Product Recalls Happen to Everyone, How Can Your Business Prepare?

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As traceability initiatives take flight and regulators sharpen their teeth, product recalls are becoming an increasingly regular part of business for manufacturers, wholesalers and distributors. A poorly managed product recall can be a major burden for a small or medium sized business and can create outsized reputational risk for a business of any scale. No business wants to be caught up in a product recall but when something does go wrong, how can you come out the other side in the best state possible?

Get the team on side

From online inventory management software to better process documentation, there’s a lot that most businesses can do to prepare for a product recall. Unfortunately, getting buy-in from the business can often prove challenging, particularly when the spectre of a product recall doesn’t loom especially large. Boards often consider that the chance of a serious product safety incident requiring a major recall is low, and might not justify intervention.

Equally, in an environment with tight margins and limited budgets, there might be a preference to spend money preventatively. But, as we know, product recalls occur much more often than most business owners think. As supply chains are increasingly marked by outsourcing, control over product safety and quality goes down and the likelihood of a recall event goes up.

Low-level product recalls can distort manufacturers’ impressions of the level of risk in a recall. Regulators are paying more attention than ever, and businesses who are slow to respond to a product safety issue risk hefty fines and third-party lawsuits. The risk of public condemnation and a plummeting stock price might also be relevant. Making the case for product recall preparedness is an essential investment; without buy-in, difficult conversations about existing practices are too hard and budgets are simply too tight.

Use an inventory management system

When searching for logistics, inventory management or supplier management software, think carefully about each platform’s product recall capability. Online inventory management software can be particularly useful in this regard. Consider which of the following features would help your business respond faster in a time of crisis:

  • Batch tracking allows you to group and report on batches of products and, in a recall situation, to identify every affected batch
  • Serial number support makes it easy to ensure higher value products (such as cars or industrial machinery) can be traced
  • Assembly and Bill of Materials functionality, so you can identify which raw materials were used in products at different times
  • Sales records, so you can identify affected customers in a timely manner
  • Perpetual inventory, a common feature in online inventory management software which means your inventory data is always up-to-date

Responding to a product recall

If it becomes apparent that there is a likely product safety issue or some other reason to recall, the first step is usually to diagnose and scope the problem. A recall might not be limited to the products with documented issues but, equally, it’s rare for a recall to extend to all of a business’ products. On that basis, your first step should be to leverage inventory data to determine the root cause. This might involve tracking affected shipments back to batches using sales and batch data, and then tying those batches to a common input using a Bill of Materials feature in your inventory software. Once you have identified the scope, you’ll be in a much better position to speak to regulators, the media and consumers in general.

The next step is to develop a plan of action. How can you let wholesale and distribution customers and end users of your products know? How will you manage recalls? Are there legal and financial risks to plan for? Once your action plan is in place, moving quickly is essential to prevent further safety risk to consumers.

Whether your recall is a success or not, the final operational step (noting that regulatory and legal matters might continue well into the future) is to consider how to improve future product recall performance.

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Melanie - Unleashed Software

Article by Melanie Chan in collaboration with our team of Unleashed Software inventory and business specialists. Melanie has been writing about inventory management for the past three years. When not writing about inventory management, you can find her eating her way through Auckland.

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