Product recalls are a fact of life. In recent years, there has been an increasing number of high profile recalls in the automotive, food, toy and consumer goods sectors. The number of recalls is likely to continue to rise, making it crucial that a company has a robust, thorough and effective procedure in place when it becomes aware of a problem which could potentially affect the safety of its product.
A badly handled recall could cause considerable reputational damage to a company, particularly given the media scrutiny and impact of social media. This could in turn lead to a loss of revenue and market share, and, in extreme cases, the demise of the business.
The flipside, of course, is that a well-managed and responsive recall could instil trust and confidence in consumers, thereby strengthening a company’s brand. The investment in a solid product recall procedure could therefore pay dividends.
There are a number of key elements to a successful recall, including:
- have the requisite regulatory and local knowledge of the markets in which the product will be sold. A product may be regulated in one country and not another. It is therefore critical that a full knowledge and understanding of the legal and regulatory requirements is gained before production commences. This issue is likely to become more pertinent in view of the increasing globalisation of business, which is today commonly conducted across different jurisdictions and regulatory regimes
- plan ahead. To be forewarned is to be forearmed. Companies should not assume that a product is without fault. Even the most thoroughly tested product could prove to be defective, whether by design or through faulty manufacturing. A thorough policy should therefore be implemented to ensure that any issues can be anticipated early, and responded to, in a timely and discreet manner. This should include a structured system of audit and an analysis of consumer complaints and feedback
- undertake a thorough investigation. If notice of a defective product is received, it is important to establish promptly whether the defect does exist, before potentially incurring considerable expense and risking exposure to bad publicity for potentially no reason. If a defect is established, determine whether there is a problem with the product’s design, or whether there is a manufacturing defect. If the problem emanates from a manufacturing defect, establish the nature and extent of the defect. Can a particular batch of goods be identified? Is the defect limited to a certain location or to a certain day or week of production?
- assuming a defect is found to exist, time is of the essence. Customers and end-users need to be identified. Maintenance of detailed records will assist in tracing customers (possibly retailers) and end-users (ie those who purchased the item from a retailer for personal use). Should a product recall be necessary, it will be crucial to contact those affected urgently. Traceability is therefore key
- a quick, cost effective and well managed system of collecting all products affected by the recall needs to be implemented, and replacement products and/or refunds administered promptly. The less inconvenience caused to the consumer, the greater the likelihood of retaining consumer confidence
- effective and sensitive management of the publicity which will ensue is critical. The press and media will require careful handling. The use of social media to keep consumers informed, and to promote a responsible and proactive approach to the recall, will pay dividends
- looking slightly beyond the product recall itself, business interruption issues will need to be addressed. It will be imperative to get back on track as soon as possible and to minimise losses and reputational damage. A recognition of any problems identified by the product recall process, and an explanation that these issues have been taken on board and dealt with, will go some way to restoring consumer confidence and loyalty
- ensure adequate insurance cover is in place, to cover, inter alia, recall costs, product replacement, business interruption, product liability claims and prosecution defence costs. This list is by no means exhaustive.
A general adherence to the guidelines set out above will put any company in good stead insofar as managing a product recall and its potential fall-out is concerned. A recall situation is inevitably stressful and challenging. A focused, tested and effective recall strategy will ensure that it is nonetheless dealt with successfully, thereby minimising the risk of long-term reputational and financial damage to the company.