Product recalls serve an important purpose, removing dangerous products from the marketplace and limiting a company’s liability for corporate negligence. Provided that the recalling firm communicates clearly with the general public, a recall can also serve to demonstrate to the consumer that the company values their safety and quality of experience.

However, a recall can also have a detrimental effect on a company and its long term profitability, posing huge reputational and financial risk. The cost of a product recall, regardless of the sector, can run into millions. Companies must contend with myriad recall costs including product losses, costs to withdraw the product from various markets globally, disposal of a faulty product, product testing, overtime wages and crisis management advisory. Although all of these functions are necessary steps of the product recall cycle, they can be prohibitively expensive.

Yet, despite the cost implications, many firms pay little heed to the possibility of having to issue a recall, and so are ill prepared if one becomes necessary. In order to manage the negative effects that a product recall can have on a firm, companies must plan and prepare for every eventuality. A prudent manufacturer should have a well rehearsed recall plan in place, enabling it to carry out the recall in a quick and efficient manner. 

Oct-Dec 2014 Issue

Richard Summerfield