What is a Product Recall?
Better Safe Than Sorry (article)
K'NEX Success (case study)
Recall is the act of officially summoning someone or something back to its place of origin. A product recall is defined as a request to return, exchange, or replace a product after a manufacturer or consumer watch group discovers defects that could hinder performance, harm consumers, or produce legal issues for the producers.
Due to a greater awareness of consumer safety concerns, many companies focus on taking preventive measures, using an internal product recall team, and implementing quality control procedures designed to reduce the risk of—and perhaps even prevent—major product recall expenditures.
Risks of a Product Recall
Possible risk exposure stemming from a product recall includes:
- Product liability claims
- Governmental prosecution
To reduce and contain risk, the product recall teams should document all recall actions, including customer, distributor, user and public communications
If suppliers or component manufacturers are responsible for the recall, it is important to reach out to them as soon as possible to understand the reason for the recall, scope of the recall, and how they plan to address it.
Track all recall-related costs to facilitate future insurance claims and claims against responsible suppliers and component manufacturers.
In conjunction with government regulators, send follow-up recall notices to customers, distributors and users, keeping copies of those notices. Post a notice on your organization’s website and prepare a notice for retailers to post on their sites, as appropriate.
When affected by a recall, it can be beneficial to work with corporate communications or public relations to ensure the proper messaging reaches the correct audiences. In addition, working with legal counsel can help your organization understand its full legal risk and take appropriate course of action.
While not desired, a product recall should be seen by an organization and its employees as a potentially positive opportunity to eliminate or reduce personal injury, property damage, and harm to the reputation of the company and its products. In addition, it may help rebuild public trust in the organization and its products.
Prevention Planning for a Product Recall
An organization-wide culture of product safety — including product management (manufacturing and sales), design, quality, use and testing, and literature — is the best means of preventing a product recall.
However, even with an established culture of quality, organizations face product recall risks due to human error, systems failures, or product or component failures. That is why it is important to have a documented response process if one or more of these errors occur and necessitate a product recall.
Having a response plan (decision-making process) will help ensure the faulty products affect as few persons or organizations as possible, and also help reduce the difficulty and expense associated with product recalls.
Procedures should be created that will permit tracking of all products sold, either by lot number or production period. Manufacturers should also consider using product registration cards for consumers to fill out and return, identifying information such as model number, style number and special features of the product that was purchased. Registration cards, coupled with an easily retrievable customer database, can be an effective tool for identifying owners of recalled products.
The use of accurate records and product labeling can help manufacturers isolate defective products and potentially limit the scope of a recall. In addition, it can facilitate rapid and widespread notice to customers, distributors, and end users when a recall is needed.
Product Recall Team Approach
- Create a product recall team designed to uncover and evaluate any possible product deficiencies before they result in injury or damage and to recommend a fix, when appropriate.
- Prepare a product recall action plan, which can be followed if a recall is instituted and can be adjusted and modified as the recall unfolds.
To best equip the recall team for its tasks, management should consider appointing a cross-functional team consisting of the following job roles:
- Management representative
- Product manager
- Chief engineer
- Quality control manager
- Public relations expert: The public relations professional can assist management in delivering a clear, concise, and accurate message to consumers and possibly transform a potentially negative event into an opportunity to build brand and company credibility
- Attorney: The inclusion of corporate counsel an attorney ensures timely legal advice in the decision-making process, as well as appropriate evidentiary privilege protection with respect to legal advice sought and provided
The objective is to combine the team’s skills and experience to implement and periodically review product safety evaluation procedures, product recall plans, and product safety concerns raised internally or by user or governmental inquiries and complaints. It is important that people with the necessary requisite skill and product and marketing savvy are named to the product recall team and actively participate in its deliberations and testing. If the manufacturer does not have adequate or available internal resources, it may consider retaining outside expertise.
Ideally, the team will meet regularly to review public and internal information on safety issues, including items or procedures identified as toxic or hazardous by safety or industry organizations, governmental agencies or consumer groups.
The team may want to develop internal operating and quality control procedures, such as component certification, product inspection during and after the manufacturing process, and product testing, including testing by an independent testing laboratory. Doing so will help ensure compliance with the Consumer Product Safety Improvement Act (CPSIA), which is enforced by the Consumer Product Safety Commission (CPSC).
Responding to a Product Recall
Armed with the advance planning and continuing dialogue, the product recall team can rapidly respond when a potential recall is identified. It can:
- Evaluate the data and options and perform a risk/benefit analysis of the potential concerns for management.
- Make certain that any reported incidents are not due to product misuse or abuse, or, in the case of some toys, lack of proper parental supervision.
- Determine whether the problem is due to a design defect rather than a production problem and, in conjunction with management, whether a product recall is required.
A product recall is often seen as a process, one that is approached methodically and thoughtfully, with disciplined brainstorming, vetting, testing, and double-checking. Manufacturers may wish to carefully and systematically investigate and analyze all product incidents. If an investigation indicates a product fails to comply with standards or creates a substantial risk of injury, then a formal report to the CPSC or other governmental agency may be required. Manufacturers may also want to act promptly to correct any inaccurate public reports or misperceptions contained in the CPSC’s product database or the media.
To avoid and minimize potential litigation or governmental exposure, the best antidote is prompt, clear and concise notice to all persons affected by the recall, including direct notice to end users or consumers whenever possible.
For example, Williams-Sonoma Inc. was commended by the CPSC in 2001 for using its own electronic credit card records, in conjunction with bank credit card companies, to identify purchasers of recalled portable gas grills. By notifying purchasers individually and offering a full refund and $50 gift certificate, the company was able to make its recall successful, with more than 99% of the grills returned.
It may also be a good idea to explore product recall insurance to cover out-of-pocket costs associated with a recall.
Certain markets, such as children’s products, require additional steps in the event of a recall. The Consumer Product Safety Improvement Act (CPSIA) amended the Consumer Product Safety Act (CPSA) with significant new regulatory and enforcement tools. The CPSIA included provisions addressing, lead, phthalates, toy safety, durable infant or toddler products, third-party testing and certification, tracking labels, imports, ATVs, civil and criminal penalties, and SaferProducts.gov.