Consequences of product recalls
Munich – Product recalls at automotive manufacturers are a mainstay of the news. It is expected that in Germany alone between 3 and 4 million vehicles will be recalled in 2019. Besides the technical complexities of a recall, the number of vehicles affected is the key factor for the evaluation of the financial risk. For the most part, there is a lack of clarity at both OEMs and distributors regarding the potential quantity affected by recalls in the case of claims. By ensuring traceability, the impacts of product recalls can be reduced. OEMs and suppliers implement the requirements in different ways – the number of vehicles recalled thus varies widely.
Quantification of potential recall quantities in practice
The reasons for high quantities of recalls can be found on the one hand in the rising number of common parts, and on the other in the individual production management. KBC has developed and successfully piloted a procedure to evaluate and reduce the potential recall quantity:
For a large number of vehicle affected in the case of defective components, several key drivers can be identified in production. These are large batch volumes, grouping/sorting processes and the attendant violation of First in First out (FiFo), as well as a mixing of the units used and documented in the production process. These three drivers are identified in practice for each separate production step of a component. This allows the potential amounts affected to be quantified and evaluated.
Extrapolation of measures to lower the potential quantity of recalls
Control levers for optimisation are subsequently identified for each production step and driver. The top measures include:
- Continuous adherence to FiFo as well as a system-wide restriction in the booking system.
- Continuous separation of incoming goods batches until assembly (no “turbulence”) for components important to functions.
- Reduction of batch sizes in your own production process (e.g. from layers to KLT).
- Increase in the depth of documentation (e.g. introduction of dynamic label printing).
By implementing the measures the potential quantity of recalls can be pre-emptively reduced by 40% on average. This process significantly reduces the financial risk in the case of a recall taking place.