Toyota Recall Crisis

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Proceedings of the 2012 International Conference on Industrial Engineering and Operations Management Istanbul, Turkey, July 3 – 6, 2012 Car Recalls: A Problem Unique to Toyota or For All Car Makers? Kamrul Ahsan School of Management and Information Systems, Faculty of Business and Law Victoria University Australia Abstract Often automobile recalls are drawing media and public attention. Influenced by Toyota’s recent automobile recalls 2009-2010 this research conducts an empirical study on historical car recalls. The research uses secondary data from recall websites maintained by public and private organizations. For different car model year and manufacturer the study looks at frequency of recalls, recorded customer complaints, and…show more content…
Proper communication channels are also important to handle recalls efficiently. Companies are still not prepared to deal with recalls nor do they recognize how great an impact recalls can have on an organization’s reputation. The point is that risks are higher than ever for the company that fails to anticipate the possibility of a product recall (Monczka & Trent, 1995). The costs of recalls are enormous for all parties in the chain. Product recalls due to safety hazards entail social costs, such as property damage, injury, and sometimes death (Hora et al., 2011). Costs of product recall through the reverse distribution channel are at least two or three times higher than costs incurred in forward distribution, often due to small quantities of shipments, fluctuating and uncertain demand, and the urgency 2027 involved in the recall process (Chandran & Lancioni, 1981; Jayaraman, Patterson, & Rolland, 2003). Costs to customers sometimes amount to death or physical disability. For the manufacturer, costs are quite substantial and can be compared with the cost of quality. The cost function can be the cost of recall operations, cost of product replacement or repair, cost of losing market share or goodwill, cost of marketing the brand value, cost of lawsuit settlements, and cost of closing share price (Berman, 1999; Gomer, 2008). There are various categories of recalled products and these include: automobiles, children’s products, appliances,
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