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How Product Recalls Can Create A Crisis For Companies

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How Product Recalls Can Create A Crisis For Companies

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Although product recalls are nothing new, why and when they are initiated can create a crisis for companies and organizations.

Newsmaking recalls can raise concerns and doubts in the minds of the public about a product and its brand, and call into question company’s committement to the safety of the goods it sells.

There have been several recent headline-making product recalls, including Stallintis,which today recalled 132,000 Jeep Cherokee vehicles because of the risk of fire; Peloton, which recalled 2.2 million exercise bikes due to fall and injury hazards; and Gerber, which recalled its formula in March.

Gerber’s recall is esepcially notewowrthy, since the company shiped the formula to retailers in eight states after the recall had begun, the Associated Press reported today.

The federal rules and reporting requirements that govern recalls depend on which government agency has jurisdiction, such as the Food and Drug Administration, the Consumer Product Safety Commission, and the National Highway Traffiic Safety Administraton.

And then there is the impact of the court of public opinion, which usually moves much faster than any government bureaucracy.

Consequences

“Companies that don’t initiate recalls on defective products could be held liable for damages in lawsuits, they could be responsible for the death or injury of their customers, and they’re likely to suffer a serious PR hit that could translate to lost sales,” Ben Michael, an attorney with Michael & Associates, said via email.

Companies that refuse to recall a product can make a bad situation worse.

Take ARC Automotive, for example, which so far has bucked a request from the National Highway Transportation Board to recall 67 million of its airbags.

“This kind of request typically sparks a recall, experts say. But ARC Automotive refused, instead accusing the regulator of overstepping its authority while refuting the central conclusions underpinning the recall request,” the Washington Post reported.

“Steve Gold, ARC’s vice president for product integrity, wrote in a May 11 response letter that NHTSB’s recall request is too broad and based on hypothetical scenarios rather than any objective technical or engineering conclusion,” according to the newspaper.

Rather than wait for ARC Automotive to comply, GM, which has installed the airbags in one million vehicles, said it decided to recall them “out of an abundance of caution and with the safety of our customers as our highest priority.” GM said it would offer “courtesy transportation” on a case-by-case basis to owners who fear driving vehicles that are part of the recall.

Recall Records

By one measure, 2022 was a record-setting year, with more than one billion units of food, drugs,, medical devices, automobiles, and consumer products recalled. That’s according to Sedgwick’s latest State of the Nation Recall Index Report.

“With regulatory scrutiny continuing to increase, 2023 may shape up to be another one billion unit year, requiring businesses across industries to remain vigilant on matters of product safety and recall preparedness,” it warned in a press release.

Crisis Management Plans

Since product recalls can be an ever-presnt crisis trigger for a wide variety of companies, business leaders are well-advised to account for them in corporate crisis management plans.

“Every crisis management plan should have a procedure for a product recall,” Baruch Labunski, CEO of Rank Secure, said via email.

“This should include logistical details or how to pull the product from stores and warehouses, but it should also include the public relations and reporting components. Consumers need a way of reporting a problem with a product, and the marketing and public relations team need to be able to disseminate information and mitigation pieces quickly when a recall happens,” he advised.

Silver Lining

Ironically, there can be a silver lining to a product recall by underscoring a company’s committment and prioirty to protecting consumers when a worst-case crisis scenario becomes a reality.

That is, of course, if the organization reacts quickly to the situation and in a strategic, effective, and efficent manner.

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