wipro Infotech was tailored to the overall solution in line with Pantaloon's business processes and IT landscape (from the factory outward to the warehouse inward and from the warehouse outward) in order to capture real-time data. The application is integrated with Oracle database 10g and middleware along with an implementation of the RFID hardware. It integrates with the existing IT infrastructure, the in-house developed Retail Enterprise Manager (a special variety of ERP package). The main objective was to smoothen the entire product lifecycle, introduce item-level tagging for identification, and track the entire RFID roadmap with Pantaloon. The piloting was also to do an RFID feasibility study for additional uses.

At the factory outlet, RFID tags were attached to the merchandise and the data written to them. When the RFID-tagged merchandise comes through the inward gate, all related information such as purchase and delivery orders will be fed in the inward terminals in real-time. After correlating the requirements of specific outlets with the merchandise in the warehouse, the items allocated for different outlets will be transported. The tags are removed once the RFID-tagged goods pass through the outward terminal.

Efficiency and accuracy: After the RFID implementation, the time saved on the same is about 80 percent in inward warehouse processing and 12 percent in outward. Real-time visibility of items during all stages of the supply chain improved to 98 percent.

Pantaloon now aims to extend the application to production routing and scheduling, product recall and returns, and real-time data for category managers for effective forecasting. "We expect that the RFID application will further help us to improve the shopping experience, store layout and any inventory situation. Going forward, we see the use of RFID technology to improve collaboration across our supply chain right up to the point of sale," remarks Deshpande.

National Accreditation Board for Certification Bodies

Clause 4.39: Where certification is suspended rather than withdrawn; the certification body shall require that, during the period of suspension, the supplier makes no misleading claims as to the status of certification, and ceases to use the certification mark on the products manufactured since the date of notification of suspension. If relevant, the certification body may require in addition: -

That no certified product is placed upon the market; that potentially defective certified product is subject to corrective action, including product recall where appropriate.

Traceability: Key issue

Traceability has been defined by the International Organization for Standardization (ISO 8402) as the "ability to trace the history, application or location of any entity by means of recorded identification".

Traceability is closely linked with product identification. It may relate to:

  • the origin of materials and parts (food products and ingredients);
  • the product processing history;
  • the distribution and location of the product after delivery.

The matter of traceability has been raised in various Codex Committees and Task Forces, including Codex Committee on Food Import and Export Certification Systems, Food Hygiene, Food Labeling, Food Additives and Contaminants, Committee on Fish and Fishery Products, Task Forces on Animal Feeding and Foods Derived from Biotechnology.

The concept of "traceability" has already been included in many Codex texts and is linked to product identification and recall procedures. Codex texts do not currently apply traceability to the origin of foods and ingredients with the exception of the Country of Origin provisions of the General Standard for the Labelling of Pre-packaged Foods and the Guidelines for the Production, Processing, Labelling and Marketing of Organically Produced Foods: Source: Codex India ( Ministry of health and Family welfare)

Conclusions:

Product recalls are widely spread across various industries from medicines to food products to automobile to household gadgets. The recalls often indicate poor product design and quality assurance failure in company when processes are go occasionally out of control or in some situation recalls can take place when some outsourced vendor makes mistakes or product was not tested enough by company and launched in market. Product recall does not have anything to do with normal manufacturers warranty processes. Recalls take place when large number of consumer's safety is at risk in any manner or major flaw takes place in product contents or labels.

The strong government participation, consumer movement and tough legislations are driving forces behind several product recalls by famous companies and brands who can't afford to risk serious financial beating in costly litigations and awards and loss of goodwill in market. Faster and low-profile is the recall, the better for company and cheaper. Reverse logistics have to be built in distribution plans for possible recalls. Product identification and traceability concerns are being tackled by companies with latest technologies and also by State and quality enforcement bodies as described above.

Like Disaster management-Companies should have express plan for possible product recall. For automobiles the exercise is quite expensive and cumbersome besides drugs and food products.

  • Insufficient supply chain visibility effects planning reliability in the automotive industry. According to A.T. Kearney, supply chain inefficiencies can waste up to 25 percent of a company's operating costs.
  • A well-known example is the recall of 14.4 million Firestone tires in 2000. The recall caused Ford a loss of approx. $ 2.6 billion. Being able to say exactly on what cars the tires are used would have made the recall faster, more precise and more "silent". Most recall actions are less spectacular, but the cumulative effect is still significant. In 2000, for example, 94 recalls were registered in Germany  (Source: Auto-Id)
     


Prof. R.K.Gupta
Senior Consultant & Professor
Aravali Institute of Management
Jodhpur
E-mail:
rkgupta@rkgupta.in / cityju@rediffmail.com
 

Source: E-mail August 30, 2007

          

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