Inventory Control and Product Recall Crisis Management
Inventory control is the process employed by a company to track and manage its operations such as warehousing and storage, and shipping. Generating maximum profit from the least inventory investment is the ultimate goal of inventory control. Businesses need to integrate effective inventory control in their operations to ensure that they have enough stock in place to satisfy customers’ demands. If inventory control is ineffectively handled, an organization may be at risk of spending unnecessary amounts on business processes that do not benefit the firm and engaging in time-consuming that are not beneficial. There are various methods of inventory control methods, including managing effective relationships and accurate forecasting.
Fiat Chrysler and Peugeot owner had maintained a good relationship that enabled them to engage in a $48 billion merger agreement. The agreement was to create the fourth world’s largest automaker to spread the cost pressure that had mounted in the global car market. The binding agreement is believed to have been finalized within weeks, and the two businesses quickly adapted to the merger (Quayle, 2006). The two businesses had a good relationship with each other, as well as an effective understanding with their customers. Thus, they were able to sell a combined 8.7 million cars, not far behind businesses such as Volkswagen and Toyota, that sold over 10 million vehicles within a year (Caputo, 2019). A good inventory control comes down to a business accurately predicting demand. The merger agreement between the two businesses came when automakers were under intense pressure to manufacture self-driving cars and electric vehicles. The two businesses forecasted that there would be an increase in demand for such vehicles soon; hence they merged to share the investment load.
According to Souiden & Pons (2009), product recalls in the automobile industry have continued to increase over the last two decades. In 2004, it was estimated that 29 million vehicles were recalled, thus exceeding the 24.6 million products that had been recorded in the year 2000. The authors argue that product recalls in the automobile industry are associated with colossal expenses, such as repair, logistics, and readjustment to assembly line costs. Despite the large scale of product recalls recorded in the last 30 years, automakers desire to understand consumer reactions to these recalls and establish proactive management crisis strategies to solve the issue. In the last three decades, research on the impact of product recalls on consumer behavior has significantly increased.
According to the study, several automakers implement various types of product recall strategies involving offering full refunds to customers when they discover that their products have defects. Automakers keep open lines of communication with customers and often try to educate customers about the potential hazards of their products’ defects. Souiden & Pons (2009) also argue that products recall significantly impacts consumer behavior. Product defects can seriously damage a company’s image, hence, causing a decrease in its market shares and long-term sales because consumers may have no intention to purchase the company’s products due to a lack of trust. Customers’ loyalty to a given automobile company may also deteriorate (Souiden & Pons, 2009). To prevent instances of recall of products that may have defects, I can ensure that all my company’s products are effectively tested before they are released into the global market and that they sufficiently satisfy the consumers’ demands.
Caputo, A. (2019). Cooperation in the Automotive Industry Prior to the 2009 Fiat–Chrysler Agreement. In Strategic Corporate Negotiations (pp. 65-82). Palgrave Pivot, Cham. Retrieved from https://link.springer.com/chapter/10.1007/978-3-030-15479-0_4
Souiden, N., & Pons, F. (2009). Product recall crisis management: The impact on manufacturer’s image, consumer loyalty, and purchase intention. Journal of Product & Brand Management. Retrieved from https://www.emerald.com/insight/content/doi/10.1108/10610420910949004/full/html
Quayle, M. (2006). Provisioning and Inventory Control. In Purchasing and Supply Chain Management: Strategies and Realities (pp. 161-227). IGI Global.