Avoiding Regulatory Wrist Slaps: Retailers Face Stiffer Recall Penalties

Even though the brunt of product recalls falls on manufacturers, retailers have an obvious stake in quickly and efficiently clearing recalled products from their shelves. Retailers are ultimately responsible for every product sold in their stores, regardless of the source. The public will punish manufacturers and retailers for what they consider a poorly handled recall.

When recalled products remain on shelves, retailers face severe regulatory fines, civil liabilities and lost revenue, sometimes even years after the recall has occurred.

Removing the recalled product from store shelves is an important part of the equation, but it’s often overlooked, to the detriment of manufacturers, retailers and customers combined. At the same time, retailers don’t want to inadvertently pull unaffected product because that can elevate recall costs and alienate customers who rely on the products, costing the manufacturer and possibly the retailer both sales and market share.

There are four best practices that lay the foundation for efficient recalls.

1. Create a recall plan before you need one

Be prepared. A recall can happen at any time. Having a plan in place can help make the recall notification process less painful and faster. It’s important to consider likely scenarios that may occur.

2. Develop a system for immediately removing affected product from shelves, including:

   1. Speed: Delayed responses have the potential to expose manufacturers and retailers to litigation, brand damage and regulatory scrutiny. Without a professional global field force in place, many companies disrupt day-to-day operations and lose time and money trying to manage and coordinate retrieval logistics.

   2. Accuracy: With a company’s image and reputation on the line, accurately retrieving all affected products is vital for the integrity of the brand. If products remain on shelves, in back stock or in homes, a company’s liability increases along with the risk of regulatory action and brand damage.

   3. Efficiency and Effectiveness: Retail employees are typically trained to keep shelves stocked, not remove a limited number of products due to a recall. Assigning this task to internal teams can leave retailers vulnerable. With a third-party solution, a field force can perform the retrieval or provide effectiveness checks to ensure all the affected products are removed.

   4. Scalability: During a retrieval event, the number of units that need to be retrieved from anywhere in the world and along the supply chain can vary from one extreme to the next. Companies can have events that require them to pick up anywhere from one product at a customer’s home, to millions from retailers and distributors globally. Because retrievals are not always a part of an organization’s day-to-day activity, it can be costly and prohibitive to hire and maintain a global field force or to require existing staff to assist. When a situation does occur, companies need the flexibility to handle any type of event anywhere in the world at a moment’s notice.

   5. Quality: In any product retrieval situation, a brand’s reputation is already at risk. To protect the integrity of the brand, manufacturers and retailers must ensure that representatives picking up product act as an extension of their team. It is important for companies to meet the highest quality standards and document every step of the process, from transporting and storing products with a secure chain of command, to handling subsequent product testing or product recalls in a regulatory-compliant manner.

3. Regularly review recall plans

Retailers should periodically audit their recall effectiveness to identify any gaps in their processes and update their plans accordingly. It is important not to rely solely on what systems show, as these can be inaccurate. There is no substitute for examining inventory to ensure the removal of recalled product is as accurate as possible.

4. Communicate early and often with customers and regulatory bodies

While manufacturers are responsible for informing the public of a recall, there are steps retailers can take to make the process more effective and demonstrate their dedication to the safety of their customers. An example would be using an existing loyalty rewards program to reach out directly to customers who have purchased affected product. To avoid any issues with regulators, retailers must document everything. Records of retrieval processes and effectiveness checks can act as a record of the company’s efforts to keep affected product off shelves.

It’s also good practice to forge strong relationships with manufacturers before a recall situation arises. Working closely with the manufacturer in advance of and during a recall can close gaps in retailers’ recall operations that can cause them to miss recalled products or inadvertently pull unaffected products from store shelves.

It also works in the other direction. Manufacturers are often unfamiliar with the retail operational requirements of a recall and may not understand the specifics of what happens at the retail store level with recalled products. Combining knowledge at both ends of the process benefits retailers and manufacturers alike.

Consumer safety will always be the top priority for recalls. The most urgent task for retailers and manufacturers is to get affected product off the shelf as quickly as possible.

Close cooperation between manufacturers and retailers can prevent wasteful and expensive movement of salable product. Manufacturers can help retailers identify specific lots and batches of product that should be pulled back. Retailers can advise manufacturers on store-level processes that can influence the efficient movement of recalled and replacement product.

Recalls are a part of manufacturing, particularly in this era of rapid innovation to satisfy just as rapidly changing consumer preferences. Through more methodical, targeted and cooperative processes, manufacturers and retailers can curb recall expenses and keep the overall product costs competitive.

Michael Good is Vice President of Sales for Stericycle ExpertSOLUTIONS, where he leads a team of professionals using his proven skills in the areas of sales, marketing, and strategic account management. Throughout his career, Good has been involved with all aspects of the sales organization, including developing go-to-market strategies, forming and nurturing a sales team, and securing strategic partnerships. One of his main areas of focus has been improving the customer experience through strategic consulting initiatives with industry leading clients. His marketing responsibilities have included the shaping of content and social media strategies and the development of new initiatives. Good also co-founded and led a software development firm specializing in asset management health care solutions.