RLA WebinarPeter PhilippensMarch 20, 2014

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• DHL IT Project Lead Philips Senseo Product Recall

• Co designer DHL Recall Management System

• Designer Solution Design Simulator

• Solution Design of several Product Return solutions

Peter Philippens

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“Fortune favors the prepared mind”Louis Pasteur

Recall !! Are You ready?

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All notifications Serious risk notifications

Recalls Can HappenRAPEX notifications 2003–2011

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Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012

Over the last 10 years there has been a substantial broadening in Regulatory Power and Oversight for End-user Safety

Q1 2013 the FDA reports:For the third straight quarter, nearly forty percent of medical device companies named in FDA Enforcement Reports were involved in two or more recalls. Those within the industry should take this time to make sure that they have procedures in place to properly assess the scope of any recall event. By ensuring that all potentially affected products are accounted for and collected in an efficient manner, customers and patients will be much more likely to remain loyal to a brand.

Especially for the automotive industry the NHTSA (National Highway Traffic Safety Administration) was established in 1970 to increase the safety on the US highways.

The Largest Recalls in history

7,9 Million carsThe ignition

switch had to be replaced.

Multiple reports of it sparking and

starting fire in the steering

colom1996

5.3 Million carsReports of

driver-side floor mats becoming

wedged beneath gas

pedal causing vehicles to accelerate

uncontrollably 2010

4.5 Million carsSame problem

as in 2005 recall Cruise

Control button continued to catch on fire

2009

5.8 Million carsBolts of

suspension were easily loosened

rendering driver unable to steer

the vehicle1981

3.7 Million cars

Passengers become

trapped in their vehicles

due to cracked and

disintegrating safety belt

release buttons

1995

Source : msnbc.msn.com

150,000 medical devices US$ 3 BILLION cost

Launched in 2010

200,000 medical devices US$ 500 MILLION cost

Launched in 2010

25,000 medical devices US$ 100 MILLION cost

Launched in 2011

30,000 medical devices US$ 9 MILLION cost Company placed into liquidation following the recall

Launched in 2010

113,000 medical devices US$ 7 MILLION cost

Launched in 2012

803,000 medical devices US$ 82 MILLION cost

Launched in 2012

Source : fda.com

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Implications For You

A poorly reactively Managed Product Recall may have Disastrous Consequences

Brand Image

Share Value

Product Liability Claims

Loss of Market Share

Loss of End-user /Trade Confidence

Administrative Penalties

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Example case: Senseo

Recall : 7.5M affected medical devices in Europe, US/Canada and Asia

• # registrations first week: ~700K, In the first hours: 300 registrations per minute• Total registrations well above 1.3 Mln• Registrations: 80% via Web, 20% via Call Centers• > 1000 call center agents (at the peak)• > 750K outgoing calls

Scope : Repair and replacement• At the peak 35k boxes shipped per day• > 2800 truck loads of boxes• > 6400 drop-off points• Up to 22k repairs/day on multiple locations • ~ 900 FTE’s repair staff• < 2 months preparation time

Costs : Budget € 47.0 Million

Recall - Lessons Learned

• We tend to react too late • Debate too long about appropriate actions• Under estimation of the challenges and costs• Tendency to engage key partners too late• No solid recall contingency plans in place• Power of Consumer Safety and Legislation institutes• Bad news travels faster than ever !• Realize that current supplier contracts are insufficient• How solid are our quality control programs ?• Crucial dependency on IT• Key role of company communications• Importance of managing the Trade partners• Poor product traceability

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Recall ! Are You Ready ?

• What is your Product Recall plan?• How quickly could you execute that plan?• What is your Personal Experience of Recalls? • How would your Organization respond to a

Recall? • How would you be Notified of a Recall?• What Resources could you depend on in case of

a Recall? • Do you have a Recall Insurance? • Have you involved your key partners in your

Recall planning?• …

• ...• ...• ...• ...• ...• ...• ...• ...• ...• ...• ...• ...• ...• ...

Are you prepared for a B2B, or even more challenging, for a B2C Recall?

Response

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Crisis!

CRISIS!

costs

market share

consumers

liabilities

brand

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The risk of being unprepared and out of control !

Day 1, 09:00: Media reports fault with productDay 1, 10:00: Adverse Public reactionDay 1, 11:00: Website and Call center volumes increase

exponentiallyDay 1, 12:00: Website and Call center collapse under volumesDay 1, 13:00: Corporate executive team start reacting internally to

media message and infrastructure collapseDay 1, 15:00: Crisis response team nominatedDay 1, 18:00: Virtual team assembled Day 1, 19:00: Unmanaged media messages increase

Day 2, 09:00: Internal debate about response to media/End-usersDay 2, 10:00: Website and Call center volumes still uncontrolled,

callers concerned with lack of informationDay 2, 12:00: Reactive holding statement issued to mediaDay 2, 13:00: Website still carries no adequate response to

potential recallDay 2, 14:00: The crisis team assembled to design an adequate

solutionDay 2, 15:00: Regular business starting to become impactedDay 2, 16:00: Internal debate about the solutionDay 2, 18:00: Unmanaged media messages continue to increase

Day 1, 09:00: Media reports fault with productDay 1, 10:00: Adverse Public reactionDay 1, 11:00: Website and Call center volumes increase

exponentiallyDay 1, 12:00: Website and Call center collapse under volumesDay 1, 13:00: Corporate executive team start reacting internally to

media message and infrastructure collapseDay 1, 15:00: Crisis response team nominatedDay 1, 18:00: Virtual team assembled Day 1, 19:00: Unmanaged media messages increase

Day 2, 09:00: Internal debate about response to media/End-usersDay 2, 10:00: Website and Call center volumes still uncontrolled,

callers concerned with lack of informationDay 2, 12:00: Reactive holding statement issued to mediaDay 2, 13:00: Website still carries no adequate response to

potential recallDay 2, 14:00: The crisis team assembled to design an adequate

solutionDay 2, 15:00: Regular business starting to become impactedDay 2, 16:00: Internal debate about the solutionDay 2, 18:00: Unmanaged media messages continue to increase

1) No effective crisis communication2) Lack of media / social media management3) Insufficient short term scalability of website and Call

center infrastructure4) Lack of structured recall management5) Lack of organizational readiness6) No clear ownership in the organization7) Uncontrolled response and process8) Message to media, partners and stakeholders is unclear

driving frustration and dissatisfaction 9) Betrayed the End-users trust in the brand10) Lack of a predefined solution and process

1) No effective crisis communication2) Lack of media / social media management3) Insufficient short term scalability of website and Call

center infrastructure4) Lack of structured recall management5) Lack of organizational readiness6) No clear ownership in the organization7) Uncontrolled response and process8) Message to media, partners and stakeholders is unclear

driving frustration and dissatisfaction 9) Betrayed the End-users trust in the brand10) Lack of a predefined solution and process

Sequence of events Sequence of events Lessons learned Lessons learned

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Fast Set-up & Execution Brand Protection Single Dedicated Empowered Team Clear, Effective Communication Ownership of End-Customer Relationship Agile and Modular Solution (menu) Regulatory Compliance Visibility and Measurability Registration Process Efficiency Scalability and Flexibility Global Solution & Local Implementation Traceability and Visibility Financial Transparency

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Low

Importance of customer needs

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Voice of the Customer

Source: MEASURE Workshop May5/6, 2011; customer interviews

Workshop: Set the Customer Priorities by plotting the yellow number boxes into the appropriate part of the Pyramid

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Recall - how to get prepared ?

• Install a Recall Plan

– Ownership

– Mandate

– Define processes and procedures

– Checklists

– Internal deployment and training

– Engage partner(s)

– Maintenance of plan

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Supply chain coordination Service execution monitoring Exception Management

Control Tower

Improved Manageability Management Decision Support

Business reviews (MBR, QBR, …) Performance reporting Root cause analysis (RCA) Corrective actions implementation

PerformanceManagement

Service Controllability Performance Visibility Management Decision Support

Functional and geographical business extensions

Growth accomodation Coordination of process changes

ChangeManagement

Service Flexibility Business Agility Consultative Advice

Solution optimization Innovation management Leveraging of best practices Cost and efficiency management

ContinuousImprovement

Business Intelligence Learning from Leaders

Customer relationship management Collaborative service development

AccountManagement

Single point of contact for all questions Ease of Business

Project Management Recall Solution Design Recall Solution (IT-) Implementation Readiness Assessment

Project Design & Implementation

Optimal Solution Fast Readiness

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RMS

• Packaging Delivery • Recall Product• Retrieval• Repair Services• Return Delivery

• Dashboards• Track & Trace• Performance

Reporting

• Scenario Planning

• Solution Optimization

• Order Management

• Partner Management

• Exception Management

• End-user Web portal• Batch Registration• Validations

Registration1

Repair

• Carriers• Service Points

&Consolidation HUBs

• Repair Vendor• Warehousing

Simulation

End-user

BusinessCustomer

Control Tower

Scrap

Service PointPUDO

Example end-to-end Replacement and Repair Model

Recall Management System

E2E Business Intelligence RMS

Operational Flow Model - Example

ConsolidationHUB

WarehouseCall

Center

Customer

Supply ChainIntegration

A E2E OrderManagement

B ReportingC D

• New Product Delivery• Packaging Delivery• Recalled Product Retrieval• Scrap Services

Replacement3

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• What is the optimal number and location of material and service suppliers?- e.g. for packaging, spare parts ,repair vendors, recyclers

• Where to locate the warehouses and distribution centers?-geographical spread of end-users / customer locations-expected response rates- location of the production site(s)

• What are the optimal transportation modes and routings to meet delivery requirements?

• What capacities do I need where and when?

• What lead times are allowed, what are the expected costs? • Other challenges like customs, authorities, environment etc.

Solution Design Challenges

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An Integrated Recall SolutionThe Recall Management System

An end-to-end Recall Management Solution

The solution provides open information flows at any point in the recall process

RECALL MANAGEMENT SYSTEM

RECALL MANAGEMENT SYSTEM

End-user

Track & Trace

End-user Registration Platform

Multi-language coverage

Control Tower Planning & Optimization

Multi-level Reporting

Exception Management

Customer

Performance Dashboards

Customized Solution Design

Supply Chain Integration

Service Partners

Pre-Integrated Partner Network

Open connectivity architecture

Execution Management

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The simulator as part of the Recall Management System

Registration

ManagementSystem

Added Services

Partner System

Integration

Dashboards,Reports & Analysis

Label ManagementSystem

Call CentersIVR

Solution Design Simulation

Packaging & Warehousing Repair & Recycle VAS Carriers

ProcessConfiguration

OrderManagement

Data Consolidation& Conversion Engine Tracking & Tracing

End-user Registration Webpage

Address ValidationModule

RMS is a fully modular solution using expert partners

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TweakingAdjustment / Fine-tune the model, re-input the model and run to optimize The following variables can show improvement (or not):• Total number of days of the simulated project (did it become shorter?)• Bottlenecks in all the nodes (bottlenecks gone?)• Time frame in which a node is active (active time frame shorter?) Example of a scenario that shows an increasing stay time (waiting + processing of an order within a node, i.e. repair):

This example clearly shows that the stay times are increasing towards the end of the project.This does not necessarily mean that processing within the packaging process takes longer and longer. In this case the orders had to wait longer and longer before they could leave the packaging vendor, due to constraints in the following process, in this case the delivery line from packaging to central hub.

Questions ?

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