This Year's Recall 'Pileup' Is a Supply-Chain Nightmare for Automakers

Jun 10 2014, 4:56pm CDT | by

The recent flood of recalled vehicles is putting a huge strain on automotive supply chains.

Some 13 million cars and related parts, including child seats, equipment and tires, were recalled in the U.S. in the first quarter of 2014 alone, according to the latest Stericycle Recall Index. That puts the industry on pace easily to surpass the 28 million units recalled in 2013 — a number that was 54% higher than the previous year.

The number of auto-related recall events, averaging nearly two per day, hasn’t changed much over the past four years. But unit amounts “are soaring drastically,” said Stericycle vice president Mike Rozembajgier. “This puts stress on the supply chain to produce replacement parts, taxes auto dealerships and used car networks, and further complicates the consumer notification and communication process.”

The biggest name in recalls this year is General Motors, which reportedly has called back some 15.8 million cars and trucks worldwide. Faulty ignition switches in GM vehicles allegedly are responsible for at least 13 deaths and 54 accidents, but chief executive officer Mary T. Barra has said the number could climb in the weeks ahead. The company has dismissed 15 employees and earmarked $1.7 billion for that recall alone. It has also revealed defects in headlight switches, seatbelt cables, airbags and a host of other problems across dozens of models.

GM is far from the only automaker to be plagued by a surge of recalls. In recent months, it has been joined by Toyota, Nissan, Honda and Ford Motor Co., to name a few of the biggest players. At the same time, said Rozembajgier, just over a quarter of recalls over the past four years were caused by the top 10 assemblers. The vast majority involved small companies and makers of add-on parts.

Why the huge increase in recalled units? One factor is the growing technological complexity of newer vehicles, said Rozembajgier. According to the Stericycle index, 70% of the vehicles affected in the first quarter of 2014 were manufactured within the last five years. They feature systems and software with a high propensity for glitches.

Growing public awareness of the problem is another reason. Each successive recall generates concerns that make both consumers and government regulators hyper-sensitive about product defects, causing a ripple effect among other manufacturers. Social media can set off a firestorm of reaction. “There’s a laser focus on safety coming out of Washington, D.C.,” said Rozembajgier.

Even so, car owners appear blasé about issues that don’t directly lead to death, or involve malfeasance on the part of automakers. The pace of recall announcements is so relentless that many are suffering from “recall fatigue,” Rozembajgier said. Nearly a third of recall notices are ignored by owners. Last year, 3.5 million used cars went up for sale on line with unfixed defects. Moreover, an estimated 36 million vehicles — one in seven of those on the road today — are driving with problems that are under recall.

Manufacturers, who in some cases face charges of criminal negligence for covering up known defects, can’t afford to be complacent. “It just begins to snowball for a company,” said Rozembajgier. At the same time, they’re dealing with extended supply chains and multiple partners, any one of which could trigger an incident.

More than anything else, said Rozembajgier, the auto recall “pileup”  is a supply-chain issue. “With small manufacturers and suppliers contributing to the majority of [2014 first quarter] events, it’s clear that no organization is safe and that auto brands are only as strong as their weakest link,” he said. “To protect consumers and the brand alike, companies must ensure they are prepared to efficiently address every facet of a recall in this increasingly complex industry.”

It starts with a lack of visibility throughout multiple tiers of suppliers. “A lot hinges around creating much more transparency across the extended supply chain,” said Keri Dawson, vice president of industry solutions and advisory services with MetricStream, which specializes in software for governance, risk and compliance. “It’s critical to know every step along that product’s lifecycle, so you can make a determination of where the failure occurred.”

That’s becoming more of a problem for automakers, which used to produce the lion’s share of components that went into a vehicle. In the late 1990s, they began spinning off their parts-making divisions, opening up a communications gap in the manufacturing process.

With the growing complexity of vehicles, it becomes more important than ever for manufacturers to keep tabs on independent vendors. In an intensely competitive marketplace, however, they might be tempted to slack off on vetting and re-certifying suppliers on a regular basis, Rozembajgier said.

Automakers also need to deal with the aftermath of announced recalls. Their supply chains must be prepared to supply the parts needed to fix vehicles quickly and minimize inconvenience to the owner, who is already upset over the very existence of the defect.

The responsibility for quality doesn’t rest with one individual or department, said Rozembajgier. Sourcing, legal, finance, quality control and even sales and marketing must get involved. “It really is cross-functional,” he says.

 
 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

IPad Air Giveaway 2014 is Online
IPad Air Giveaway 2014 is Online
Our sister site I4U News is giving away a brand new iPad Air or if you can wait an iPad Air 2. This is an $499 value.
 
 
Your Parent Or Kid Moved In: Are You Covered?
A record 57 million Americans now live in multigenerational family households — double the number in 1980, according to a new Pew Research Center study. And I bet many of them have the wrong homeowner’s or renters...
 
 
Pandora Looks to Challenge Terrestrial Radio's Dominance in Cars
Pandora Media is one of the largest Internet radio providers in the U.S. with more than 75 million active users. While the company’s active user count has increased at a robust pace historically, it is likely to slow...
 
 
Are General Manager Salaries About To Skyrocket? Will There Be A Front Office Salary Cap?
Are General Manager Salaries About To Skyrocket? Will There Be A Front Office Salary Cap?
It’s January 2026. New York Yankees owner Hal Steinbrenner gets out of his driverless car and triumphantly marches before the gathered press to introduce his prized new free agent. It’s a record-breaking contract—over...
 
 
 

Latest from the Network

IS committing crimes against humanity in Iraq: UN
Geneva, Sep 1 (IANS/EFE) Violence carried out by militants of the Islamic State (IS) Sunni extremist organisation in Iraq, including murders, executions, abduction, sexual violence and torture, amount to crimes against...
Read more on Politics Balla
 
Iran vows to free Al-Aqsa mosque from Israel
Tehran, Sep 1 (IANS) Iran's President Hassan Rouhani Monday vowed to liberate the Al-Aqsa mosque in the old city of Jerusalem from the Israeli forces and spare no efforts to help the Palestinian people, state-owned...
Read more on Politics Balla
 
200,000 Indians granted Saudi visas in one month
Riyadh, Sep 1 (IANS) More than 200,000 Indians, mostly domestic helpers and labourers, were granted visas by Saudi authorities in one month, an official said Monday. "Since we resumed bringing in Indian workers at the...
Read more on Politics Balla
 
Number of SAARC regional centres to be slashed
Kathmandu, Sep 1 (IANS) SAARC member states have agreed to bring down the number of the association's regional centres from 11 to five in order to end the duplication of work and to reduce expenditure. A meeting of...
Read more on Politics Balla
 
Now, 'electronic nose' to detect diarrhoea
London, Sep 1 (IANS) In what could lead to faster diagnosis of diarrhoea and stomach cramps, researchers have developed an "electronic nose" that can sniff the highly infectious bacteria that causes these diseases....
Read more on Business Balla
 
Japan has committed $35-bn investment in India: Modi
Tokyo, Sep 1 (IANS) Prime Minister Narendra Modi Monday signalled a new era of ties with Japan and welcomed the commitment made by his host and Japanese counterpart Shinzo Abe to invest $35 billion in India over the...
Read more on Politics Balla
 
Indian in UAE unable to pay bills, hospital says go home
Abu Dhabi, Sep 1 (IANS) An uninsured Indian man has run up more than $160,000 in medical bills after he suffered a brain haemorrhage and spent about six months in an Abu Dhabi hospital, a media report said. The...
Read more on Politics Balla
 
Abe wants 'special strategic' ties with India
Tokyo, Sep 1 (IANS) Japanese Prime Minister Shinzo Abe Monday said ties with India should be elevated to a "special strategic partnership". "We have to fundamentally improve our ties in every field to elevate our...
Read more on Politics Balla
 
New blood test to reliably detect TB
London, Sep 1 (IANS) A new blood test has been developed to provide a fast and accurate tool to diagnose tuberculosis in children. About one million children develop tuberculosis (TB) globally each year but detecting...
Read more on Business Balla
 
Talks on for civil nuclear deal with Japan: Modi
Tokyo, Sep 1 (IANS) Prime Minister Narendra Modi Monday said negotiations were on for a civil nuclear agreement with Japan, indicating that the deal is not likely to be sealed during his ongoing five-day visit to the...
Read more on Politics Balla