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In 2019, the Consumer Product Safety Commission (CPSC) announced 241 recalls,  ranging from essential oils to motorized vehicles, and from as few as a couple hundred units to the largest of the year—5 million units.

Try as you may to avoid one, recalls happen even to the best companies. And while year-to-year the overall percentage of product recalls is down, it’s still important to include recall scenarios in your business continuity (BC) plans.

In the first two months of 2020, the Consumer Product Safety Commission listed more than 25 product recalls ranging from 100 units of leaf blowers to more than 850,000 cans of waterproofing wood protector.

Are You Ready for a Recall?

A product recall generally happens when a product is defective or found to be unsafe for consumers.

In most cases, the company or product manufacturer will cover the cost of either replacing the recalled item or fixing it. Costs to implement these recalls, repairs, replacements and reimbursements can easily reach into billions of dollars for large companies.

In the United States, government agencies are tasked with testing products, food, drugs and automobiles to ensure they’re safe and to alert the public when they’re faulty. Among these agencies are CPSC, the Food and Drug Administration, and the National Highway Safety Administration.

While food and automobiles can lead the list of commonly-heard-about recalls, any product can be affected. Those 5 million units mentioned earlier as the largest recall in 2019? That was an infant sleeper, which was recalled after reports of infant deaths.

Some other common recall items include:

  • General consumer products such as appliances, clothing, furniture, and electrical products
  • Boats, personal watercrafts, and equipment installed by boat manufacturers
  • Medications, including medical devices, vaccines and veterinary products
  • Cosmetics
  • Environmental products such as pesticides, fungicides and rodenticides

The Impacts of a Recall

Recalls are costly for business.

One of the most costly recalls in history is the Takata air bag recall that began in 2008. To date, its costs are about $24 billion.

Takata created air-bag inflators, which were used by most major automakers. The inflators had an issue that could cause them to explode and eject shrapnel-like material, causing deaths.

Examples of other recent high-profile recalls include:

  • Volkswagen diesel engines: $18.3 billion
  • Samsung Galaxy Note 7: $5.3 billion
  • General Motors ignition switch: $4.1 billion
  • Peanut Butter Corp. of America: $1 billion

But recalls impact more than just the costs to repair and replace defective products. There are often also plummeting stock prices, government sanctions, and lawsuits. Recalls can also cause irreputable company and brand damage, sometimes resulting in bankruptcy or closed businesses.

Manufacturing defects and other manufacturing-related issues often cause recalls. As the global sales market continues to expand, so does the global supply chain. With parts now coming from around the world, one defect can have a crippling impact on your organization.

Planning for Recall Recovery

When it comes to planning for recall recovery, here are a few key points to consider:

  • Implement your recall procedures as quickly as possible. This includes working with all related vendors and retailers that distribute or sell your product.
  • Make it as easy as possible for your customers to return the defective product or take other required steps for repair, replacement or reimbursement.
  • Communicate quickly, clearly, and often to your suppliers, vendors, employees, consumers and other key stakeholders. Be as accurate and transparent as possible.
  • Plan ahead. Don’t wait until you’re facing a possible recall to plan your response. Like we mentioned in our Black Swan blog, you can’t plan for every possible scenario, but you can plan for consequences and reverse-engineer your response strategy.

Business Continuity for Recall Management and Recovery

Crisis preparation, mitigation, and recovery are important components of your business continuity program. A recall is one of many ways your business could face a disruption that can have devastating impacts on your organization.

Is your business continuity program ready to help you deal with the fallout of a recall?

Ask yourself:

  • Are there weaknesses in your supply chain?
  • Are there supplier quality issues?
  • Have your suppliers made changes to their materials?
  • Is there an impact of those changes on your products?
  • Are your employees following your production and manufacturing processes?
  • Are your existing processes effective and efficient?
  • Can you quantify the potential financial impact of your recall scenario?
  • What can you do to mitigate the likelihood of a similar recall happening in real world situations?

Remember: A mishandled or poorly handled recall can have far more devastating impacts on your operations than the initial recall itself.

Need help planning a recall recovery response? Assurance crisis management software can help you predefine recall scenarios so you can quickly plan for response and recovery, validate your recovery time objectives (RTO), identify all of your critical assets, and track all of your event recoverability actions.

Have questions or want to see a demo of how Assurance can help your plan for recall recovery? Contact an Assurance professional today.

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References:

https://www.controlrisks.com/our-thinking/insights/3r-adopting-a-resilient-approach-for-recall-management
https://www.reliableplant.com/Read/19372/what-companies-must-do-to-recover-from-a-product-recall

https://www.continuitycentral.com/index.php/news/business-continuity-news/2531-communication-is-key-during-product-recall

https://foodsafetytech.com/news_article/practice-practice-practice-why-mock-recalls-are-so-important/

https://hbr.org/1996/09/a-strategic-approach-to-managing-product-recalls

https://www.washingtonpost.com/business/2020/01/13/product-recalls-under-trump-fall-lowest-level-16-years-new-signs-emerge-tougher-regulator/

Topics: Business Continuity| Retail

Assurance Software

Written by Assurance Software

Assurance Software takes your company’s enterprise-wide business continuity and resiliency program to the next level. With Assurance as your go-to partner for continuity and resilience, you can confidently mitigate risk, manage recovery, and safeguard your employees, customers, operations and brands.

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