An increasingly stringent regulatory environment is tightening standards that are leading to a growing number of recalls. For companies in this global economy, the mere mention of a product recall strikes fear in every manufacturing, pharmaceutical, chemical, distribution, and food and beverage organization.
A recall is complex with many moving parts involving everyone from the warehouse to the c-suite. While many companies understand the complexities of the process, they are wholly unprepared. Besides the compliance and financial consequences, which can be significant, a recall can be as innocuous as a mere inconvenience, as significant as to cause a black eye on the company’s reputation, or as disastrous as the downfall of the entire organization.
Learning from recall mistakes
There are many companies who learned the hard way how a poorly handled recall can have significant consequences. Some noteworthy examples:
- Peanut Corporation of America triggered a massive food recall in 2009 that impacted 360 other companies and nearly 4,000 products after a salmonella outbreak killed nine people and caused another 700 to fall ill. The company eventually went out of business and the CEO was sentenced to 28 years in prison.
- In 1994, Intel initially refused to replace a faulty microprocessor chip, losing the business of some major companies and angering many customers. The total losses due to the recall and delayed response are estimated to be $500 million in damages and lost business.
- Merck withdrew prescription painkiller Vioxx from the market in 2004 after 38,000 deaths were linked to the drug. The case became mired in a controversy with a painful and lengthy investigation from the Food and Drug Administration.
If you think about the fact that these recalls took place long before social media took hold and accelerated the rate of how fast news travels, you realize it’s even more important today to act quickly to contain any damage. The recent recall of the Samsung Note 7 (estimated to cost as much as $2 billion) is case in point. The news was shared at lightning speed and has stayed in the public eye for a long time.
Avoiding a recall disaster – The importance of ERP
In order to contain and react quickly, you need systems in place that can track and recover product quickly. Because of supply chain and other issues outside of their scope, manufacturers can’t control every factor that might lead to a recall — but they can put measures in place to contain the damage.
The faster you can react to a recall the better off your organization will fare — ERP quality control features and inventory and supply chain management mean that you have what you need at your fingertips to take action.
- Planning: Like disaster planning, recall planning must involve a cross-functional team, from legal and customer service to corporate communications. Make a plan that names the parties responsible for every step along the way. Create a playbook that covers tracking and recall procedures, recall notices, regulatory reporting, and progress monitoring — and practice your organization’s reaction to various scenarios. The plan should also incorporate policies and procedures to detect problems early on.
- Supply chain management: Foster strong relationships with all vendors in the supply chain as partners who are invested and share in the success of your product. Implement a management system that can monitor quality and other issues along the entire chain.
- Tracking: A robust tracking system will isolate the root cause of the problem that triggered the quality concern. ERP systems will identify and isolate the lots that are affected as well as the unsold inventory across the distribution chain so it can be stopped before reaching the market.
To manage the varied needs of stakeholders such as suppliers, customers, and regulatory agencies, ERP will ease the process. ERP automates forward and backward traceability has extensive tracking capabilities and integrates inventory and supply-chain management to significantly ease the burden of a recall.
NextTec Group is an award-winning businesses technology consultancy that offers state-of-the-art ERP, CRM, and BI solutions, in the cloud and on-premises. Our team can help small and medium enterprises find a solution that not only effectively manages a product recall but will make all aspects of your operations more efficient and cost-effective. Contact us for a demo of our product recall software solution for Sage X3.