After first becoming aware of a problem, many companies spend the first 48 hours scrambling to organise a recall team and gather necessary information.
Rarely a week goes by without news that another food product has been recalled somewhere in the world. In 2013 alone, the US Food and Drug Administration recorded more than 400 recalls.* In addition to the direct costs of a recall, regulatory sanctions and negative consumer reaction can result in lost revenues and substantial reputational damage. The power of consumers on social media, combined with regulators’ increased expectations, has made recall management a strategic priority. But many companies spend the first 48 hours of a crisis scrambling to organise a recall team and gather necessary information for a senior individual to make the decision to immediately prevent further distribution of an affected product. The result is that the recall issue continues to grow.
Common reasons why companies fail to effectively execute recalls include:
These factors make it difficult to quickly launch an effective recall operation. Definitive action within 48 hours of detecting the problem is critical.
Companies can greatly improve their ability to manage recalls if they approach the process systemically and aggressively. The foundation for success is a pre-determined ‘pivot point’ team, reporting to a C-suite sponsor and empowered to oversee the recall process. The team is responsible for driving cross-functional coordination and execution, deploying and managing resources, and providing transparency into progress and costs and is accountable for performance.
Building on the foundation of the ‘pivot point’ team, these are the five pillars of effective recall management:
A holistic view of the ‘recall system’ should identify all impacted employees and clearly define their tasks and responsibilities. Recall plans should be sufficiently detailed for immediate execution, but not excessively complex or inflexible. Plans should be updated frequently to account for changes in suppliers, manufacturing, distribution, customers and other factors.
Companies should be able to assess the scope of a recall, track and document recall activity, respond quickly and accurately to regulator or other external stakeholder requests for data, and track all recall costs and KPIs. This requires a robust information management capability, and the right systems and processes.
Upstream and downstream traceability is essential for quick and precise identification of both the source of the problem and the scope of products to be recalled. Better traceability can lead to a smaller and more targeted recall, limiting health risks to consumers as well as damage to your brand.
In the event of a recall, companies should communicate effectively with relevant government agencies and other key stakeholders, including employees, customers, suppliers, insurance carriers, investors, and the board. The recall team must determine which information to communicate, to whom, how, and when. The team must ensure that all internal and external communications are consistent, coordinated and timely.
The company should have a strategy in place for addressing insurance recovery. Immediately after a recall, the company should communicate with its insurance carriers about the recall process and identify all possible claim elements. This will help facilitate full and prompt insurance recoveries that safeguard cash flow.
* US FDA 2013 Recalls, Market Withdrawals & Safety Alerts