Product recall is a major concern across almost every industry and its impact is felt at all points in the supply chain. Dave Bruno, Director of Commerce Studies for RedPrairie, posted this article on traceability recently and I thought it you would find it informative. How quickly can your business react to a product recall? Are you and the people in your supply chain prepared to move quickly when required?
By Dave Bruno
It seems that a week doesn’t go by without the media covering a product recall. From drugs and consumer products to food items and cars, few industries are immune to the very public nature of a product recall, not to mention the financial fallout and potential ensuing liability issues. Product recalls have a ripple effect, up and down the supply chain. In fact, at last month’s RedShift, we heard one panelist emphatically state that a recall is the number one fear for grocery stores. We learned that 40 percent of recall notices are issued by brands after the stock market closes on a Friday evening, precisely when they are most understaffed.
In May 2010, a report issued by Deloitte on behalf of the Food Marketing Institute (FMI), the Grocery Manufacturers Associate (GMA) and the international global standards association GS1 determined the average cost of a product recall to be $10 million. That cost alone is enough to bring a large public corporation to its knees, not to mention the unquantifiable effect on reputation.
In short, the ability to effectively track, trace and recall products up and down the global supply chain is mission-critical. However a new study we published today, as part of our research into Commerce in Motion, found that almost 50 percent of brands are unable to recall products within one business day.
During April, we commissioned a survey of senior supply chain and operations executives from 130 consumer product goods, life sciences, and food and beverage companies. We set out to determine their level of confidence with their current traceability capabilities and the degrees of adoption of technologies to help automate and optimize the recall process.
What we found was a surprising degree of confidence among almost 30 percent of the executives surveyed, despite the fact that almost half of the firms admitted their inability to execute a recall within hours. The research also found that:
- More than half of executives are concerned about their ability to isolate items with their own supply chain.
- Coordinating recall issues with suppliers and distributors is a real concern for almost 70 percent of executives surveyed.
- Only 51 percent of organizations are able to execute a product recall within hours.
- Less than 20 percent have deployed traceability technology solutions to help fully-automate trace and recall processes.
- Forty-six percent say their companies are struggling to stay compliant with regulations.
- Almost one-third of executives were most concerned that their ineffective ability to trace items would have a negative financial impact on their company. Almost 25 percent of them also cited negative brand reputation as a pressing concern.
- Eighty-six percent are worried about their financial liability if something goes wrong with a product recall process.
You can download the full report entitled “On the Trail to Traceability” at http://www.commerceinmotion.com/feature/on-the-trail-to-traceability.
Plus, to listen to a lively analysis of the study findings with industry analyst Simon Ellis, check out this recent videocast athttp://bit.ly/LjfVBT.
Dave Bruno is responsible for leading RedPrairie’s Commerce Studies program, and directing CommerceInMotion.com. You can email Dave at: David.Bruno@RedPrairie.com
- Surge in products being recalled may be numbing consumers (usatoday.com)
- Tracing materials across the value chain: The shifting landscape (greenbiz.com)
- Report: Fewer Kids’ Products Recalled, But Recalls Ignored (sanfrancisco.cbslocal.com)