Customer rejects suck…period!
The reasons they hurt your business are well-documented. Not only can they damage your relationship with your customer – in the worst case pushing them to look for another supplier – they can even make you question your own capabilities as a manufacturer. But most of all, they are expensive.
The impact of rejects can vary widely by industry and manufacturer. For instance, if you make DVD’s or tablet computers, handling a reject can be as simple as providing your customer with a replacement unit.
Problem solved. A short-term hassle. Pricey, perhaps. But minimal impact.
From there, things can escalate quickly…
Being from the Detroit area, we grew up in the automotive industry. With all the recalls in the news and all the attention they get, you might think that the automotive industry has it worse than all other industries. A single manufacturer can recall thousands of cars – sometimes hundreds of thousands – to fix a single manufacturing defect (think of the recent Takata airbag debacle). In the worst case, there can be injuries and even loss-of-life, and there’s always intense media scrutiny. Identification, coordination and resolution of the problem requires a monumental effort on the part of the car manufacturer and their dealers. And ultimately, it is extremely expensive.
Fortunately, it is also a fairly high-margin product.
We have been fortunate to work in many industries. And because our fundamental focus is on manufacturing quality, it allows us to make some interesting observations regarding rejects. As a result, though I agree that the automotives have it bad, in my experience, the worst of all customer reject scenarios falls on manufacturers of the lowly metal can.
How can that be?
Let’s look at just one defect – improper sealing of the can end to the body. And then let’s start with simple production volumes.
As the above graphic shows, worldwide annual automotive production is now approaching 90 million units.
But the simple can end is manufactured at a rate of more than 5/second. At this rate, the average line can produce more than 300,000 ends per day and the last plant I was in had 10 lines running simultaneously. That’s more than 3 million ends per day, which means that end production from this one plant exceeds worldwide auto production in just one month! In fact, according to the Can Manufacturers Institute, in the US alone, there are more than 200 can manufacturing plants producing the more than 130 billion cans that Americans consume every year!
Now think about a customer reject of a can for an end sealing problem. First off, they don’t find the problem until after the can has been filled and sealed. As a result, the cans being returned are filled with product – food, beverage, oil, etc. – which cannot be reused. The can manufacturer is expected to take responsibility for both the can and the contents. And the contents may be many times as expensive as the can itself. Plus, you have to replace the defective cans – just like the DVD or Tablet manufacturer. A single rejected lot of cans can cost a manufacturer 30 to 50 times the profit made on that sale, or more!
And it’s really hard for a can manufacturer to mitigate their losses.
Auto manufacturers can often go back to the supplier that provided the defective part and compel them to share in the cost, but the can manufacturer has very little in the way of suppliers to fall back on. Unless it is a blatant metal or sealer compound defect, the total responsibility falls on the can manufacturer.
One of the attractive features of the common metal can is the fact that it is recyclable, but it is hard to recycle a can when it is full of product – and getting the product out can be more expensive than what you get back from the recycler. Just think of a load of aerosol cans filled with hairspray…
And product liability and media scrutiny are no strangers to the can maker, either! Imagine you are making defective cans of baby formula that get delivered to store shelves before the problem is discovered…
So, customer rejects suck…for everyone. But rejects for the can maker are the worst of all!
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