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HOW RECALL READY IS YOUR BUSINESS?
VIEWPOINT
BACKGROUND
Product recalls are inevitable, but poorly handled recalls can have a significant impact on brand reputation, consumer loyalty and future business success. Ensuring that your business is well prepared at all times is ultimately the best way to mitigate the impact of a recall if, or when, it happens.
But, how do you measure recall readiness, and what does it entail?
As a leading single-source global recall management partner, Stericycle Expert Solutions has worked with thousands of brands across the globe to assist with product recall events. This white paper draws on this experience, emerging trends and new UK survey findings to:
• Explore the extent to which organisations operating across a range of sectors feel prepared
• Review the measures they have taken to improve their recall readiness
• Provide insights into these findings and make key recommendations to improve recall readiness
INTRODUCTION
Investing in ‘readiness’ is the best way to ensure the best outcome for your business in the statistically inevitable event of a product recall.
In this first contribution to Stericycle Expert Solutions’ You Tell Us series, we have asked business leaders from across different industries to tell us how ‘recall ready’ they are, based on 16 key indicators.
Our ambition is to build a comprehensive snapshot of recall readiness across UK based industries.
Want to find out how ready your business is and how it compares with its peers?
Contact us to take part in our survey and receive a personalised report with key recommendations.
Stericycle Expert Solutions has designed its UK survey to assess recall readiness by collating responses from industry leaders on 16 key indicators of preparedness. These include owning a standard procedure, maintaining a defined recall team, having access to legal support with expertise in the legislative requirements of product recall, and being clear on existing regulatory restrictions and requirements.
The research also explores internal processes and data capture, such as whether a business has labelled products with the required identifiers or conducted a mock recall, and if it can confidently track the number of products it has sold in each market, who its customers are and how it can make contact.
Finally, it delves into elements of delivering a successful recall by asking if systems have been set up to track the full recall cycle, inform customers, monitor and replace recalled stock, support customer enquiries, and crucially, respond to a recall incident within 48 hours.
This section will provide a detailed overview of survey responses by sector, and align these findings with recent recall activity. It will also consider how this may evolve in the face of emerging consumer trends and other external factors.
AUTOMOTIVE
This year, passenger cars have been the most recalled items in this category, making up 61% of the vehicles recalled globally in Q1. This aligns with the survey data, which shows that recalls are a very real and present prospect for automotive companies today.
Of the eight industries surveyed, it was the most likely to have experienced a recall in the past 12 months (over 90%), and amongst the most likely to have conducted a mock recall. Despite this, just over eight in 10 respondents in this space were confident they could initiate a recall within 48 hours, even though all respondents reported that they had a standard operating procedure in place for product recalls and that their call centre was adequately resourced and trained to respond.The ability to respond quickly is critical, particularly when it comes to preventing accidents or injury. This lower positive response rate
suggests the industry should give this indicator more attention when assessing readiness.
Other responses also call into question how confident participants really feel about their standard processes. For example, if 100% of respondents genuinely have procedures in place, adequately staffed call centres, and access to key sales and customer info, why are they less confident about their ability to track a recall from start to finish (9 in 10), or even correctly display product identification (9 in 10)?
Another key area of focus for the automotive industry is the regulatory landscape and the impact of technological change. The pressure to keep up with consumer demand in this sector often means striking a balance between testing boundaries and avoiding the risks associated with being a first mover. However, with technological innovation comes countless unknowns and possibilities, as well as new rules and regulations.Looking at survey responses, 92% said they had a clear understanding of regulatory restrictions that may impact recall from key markets - higher than some of the industries surveyed, but surprisingly, not the highest.
Beyond regulation, it is worth considering the wider implications of innovation. According to Mintel’s latest UK Car Review, automation is just one of the trends that will separate the leaders from the followers, not just in the development of driverless vehicles, but also new enhancements that make driving safer and more pleasurable. With technology often comes software, which has been the culprit behind a series of recalls in the past six months including one recent alert where a software issue caused some affected vehicles to temporarily lose power assistance, increasing the risk of an accident.
What this trend indicates is that as automotive technology continues to advance, the industry
RECALL READINESS – KEY FINDINGS BY SECTOR
will increasingly encounter new, unexpected or unpredictable faults, potentially leading to increased recall activity amongst manufacturers and suppliers.
Overall, however, the survey data suggests a high level of readiness amongst automotive professionals, with over 90% responding positively to the majority of indicators. Automotive brands are constantly testing boundaries and exploring new territories, therefore, being recall ready must mean more than just being recall experienced. Their environment is changing rapidly, meaning that they need to be prepared for new types of challenges, regulatory frameworks and standards.
RETAIL: TOYS AND CLOTHING
The endless battle to keep up with fashions and fads means toy and clothing brands are constantly developing new products, engaging new suppliers and sourcing new materials – all while trying to keep unit costs down and meet a host of regulatory requirements. For this reason, both are familiar with recall activity, although, according to survey findings, the clothing sector appears to score much more highly for readiness, despite being considerably
less likely to have conducted a recall in the past 12 months (92% vs 68%).
Unsurprisingly, risk of injury is a significant factor in driving recalls, and in the majority of recent cases, the risk is to babies and children, highlighting the critical importance of being ready to act in the event of an alert.
By examining some recent examples, we can see that the race to keep ahead of consumer fads has been a major reason for recalls. For example, slime – one of the latest crazes to hit the high street - was the most commonly recalled toy in Q1 2019, largely due to environmental alerts.
Similarly, the trend for hoods on children’s wear led to one high street fashion brand recalling five festive items simultaneously during Christmas 2018 due to risk of injury, while a girls’ jumpsuit from another retailer suffered the same fate due to issues with the placement of the waistband. What this underlines is the need for brands that capitalise on these fads and fashions to take a greater responsibility for ensuring they painstakingly test their products for dangerous design flaws as well as environmental and chemical hazards.
Nevertheless, recalls can still happen, even with the best preventative systems in place. The survey shows that toy and clothing brands are taking steps to ensure they are prepared, although the latter appears to have scored more positively on the majority of measures.
When it comes to processes, systems and resource, both demonstrate a high level of readiness, particularly in comparison with other sectors. All of those who responded from the toy market said they had a standard process in place, although they were amongst the least likely
to have a dedicated team. Just short of 100% of clothing responses had a standard process, but over 9 in 10 had a dedicated team. Both scored highly on having access to recall experienced legal support (92% and 94% respectively).However, despite having systems and people, both scored marginally less confidently on having an adequately trained and staffed call centre and being able to track the recall from beginning to end (91% and 92% respectively). This appears to be the case across the majority of sectors, demonstrating that simply having a system in place cannot be a comprehensive measure of recall readiness.
Another important indicator is whether a business has adequate means of tracking goods once dispatched to third party retailers and customers. This could become increasingly important post-Brexit should toy and clothing brands develop trade relationships with unfamiliar markets. In the survey, toy and clothing brands were amongst the least likely to clearly display identification numbers on their products (83% and 88% respectively). They also scored lower than other sectors for keeping a complete database of customer contact information, with toys being the least likely (75% and 85%).
Unsurprisingly, toy brands also scored lower for knowing how many goods they had sold by market and customer, and their ability to deploy recall activity within 48 hours. Conversely, 94% of clothing respondents believed they could act within 48 hours, although just 79% had conducted a mock recall, limiting their understanding of what this process might entail.
With several external trends and forces on the horizon - not least Brexit and the growing demand for electronic toys and a more sustainable fashion industry – it’s clear that both toy and clothing retailers have improvements to make and new challenges to prepare for. Investing in customer information systems as well as training are just two achievable areas of improvement that businesses operating in this space should consider when assessing recall readiness.
ELECTRONICS
Today, few of us leave the house without at least one electronic device, whether it’s a mobile phone, a laptop or tablet, a spare battery pack or even an e-cigarette. When we drive, we might use a Sat Nav or dash cam, and when we go further afield, we may take a hairdryer and straighteners or an electric razor or toothbrush. This sheer volume of products, teamed with constant innovation to make these devices easier to charge, transport or use without the need for power cords, are two of the main reasons why electronics often feature on recall lists and in newspaper headlines – usually as a result of shock or burn risk.
The risk of fire is always worrying for consumers, which is why having systems in place to manage recall effectively is so important to the long-term success of an electronics manufacturer.According to the survey findings, the vast majority of electronics manufacturers reported that they had a standard procedure in place (97%), and almost all had a defined recall team (94%).
As might be expected from such a positive response, the majority had access to legal support with the recall process (94%), and respondents demonstrated a high level of confidence in their understanding of the regulatory restrictions that might impact a recall (97%).
However, could this confidence have unsteady footing? Less than three quarters (74%) had conducted a mock recall in the past year, potentially skewing their perspective of the requirements of a recall. Even fewer had actually experienced a recall in that period (69%) reinforcing the lack of experience in this group. Complacency could well be at play here. More than a tenth (11.5%) said they didn’t know how
many products they’d sold in each country, although a larger number did have a complete database of customer contact information. Similarly, more than a tenth said they didn’t clearly display identification numbers on their products, which explains why the same number didn’t have a means of tracking the full recall process.
Electronics was also the second least likely sector to have adequately resourced and trained call centre staff to support them in the event of a recall, and the least likely to have a pre-prepared microsite with CMS integration set up to support customer communication, although this would be a straightforward fix for those with complete data records.
Regardless of the above, the sector remains confident in its recall readiness, with more than 9 in 10 agreeing they could deploy a recall within 48 hours.
By running a mock recall, electronics brands can improve their readiness by identifying gaps in process, systems and skills. This is especially worthwhile for those who have never experienced a recall, and for sectors where the risk of recall is higher. Electronics is one of those sector for the reason stated above – innovation.
The digital age is transforming the way we live and work by making us more connected through our devices. So, in the future, recalls may have nothing to do with burns and shocks and everything to do with cyber security.
Smart home devices, baby monitors and computer electronics such as printers are increasingly at risk and this will have major implications for manufacturers.
Some recent studies argue that manufacturers are not giving enough attention to cyber security – many still sell products with insecure built in passwords, for instance.
One solution would be to prevent manufacturers from using weak, hard-coded passwords in their products, and to encourage them to disable remote access capabilities and make it harder to harvest information from shared ports such as audio jacks, which are known to be vulnerable.From a recall readiness perspective, these trends need to be considered as part of the standardised approach and preparations.
FOOD AND BEVERAGES
In order to ensure their safety for consumption in any market, food and drink products are subject to significant regulation and testing regimes. Recalls in this sector have increased by over 20% in the past year – a stat that aligns with the increased media attention been given to food allergies, dietary trends, such as gluten free, and controversial non-food supplements, including CBD, DNP and anabolic steroids. Unsurprisingly, a brief review of recall activity over the past 12 months reveals that failure to include potential allergens in product labelling and risk of harm or illness due to restricted ingredients, contaminants and chemicals were amongst the most common offences.
Most food and drink producers will be aware of these trends and the importance of constantly reviewing manufacturing processes, supply chains, packaging, storage and transportation, as well as the consumer habits that drive sales. However, as food security, post-Brexit trade relationships and health concerns around salt, sugar and chemical intake climb the political agenda, it’s highly likely the upward trend for food and drink recalls will continue.
Looking at the survey data, over 95% reported having a standard operating procedure, 96% had a trained and resourced contact centre and over 90% had a microsite set-up with a built in CMS for reaching customers. This suggests that the majority of food and drink manufacturers feel confident about the procedure and system they have in place to deliver a recall.
But, are they doing enough to mitigate the impact of a recall on their business? Just 57% of survey participants said they had conducted a recall in the past 12 months, which, apart from medical devices, makes food and drink the least likely to have done so out of all of the industries surveyed. Slightly more had conducted a mock recall (65%), but again, the sector scored lowest in this respect. This lack of experience, therefore, explains other lower scoring areas where some investment
would help streamline the recall process and minimise the risk of reputational damage. For example, having a defined recall team ensures the right mix of knowledge and experience exists within a business, yet only 74% of food and drink businesses surveyed claimed to have this. In addition, just over 80% could say how many products they’d sold in each market and that their products were clearly labelled with identification numbers, making tracking down items more difficult.
With Brexit on the horizon, many UK-based food and drink firms are taking stock of their business and considering measures to ensure sustainable success. Reviewing their ability to respond to non-conformances needs to be part of this process. At present, workforce pressures, consistency in food safety regulation and labelling requirements are amongst the main concerns being raised by UK food and drink manufacturers. These factors might not only affect production, overheads and exports, but also quality and conformance, making recall readiness all the more important.
MEDICAL: PHARMACEUTICALS AND MEDICAL DEVICES
When it comes recall readiness, both the pharmaceutical and medical device industries were amongst the top scorers, according to the survey results. This is to be expected for such highly regulated sectors that depend so heavily on consumer trust and reputation.
But, perhaps because of their relatively new presence in the market place, medical device companies were the most likely to respond positively, with 100% of participants answering yes to nine of the 16 indicators. In fact, all had conducted a mock recall in the past 12 months, and just 33% had responded to a genuine recall in that same period.
It is possible that their apparent readiness on such a high number of indicators - which include having a standard procedure, understanding the regulatory restrictions, clearly ID labelling products and having a trained and resourced contact centre - could be down to their investment in a mock recall. As part of this process, recall specialists will audit the key areas of the business that influence the successful outcome of a recall, improving readiness while mitigating impact.
Pharmaceutical businesses, on the other hand, were less likely to have conducted a mock recall and more than twice as likely as medical device companies to have responded to an actual recall in the past 12 months. Interestingly, pharmaceutical businesses were also the least likely to have a standard procedure in place ( just 90%), suggesting some complacency, although all respondents said they had a designated team in place to manage incidents when they arise.
Although pharmaceutical recalls are relatively rare compared with other sectors such as food and beverage, toys and passenger vehicles, the consequences of non-conformance are potentially just as severe and larger in scale. For instance, of the 131 products recalled in 2019 so far, 52 were pulled from the marketplace following the results of research or studies into the impacts of certain drugs. This demonstrates the vital role recalls can play in protecting the public from unintended complications caused by medication, but also the increased attention the pharmaceuticals industry should give to research and testing.
When an alert is raised for this reason, removing the product from circulation is critically important. According to the survey, 100% of pharmaceutical companies said they could activate a recall within 48 hours. However, other responses give reason to doubt this confidence – for instance, just 80% said they knew how many items were sold, where they were sold and to whom. Likewise, just 80% answered positively when asked if they had a trained and resourced call centre, and a microsite with inbuilt CRM for reaching customers directly.
Given the potential cost to a business, simple measures like these make more than good sense. Medical device companies also had a 100% positive response rate when asked if they could deploy a recall within 48 hours. Having all completed a mock recall will have certainly helped, but areas requiring improvement are still evident. These include developing a dedicated team, identifying legal support, collating key contact information and building a microsite and CRM that can be activated when required. In all of these areas the sector scored just 83%.
As mentioned previously in relation to innovation in the automotive and electronics market, issues surrounding software and even cyber security are likely to become more prevalent as medical devices increasingly hit the market and our national health service. The industry must, therefore, maintain and build on the good practice it has demonstrated to date in order to drive adoption and maintain trust.
INDUSTRIAL EQUIPMENT
This industry covers a wide range of products that serve broad spectrum of sectors and environments. For this reason, it is difficult to provide a comprehensive analysis in terms of the context of any recall activity. However, it is worth exploring some trends that may affect multiple players in this space.
Firstly, the ‘skills gap’ is a phenomenon affecting a number of sectors globally, including construction, engineering and IT. This is presenting numerous challenges, not least filling positions, securing robust supply chains and managing health and safety as experienced tradespeople become fewer and further between. Secondly, Brexit, as mentioned previously, is also raising concerns about supply chain access and margins, potentially leading to lower quality materials being used in order to protect profit.
Finally, innovations relating to automated or robotic systems are becoming increasingly commonplace, especially in dangerous environments or settings where human interaction might lead to non-conformance or contamination.
Each of these trends put pressure on industrial equipment manufacturers to ensure their products are not only safe from an operational and environmental perspective, they must be easy to handle and able to withstand the stresses of the job they were designed to do. What’s more, where innovation is concerned, they must also face the unknown or unfamiliar, such as software faults and cyber threats.
According to the survey results, respondents representing this sector were consistent in their answers, averaging a score of 87% across the 16 indicators. This represents a mixed bag in terms of confidence levels, which is underlined further by the fact just 73% had conducted a mock recall – the lowest score for this indicator after food and beverage.
Given that 65% had experienced one for real in the past 12 months, it is fair to suggest the likelihood of a recall in this sector as being relatively high. Consequently, brands in this space should seriously consider having their recall readiness assessed in light of these findings and the external factors that will increasingly shape their market going forward.
With the majority of indictors registering a positive response rate of 80% or more across these eight industries, we can take some encouragement from the fact that brands are not only aware of the importance of recall readiness, but also acting to embed it in their business.
Nevertheless, the risk of a harm resulting from a failed or poorly executed recall should compel more businesses to invest in recall readiness and aspire to best practice. Ultimately, businesses must test their people and procedures to determine how prepared they really are.
A thorough mock recall will provide an analysis of how effective an organisation’s decision-making, logistics and response processes are.As an outcome from this exercise, businesses can develop their own multichannel approach to notifying consumers during a recall, thereby increasing engagement and improving communications.
CONCLUSION
Having a specialised contact centre, confidential customer data registries, traceable direct delivery records, safety alert procedures and online information resources for consumers can also help to improve a brand’s reputation as a responsive, reactive supplier.
Finally, a robust recall plan helps to locate recalled products quickly for effective removal. With the correct contingency plans in place, a recall event can be effectively managed to mitigate financial and legal risk, increase customer loyalty and prevent irreparable brand damage.
You can support Stericycle Expert Solutions’ ongoing research into recall readiness by taking part in our interactive survey by contacting us using the information below.
In return, you will receive a downloadable personalised report and helpful recommendations on how your business can improve its recall readiness.
W: stericycleexpertsolutions.co.uk
T: +44 (0) 3333 000 901
