The automotive industry is no stranger to product recalls: in the UK alone, the Vehicle and Operator Services Agency (VOSA) recorded a staggering 492 recalls in 2010. In October 2010, Nissan recalled over 2.1 million vehicles worldwide when it discovered a fault that could cause the engine to stall while running. Most recently, it was widely reported that Toyota needs to recall 1.7 million cars worldwide over fuel leak concerns. Yet whilst the majority of these only affect small numbers of vehicles, the stories that hit the headlines involve millions of vehicles at a time.
So why have there been so many recalls in recent years? The increasing reliance on part-sharing within manufacturing lines has meant that when a part fails, the recall impact is more widely felt. Instead of having three different engine switches for three different models, for example, manufacturers are increasingly combining requirements into a single part. Whilst this is beneficial for inventory levels and purchasing costs, it does mean that if anything goes wrong with the switch, then the impact is three times greater.
The increasing reliance on part-sharing within manufacturing lines has meant that when a part fails, the recall impact is more widely felt.
Additionally, the uptake of lean manufacturing principles has contributed to recall figures. Since vehicle manufacturers are under pressure to reduce inventory levels, they often prefer to set up supplier consignment stock. However, this can lead to quality issues: because the manufacturer may only check the quality of the supplier’s stock at the time of use, it means it is often too late to alter production plans without causing significant disruption.
There’s no denying that vehicle recalls can quickly present serious logistical challenges. Once a recall has been planned, the pressure on suppliers can be enormous: they must ensure that they can produce the number of parts required, plus coordinate their shipment worldwide. Assembly plants and service centres will feel the strain, even more so if they have to process faulty product returns. This aspect can complicate the social responsibility policies that car manufacturers often promote, and ultimately damage brand awareness. And of course, there is the sheer expense of a recall: a new switch may only cost £1 (US$1.6) to produce, but by the time logistics, fitting, and marketing costs have been calculated, the overall expense increases dramatically.
Once a recall has been planned, the pressure on suppliers can be enormous: they must ensure that they can produce the number of parts required, plus coordinate their shipment worldwide.
In order to avoid recalls, manufacturers must prioritise the quality control aspect of the supply chain and review their IT systems. The overall quality system needs to extend across the entire supply chain as opposed to just when parts arrive at ‘goods inwards’. Vigorous supplier audits also need to take place more regularly to ensure that a supplier is not cutting corners to meet agreed prices and demand forecasts. In addition, it is important to collaborate with suppliers during the product development process, to further reduce the risk of part failures.
Ultimately, by having an integrated quality management system, the risk of recalls and all their associated costs can be minimised. Advances in technologies like Enterprise Resource Planning (ERP) systems mean that there are now ample quality control tools available to ensure that the manufacturing process is checked rigorously and at the right time.
The opinions expressed here are those of the author and do not necessarily reflect the positions of Automotive World Ltd.
Antony Bourne is Global Industry Director at IFS
IFS is a public company (OMX STO: IFS) founded in 1983 that develops, supplies, and implements IFS Applications, a component-based extended ERP suite built on SOA technology. IFS focuses on agile businesses where any of four core processes are strategic: service & asset management, manufacturing, supply chain and projects. This includes businesses in the automotive industry. The company has 2,000 customers and is present in more than 50 countries with 2,700 employees in total. More information on IFS is available at www.IFSWORLD.com