Total recall: resellers and faulty products

Earlier this year, networking vendor Cisco was forced into its largest-ever global product recall after it found that up to 15 per cent of the WS-X5012 48-port ethernet modules it had shipped could short circuit and disable customers' networks.

About 11,250 modules were thought to be at risk from the fault, although Cisco said that only 14 incidents had been detected. In the recall notice, which Cisco posted on its website, the company warned that the defect "will cause the power supplies to go into over-current shutdown, cutting off power to the system". The short circuit could also create smoke, but would not produce fire or sparks, and it could "cause damage to the switch back-plane", said Cisco.

It's not unusual
Product recalls are unusual but by no means unprecedented. The Cisco recall of the ethernet module was unusual only in that it was a mature and widely-used product that was recalled, rather than a new one that had not been properly tested. But all product recalls raise concerns for the channel, and highlight how important it is for the vendor to work with dealers, not just when the sale is made, but when providing after-sales support for the customer.

The dealer is the first point of call for the concerned customer, and it is important that the vendor works closely with the reseller over recalls. Peter Crowcombe, European services director at market analyst Infonetics, says: "Cisco handled the product recall pretty well. If the company hadn't, we would have heard a lot more about it."

Tony Holmes, technical director at Cisco distributor Comstor (formerly RBR Networks), says the UK got off lightly over the recall issue. All UK customers were sent an email giving the serial numbers of the affected modules, but only two UK customers were affected and had to return their units.

"Product recalls are unusual for us," says Holmes. "It is more typical for a customer to decide that they do not want the kit and to return it." He believes that less than half a per cent of kit sold does not work properly and has to be mended or swapped, but about three per cent of kit sold by Comstor is returned by the customer. The distributor has a 90-day warranty agreement which allows customers to do this.

Return to base
The recall process provides an example of co-operation in the channel, says Holmes. "The user notifies the dealer if they have kit that needs replacing. The dealer then passes the concerns on to us and we can then liaise directly with the customer to provide a replacement," he explains.

With simple, swappable products, the reseller does not need to get involved in the replacement, but with more complicated products, or where there is an ongoing service relationship, the reseller might find itself fully engaged. A customer could be left with a poor impression if the reseller is not seen to be taking the product recall or return seriously.

The Cisco recall, which had affected a mature product, was blamed on a manufacturing fault at a sub-contractor. Speaking at the time of the recall, Mike Pilbeam, technical director of Cisco UK, said the fault had been isolated to a copper defect in the modules' printed circuit board. "There was a problem in the manufacturing process that was identified to a batch of boards. The sub-contractor has since been decertified."

At your service?
The channel has been largely built around notions of service, with engineers able to visit customer sites around the clock to keep them ticking over.

The most likely time for a product to fail is when it is first installed, Crowcombe claims. "The lifecycle of IT products means that most, if there are problems with the kit, will be found out quite quickly," he says.

The only exception is some form of mechanical failure that happens over a long period of time as the performance steadily degrades. This degradation is likely to affect power supplies rather than other IT equipment, and is usual in that the failure can often be predicted, and therefore avoided, by swapping mechanical components in time. The recall - which occurs only when there are safety concerns about a product - is rare.

In the dock
There is, of course, a legal aspect to the business of product recalls in the reseller channel, as in any other industry. In the US, some vendors have been hit by huge liability lawsuits, to the tune of billions of dollars in damages, after shipping defective products. But in the UK there is no legal requirement that binds manufacturers or suppliers to recall faulty, or even dangerous, products.

"Trading Standards officers have no power to force a safety recall. Any recall is purely a decision for the manufacturer to make," says Dave Roderick, lead officer for product safety at the Institute of Trading Standards and Administration. "Trading Standards can, however, put informal pressure on the manufacturer when it does see a need to protect the public," he says.

Roderick says the UK IT industry is generally good about safety. The main area of concern for Trading Standards is over the enforcement of European CE Electromagnetic regulations, which are designed to protect users from harmful emissions from PCs.

Roderick claims there is evidence that some small assemblers are flouting the law, and that a number of local Trading Standards departments have launched their own clampdown on these assemblers. The European CE Electromagnetic regulations are just one of a series of European consumer regulations that have an effect on the channel (see box).

Roderick believes safety regulations in the UK should be tightened to create a mandatory recall system that would allow Trading Standards officers, rather than manufacturers, to decide when a product poses a potential risk to the customer. Existing European legislation, the General Product Safety Directive, is under review. The Department of Trade and Industry also issues best practice guidelines to vendors on what they should do if they ever need to recall a product for safety reasons.

What's the damage?
One of the prime concerns, for both dealers and manufacturers over the issue of product recalls is what legal liability this creates with the customer. Could a customer sue for disruption or damage to business, even if the recall goes smoothly and no injury is caused?

Roderick says the key point about liability is whether the manufacturer or dealer could have foreseen that a recall might be necessary. If the vendor ignores test results, for example, that clearly show that a product is faulty and continues to ship it, then it might be held liable. But in practice no reputable manufacturer would ever do this - least of all in the IT industry - because of the damage it would do to its reputation.

Passing the buck
Roderick says that under UK law the dealer is liable in the first instance for faulty goods, but that it could in turn claim against the manufacturer which supplied the products. "It's a backwards process," he says.

As long as the reseller has not significantly altered the product, it should be able to pass on any liability to the manufacturer. For the reseller, a product recall is a time to pull together and to work with the manufacturer for the customer's benefit.

Martin Briggs, director of MCB Computing and a founder of the Network Buying Group, says: "If there is to be a product recall, then the key thing from the reseller's point of view is to get timely information from the vendor."

Nothing reflects worse on the reseller or dealer than the reseller not knowing what the problem is when the customer returns faulty products.

The best situation, says Briggs, is where the reseller is part of the solution rather than part of the problem. If there is a fault with the product, it should be the dealer who contacts the customer and arranges for the manufacturer to swap the product. The dealer needs to take the lead.

"The first stage is that the manufacturer needs to email us the information necessary so that we can explain the fault to our customer," says Briggs. "After that, the vendor needs to arrange rapid product replacement."

Recalls can be traumatic for the customer, but it's up to the reseller to make that process as easy and as painless as possible. For manufacturers, the dealer can serve as a cushion between it and the customer, ensuring that the relationship is not damaged in the long term.