Product Recalls and How it Effects the Company Research Paper

Excerpt from Research Paper :

Product Recalls and How it Affects the Company

Product Recalls


Industry effected

Healthcare Recalls

Food Industry Recalls

Instances of Product recalls

Effects on the Company

Financial Loss

Loss of reputation

Legal and regulatory issues

Handling of Product Recalls

Treatment of Recalled Products

Communications Strategy

Product recalls are one of the sensitive business areas in the operation of any organization. The businesses tend to recall its products due to various reasons including minimizing the risk of injury for consumers, the compliance requirements in legal and regulatory perspective, and to protect the brand image in the market. There are various other reasons that are discussed and elaborated in the later sections. The product recalls are critical for different industries but especially for food chains and healthcare organizations the importance is increased. The businesses also establish well planned and thought out systems to ensure that they have a policy and system in place to perform product recalls in cases of emergency and regular practice for expired shelf life products.

The sections below are mainly address the effects of product recalls on the business however the product recalls, traceability, effected industries, and instances of product recalls will also be addressed. The effects of product recall on a company including financial, legal, and effects on brand image are also elaborated below. Furthermore the handling procedures for product recall, how these products should be treated after recalls and communication strategy of a business to handle product recalls are also discussed.

Product Recalls:

The business decides to recall its products due to various reasons including the expiration of shelf life, identification of a health issue, product malfunctioning, and reports about the miscalculations of ingredients in product manufacturing. The products are also recalled after identification of a legal and regulatory issue is identified. The business is obliged to abide by the standards and legal requirements posed through their licensing system. The business has to perform all these operations swiftly in order to minimize effects on their brand image as well as the cost of recalls should also be maintained within least possible limits (Germann, Grewal, Ross Jr., & Srivastava, 2013).

The product recalls are risks that are associated with the post sales situations. The roots of product recalls might be found in the pre-sales business process however the situations are mostly identified after the sales are completed and products are in the shelves of distributors, retailers, or consumers have bought the products. The cost, damage, and risk of liabilities also increase with the passage of time as well as the completion of stages for product sales. The risks and cost of recall are minimal if recalled from distributors, and retailers. The risk and cost is increased with maximum amount of damages to company reputation in case the products are sold to consumers and they are requested to return (Sodhi, & Tang, 2009).


The traceability of products is an issue associated with all perishable products including the medicine and food products that are liable to comply with the shelflife requirements. The business manufacturing healthcare disposables, medicine, food products, and perishable grocery need to establish a mechanism through which they can recall products. The operations of business are established with a provision to traceproducts that require a recall. The legal and regulatory authorities as well as the notifying bodies also seek an established approach for products traceability. FDA and EU directives are also applicable on products that are sensitive for recall.

The companies establish certain features in their products to increase traceability. These features include a lot number, manufacturing date, product manufacturing codes, and expiry dates. Traditionally bar codes were used to trace products. However the changes in technology also facilitated the businesses to add features to products that help in increasing product traceability. These features are RFIDs added to the individual products. The RFIDs are also used with cartons, pallets, and shipments to trace location of the subjects. The cost of establishing traceability as well as compliance with regulatory requirements is a concern which should be considered while developing traceability features to the products.

Industry effected:

The businesses dealing with retail and consumer products are most affected by the product recalls. The businesses dealing with drugs and food are most vulnerable for product recalls. The baby milk, cosmetics, and products containing chemicals that can directly affect consumers are also recalled after identification of any healthcare issues. It is observed that perishable, pharmaceuticals, and food industries are mostly considered relevant for product recalls. There are three major calluses of recalls that are defined by FDA. The class I recalls are regarded as recalls that are from defected products carrying a periodic potential for health issues. The class II recalls is denoted as products that might cause health related issues e.g. food containing toxins, lifesaving drugs, and defective heart valves. The threat perception of the class II recalls is relatively low in this category as compared with class I. These recalls include the drugs that are not use to treat lifesaving situation or under strengths. The class III product recalls are related to the products carrying a minimal risk for health reactions however they are found to be violating the FDA regulations. The example of such recall can be a misprint on the label in terms of quantity or quality of the product (Granata, Flick Jr., & Martin, 2012).

Healthcare Recalls:

The healthcare products are recalled for containing misprinted labels, ingredients that are not properly used or appearing short of the contents. The drugs including pharmaceuticals, medical devices, and medical devices are major products that should be considered for recalls in case of any identified issue (Thirumalai, & Sinha, 2011). The pharmaceutical companies providing child care products including food are also associated with the industry that is scrutinized for product recalls.

Food Industry Recalls:

The food industry that provides canned food should comply with certain standards that are approved from FDA and other regulatory agencies. The global organizations dealing in food safety also issue directives for compliance. The grocery products containing ingredients with certain shelf life are also considered vulnerable for recalls. The fresh grocery products also have a shelf life and certain handling conditions. The vulnerability is increased in case the handling conditions are not fulfilled completely. Fresh food grocery and canned food has a short shelf life as compared with other retail products.

Instances of Product recalls:

The product recalls are initiated in various situations including the lack of shelf life or vulnerability of the products causing serious issues for health and safety of consumers. The electronics products including medical devices are also recalled due to their potential malfunctioning. The products are tested while manufacturing however it may be the case that a certain material is used in excess of the recommended quantity for lacks certain compliance standards. The products containing fewer amounts of prescribed ingredients are also prone to recalls.

The product recalls are also considered as potential threats for company reputation in case any damaged to the consumer is caused. The misquoting of information on labels also initiates the product recalls under regulatory compliance. The business handles the issues provided on labels and actual ingredients of the products. The companies volunteer to recall products from shelvesas they place a high value on their brand image and reputation in the market. The product recalls are also initiated in case any incidents of consumer health damage are reported.

Effects on the Company:

The effects of product recalls on a business have various dimensions. The products carrying potential damage for consumer health are considered vulnerable and they are recalled to save financial loss to the company. The business incurs a loss of reputation in cases of product recalls. The business also faces damage of brand image as well as the brand value in the market. The legal and regulatory issues are also an effect on business carrying potential claims and damages. The degree to which a business is vulnerable to the effects of products recalls is varying to a large extent. The product recall effects are measured in terms of their loss to the credibility and effects on the business standing of a company. Therefore the product recalls are also treated as per the industry requirements. The automobile product recalls are considered as carrying less vulnerability to the business however the products directly consumed by the customers' causes a direct damage to customers. Hence they are regarded as carrying a great deal of relevance for causing above mentioned damages to the business. The procedures and practices are also placed in the business considering the relevant amount of importance in business operations. The supply chains of a business are also affected through the product recalls.

Financial Loss:

The financial loss for product recalls is considered in multiple dimensions in case of a product recall for business. The business incurs a cost to produce products, the cost of materials, labor, and other marketing and sales overheads are incurred to place the products in the market. The product recalls also cause…

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