Samsung Galaxy Note 7: handling product recalls
Since the second batch of Samsung Galaxy Note 7s has proven as unsafe as the original batch, the smartphone giant has decided to discontinue the model for good.
Sales and exchanges of the Note 7 ceased earlier this week after replacement handsets displayed similar issues to the ones which were recalled. Customers have been offered full refunds as well as gift cards to soften the blow. Reuters estimated that ending production of the phone may cost Samsung up to $17 billion.
Dr. Mark Johnson, Associate Professor of Operations Management and a researcher of product recalls at Warwick Business School, has offered the following comment:
"This has been a case study in how not to do a recall. In research that I have conducted with Marko Bastl of Marquette University, and Mike Bernon of Cranfield School of Management, we found that firms that have a proactive recall strategy tend to see their share price not hit as badly by investors running scared from the potential costs of the recall.
"In Samsung’s case, the recall was very passive. It was only when the second batch of phones began to fail that they began to show that there were more serious issues at play. Shareholders rightly get twitchy when firms are seen not to care about customers.
"Recalls are a fact of modern business. As products and processes become more complex then the likelihood of them occurring increases. We can’t get everything right all the time. When a recall occurs, be proactive about it – show shareholders that you care about customers and ensure that you have business processes in place to allow you to identify affected products quickly and with minimum hazard to the customer.
"Samsung tried to rush the Note 7 to market to beat the iPhone 7. Phones are complex things and the launch of new products is fraught with difficulties and delays. Samsung potentially rushed a number of critical stages, probably testing, in order to get to market quickly.
"The recall also indicates that Samsung is not as agile as some of its competitors and process-rigidity can mean a loss of flexibility. The process of the recall also indicates that Samsung has very little traceability or integration through the end-to-end supply chain. It was asking customers to identify affected phones in the first round of recalls by examining the colour of the battery signal on the screen. In the 21st century many companies can trace where items are through linking information processes with distributors and vendors."
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IMF: Variants Can Still Hurt Manufacturing Recovery
After a year of on-and-off manufacturing in the US, UK, and the eurozone, demand for goods surged early last week. Factories set growth records in April and May, suppliers started to recover, and US crude hit its highest price point since pre-COVID. As vaccination efforts immunise much of the US and UK populations, manufacturers are now able to fully ramp up their supply chains. In fact, GDP growth could approach double-digits by 2022.
Now, the ISM productivity measure has surpassed the 50-point mark that separates industry expansion from contraction. Since U.S. president Biden passed his US$1.9tn stimulus package and the UK purchasing managers index (PMI) increased to 65.6, both sides of the Atlantic are facing a much-welcomed manufacturing recovery.
Lingering Concerns Over COVID
Even as Spain, France, Italy, and Germany race to catch up, and mining companies pushed the FTSE 100 index of list shares to a monthly high of 7,129, some say that UK and US markets still suffer from a lack of confidence in raw material supplies. Yes, the Dow Jones has made up its 19,173-point crash of March 2020, and MSCI’s global stock index is at an all-time high.
Yet manufacturers around the world realise that these wins will be short-lived until pandemic supply chain bottlenecks are solved. If we keep the status quo, consumers will pay the price. In April, inflation in Germany reached 2.4%, and across the EU’s 19 member countries, overall prices have increased at an unusual pace. Some ask: Is this true recovery?
IMF: Current Boom Could Falter
Even as Elon Musk tweeted about chip shortages forcing Tesla to raise its prices, UK mining demand skyrocketed; housing markets lifted; and the pound sterling gained value. The International Monetary Fund (IMF), however, cautioned that manufacturing recovery won’t last long if COVID mutates into forms our vaccinations can’t touch. Kristalina Georgieva, Washington’s IMF director, noted that fewer than 1% of African citizens have been vaccinated: “Worldwide access to vaccines offers the best hope for stopping the coronavirus pandemic, saving lives, and securing a broad-based economic recovery”.
Across the globe, manufacturing companies are keeping a watchful eye on new developments in the spread of COVID. Though US FDA officials don’t think we’ll have to “start at square one” with new vaccines, the March 2021 World Economic Outlook states that “high uncertainty” surrounds the projected 6% global growth. Continued manufacturing success will in large part depend on “the path of the pandemic, the effectiveness of policy support, and the evolution of financial conditions”.
Mathias Cormann, secretary-general of the Organisation for Economic Co-Operation and Development (OECD) concurred—without global immunisation, the estimated economic boom expected by 2025 could go kaput. “We need to...pursue an all-out effort to reach the entire world population”, Australia’s finance minister added. US$50bn to end COVID across the world, they imply, is a small investment to restart our economies.