Guide to Planning a Product Recall

Best Practice Guide

Major liability loss coming from defective products

If your company is in the in the business of selling consumer goods, you might already know that defective products are a leading cause of liability loss. The overall toll of consumer goods incidents to the U.S. economy: a staggering $1 trillion plus annually.

That price tag is growing too. Auto recall costs rose 26 percent in 2016. And the average cost of a recall to a food company is up to $10 million in direct costs.

Of course, missing in direct expense tallies are the varied costs of notifying stakeholders, retrieving, storing, and/or destroying unsalable products, paying for more labor, and, of course, dealing with shattered consumer confidence, one of the longest-lasting effects of a consumer product recall.

For context, a Harris poll showed that 55 percent of consumers would switch brands temporarily following a recall. Twenty one percent would avoid purchasing any brand made by the manufacturer of the recalled product.

Unfortunately, with increasing supply chain complexity and heightened oversight, the product recall threat is going to get a lot worse before it gets substantially better. We’ve already seen spikes in the number of product recalls. Recalls in the food and automotive industries, in particular, have dramatically increased over the last few years.

The case for a defensive strategy couldn’t be clearer. In many sectors, some degree of planning is already mandated by law.

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