RLA Webinar Peter Philippens April 16, 2014

1. RLA Webinar Peter Philippens April 16, 2014

2. Peter Philippens • DHL IT Project Lead Philips SenseoProduct Recall • Co designer DHL Recall Management System • Designer Solution Design Simulator • Solution Design of several Product Return solutions

3. “Fortune favors the prepared mind” Louis Pasteur Recall !! Are You ready?

4. Recalls Can Happen Over the last 10 years there has been a substantial broadening in Regulatory Power and Oversight for End-user Safety RAPEX notifications 2003–2011 Especially for the automotive industry the NHTSA (National Highway Traffic Safety Administration) was established in 1970 to increase the safety on the US highways. 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.

5. The Largest Recalls in history 5.3 Million cars Reports of driver-side floor mats becoming wedged beneath gas pedal causing vehicles to accelerate uncontrollably 2010 7,9 Million cars The ignition switch had to be replaced. Multiple reports of it sparking and starting fire in the steering colom 1996 200,000 medical devices US$ 500 MILLION cost Launched in 2010 150,000 medical devices US$ 3 BILLION cost Launched in 2010 3.7 Million cars Passengers become trapped in their vehicles due to cracked and disintegrating safety belt release buttons 1995 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 5.8 Million cars Bolts of suspension were easily loosened rendering driver unable to steer the vehicle 1981 4.5 Million cars Same problem as in 2005 recall Cruise Control button continued to catch on fire 2009 25,000 medical devices US$ 100 MILLION cost Launched in 2011 803,000 medical devices US$ 82 MILLION cost Launched in 2012 Source : msnbc.msn.com Source : fda.com

6. 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

7. Example case: Senseo Recall : 7.5M affected Coffee Machines 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

8. 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

9. Recall ! Are You Ready ? Are you prepared for a B2B, or even more challenging, for a B2C Recall? Response • 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? • … • ... • ... • ... • ... • ... • ... • ... • ... • ... • ... • ... • ... • ... • ...

10. Crisis! liabilities costs CRISIS! brand market share consumers 10

11. The risk of being unprepared and out of control ! • Sequence of events • Lessons learned Day 1, 09:00: Media reports fault with product Day 1, 10:00: Adverse Public reaction Day 1, 11:00: Website and Call center volumes increase exponentially Day 1, 12:00: Website and Call center collapse under volumes Day 1, 13:00: Corporate executive team start reacting internally to media message and infrastructure collapse Day 1, 15:00: Crisis response team nominated Day 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-users Day 2, 10:00: Website and Call center volumes still uncontrolled, callers concerned with lack of information Day 2, 12:00: Reactive holding statement issued to media Day 2, 13:00: Website still carries no adequate response to potential recall Day 2, 14:00: The crisis team assembled to design an adequate solution Day 2, 15:00: Regular business starting to become impacted Day 2, 16:00: Internal debate about the solution Day 2, 18:00: Unmanaged media messages continue to increase • No effective crisis communication • Lack of media / social media management • Insufficient short term scalability of website and Call center infrastructure • Lack of structured recall management • Lack of organizational readiness • No clear ownership in the organization • Uncontrolled response and process • Message to media, partners and stakeholders is unclear driving frustration and dissatisfaction • Betrayed the End-users trust in the brand • Lack of a predefined solution and process

12. 1 2 3 4 5 6 7 8 9 10 11 12 13 Voice of the Customer Workshop: Set the Customer Priorities by plotting the yellow number boxes into the appropriate part of the Pyramid High Importance of customer needs • 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 1 2 3 4 5 6 7 8 9 10 11 12 13 Low Source: MEASURE Workshop May5/6, 2011; customer interviews

13. Recall - how to get prepared ? • Install a Recall Plan • Ownership • Mandate • Define processes and procedures • Select and pre-implement a Recall Management IT System • Checklists • Internal deployment and training • Engage partner(s) • Maintenance of plan • Select an IT End2End Order Management Solution (and pre-configure)

14. Questions ?