A Holistic Approach To Recalls

Managing reputational risk, media, logistics costs and more.


Government regulations are driving greater awareness and demand for technology tools to manage recalls, points out Kozenski. “Customers recognize this and they’re being very proactive around compliance.”

RedPrairie’s software can be used to identify and manage recalled product in a warehouse or even at the retail level. For instance, point of sale devices and cash registers can be integrated into the system so if a store clerk tries to ‘ring up’ a recalled item it will essentially be deactivated to prevent the transaction.

Kozenski says that not only is technology very sophisticated today, it can be deployed without a lot of intrusion into a customer’s operations. Even better, it’s more affordable than ever.

“Our customers have done ROI studies to justify these types of technology projects. They have discovered that when it comes to operations costs, they can save millions of dollars not to mention the risk mitigation they enjoy. In fact, for very large companies with hundreds or thousands of SKUs, millions of dollars in savings could actually be a conservative figure,” says Kozenski.

 

Improving product disposal practices

For Reverse Solutions, in addition to guaranteeing customers that recalled product will not get back into the supply chain once they are removed, the company adds the extra step of making sure it doesn’t enter the landfill either, explains Bill Carroll, vice president.

“We do not put product in landfills,” he says. “There are alternative sources for absolute destruction of a product other than a landfill.”

If the product is packaged food, for example, Reverse Solutions separates the food and puts it into the proper waste stream while the packaging is also segregated into its appropriate commodity waste stream (paper, plastic, etc.), which is baled and processed accordingly.

“This commitment to sustainability is very attractive to our customers, like the Associated Grocers of New England,” says Carroll. The focus on sustainability also formed the foundation for the company’s Reverse Recycling division, which develops comprehensive waste stream management programs that are designed to relieve the financial and operational burdens that come from waste and turn them into savings of both time and money.

“The best part is that there are no costs for our customers,” says Carroll. “Our experience in the waste and recycling industry gives us a unique advantage when customizing programs for our clients. We know exactly what can be recycled, how it can be recycled, who can recycle it and how to negotiate the best rates and rebates available.”

 

The Hidden Costs of Recalls

According to Greg Pallaske, director of regulatory compliance at US Foods, monetary costs are only one aspect of recalls. Others include:

Administrative

  • TIME: Management and staff dealing with media, FDA, customers, lawyers, etc. during the recall; reputation repair after the recall
  • LEGAL: Cost of maintaining representation if there are legal consequences including personal injury lawsuits
  • EXTERNAL: Administrative expenses incurred by customers in contacting customers, removing the product from the market, submitting paperwork, and dealing government agency (FDA and USDA) Effectiveness Checks
  • DESTRUCTION OF PRODUCT: This includes landfill costs, transportation, etc.

Personnel

  • DOWN TIME: Paying staff for non-production time until company recovers and begins producing again
  • DESTROY vs. CREATE: Wages and benefits for staff to gather and return product for destruction
  • MORALE: Morale suffers when an illness or death has occurred from a product that was manufactured or sold by a company

Opportunity

  • WASTED: The time that company leadership spends dealing with a recall crisis is time lost from normal business activities
  • LOST: The cost of raw materials used, the time of the marketing and sales staff, and transportation to produce recalled product

 

Damages

These are external costs and range vastly depending on the severity of the recall. From a few hundred or thousand dollars per victim to many millions if there is long-term damage, or if there are deaths associated with the recall.

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