Auto Recall Issues Bring Reverse Logistics into Play

The Volkswagen scandal may have given other auto manufacturers a wake up call regarding quality control and vendor transparency, but analysts say it points to a need for greater analytics and ultimately…reverse logistics.

Derek Snaidauf, Deloitte Advisory senior manager in advanced analytics, Deloitte Transactions and Business Analytics LLP, told Logistics Management in an interview that reverse logistics providers can leverage analytics by collaborating closely with manufacturers that employ these capabilities to proactively sense potential product problems.

“Doing so allows everyone to better anticipate product quality and customer satisfaction and in this respect can really benefit suppliers and other downstream supply chain participants,” he added

While many auto executives (42.3 percent) expect more industry recalls in 2015 and 2016, just 8 percent use advanced predictive analytics to help prevent, prepare for, and manage recalls, according to a recent online poll from Deloitte.

Nearly one-quarter (23 percent) have no operational product safety and recall anticipatory analytic capabilities.

“The essential paradox is this: today’s vehicles are among the highest quality ever produced from a safety and reliability standpoint; innovations in technology have accelerated such that manufacturers can now identify emerging safety and quality issues much sooner than before; and, regulatory scrutiny of the auto industry has increased dramatically during the past 12-18 months,” said Robert Biskup, Deloitte Advisory director, Deloitte Financial Advisory Services LLP, and former automotive industry chief compliance officer.

“While adequate early warning systems seem within reach, not all are taking advantage.”

Snaidauf agreed, adding that manny automakers still take a manual, rearview-mirror approach to vehicle quality and safety.

“But, leading OEMs are starting to adopt innovative analytic capabilities like proactive sensing for early issue identification and command centers for campaign management,” he said.

“By cross-source correlating internal and external data sources, employing specialized advanced analytics, and leveraging interactive visualizations, these companies can improve customer satisfaction, vehicle safety, and brand perceptions. They also can realize significant reductions in their total cost of quality spend.”

Most respondents (90.8 percent) indicated that recalls are impacting the working relationships between suppliers and original equipment manufacturers (OEMs).

“Because the stakes are so high in recall management, it now makes even more sense for traditional automakers and those within their supply chains - particularly new industry entrants - to consider investing in predictive analytics capabilities that can help detect trouble earlier,” said Bruce Brown, principal and U.S. automotive and off-highway consulting practice leader, Deloitte Consulting LLP.

“Once in place, those competencies can also facilitate richer collaboration and communication between involved parties in times of investigation or crisis.”

One of the biggest challenges to OEM-supplier collaboration in preventing, preparing for and managing recall-related events was ineffective communication channels (21.7 percent).