I recently shared some insights with corporate directors about how to effectively manage a recall – a topic far too often overlooked. But recent events surrounding the global Toyota recalls have brought the topic to the forefront of risk mitigation conversations among corporate executives and their boards.

There are many moving parts to the recall process – many of them complicated and some of them unpredictable. But recall preparedness can help mitigate the risks. As I wrote on Directorship, there are a few simple things that executives and boards should keep in mind to ensure that customers, consignees, employees and brand ambassadors continue to trust the company and its leadership:

• Work with regulators and lawmakers.

• Be in the consumer safety business.

• Offer consumers an easy remedy.

• Communicate, communicate, communicate.

It’s been about a month since Toyota’s recall hit the headlines. To Toyota it probably seems as though the media attention, criticism and public scrutiny over its safety initiatives and recall management will never end. Don’t let yourself get caught off-guard. Get prepared now.

Stericycle ExpertRECALL™ is the industry leader in recall logistics and regulatory compliance for consumer product, pharmaceutical, medical device, juvenile product, and food and beverage recalls. ExpertRECALL’s professionals are experts in recall management who can help you streamline the entire product recall process.

Consumer Product Safety Commission (CPSC) Chairman Inez Tenenbaum recently said her agency has been able to bring parents and consumers a renewed confidence as they reach for toys on store shelves. To support her statement, Tenenbaum cited a significant decline in toy recalls in 2009 compared with 2008 and a large decrease in lead paint recalls as well during the same period.

While staggering recall numbers may sound like good news, it would be risky to relax your recall planning efforts. Now is the time to check your recall preparedness and address the new consumer product recall regulations that have recently gone into effect. It is imperative that companies understand what the CPSC’s new initiatives and campaigns could mean for the recall process in the future, and how they could force you to pull more products off store shelves.

Tenenbaum and her staff recently appeared at the International Consumer Product Health & Safety Organization’s (ICPHSO) 2010 Annual Meeting, leading workshops and discussing the Commission’s new initiatives. It was during this event that Tenenbaum discussed last year’s recall numbers and her plans for the agency moving forward. In her keynote address, Tenenbaum outlined six priorities for 2010:

1. Implement a SAFE SLEEP initiative for babies and toddlers;
2. Modernize the agency, including implementing a product incident database and opening a new product testing facility;
3. Continue working on pending CPSIA rulemakings;
4. Implement an expansive information and education campaign tied to the Pool and Spa Safety Act;
5. Conduct a minority outreach campaign on issues pertaining to product safety; and
6. Conduct an operational review of the Agency and develop a new five-year strategic plan.

During the meeting, Tenenbaum argued that product safety in the United States is strong – and only getting stronger. After a tumultuous 2007 and 2008, Tenenbaum called 2009 “a year of change” for her agency. According to Tenenbaum, the CPSC has brought in new staff with a new way of thinking. In fact, the agency opened its first overseas office in Beijing to help manage product safety internationally. The agency has also been granted new powers over product safety, including recalls, and has received an increased budget to exercise those additional responsibilities.

All this suggests that the CPSC is investigating product safety more aggressively than ever before. And we can expect this trend to continue into the foreseeable future. While some of the agency’s initiatives will be clarified in the coming months, new campaigns will surface that likely will further change the way manufacturers and retailers do business.

Tenenbaum clearly demonstrated her determination, and the determination of her staff, to make sure that products sold in this country are safe.  You and your company must show the same determination in preparing to mitigate risks associated with the agency’s expanding list of product safety measures.  And recalls are just one of them.

Stericycle ExpertRECALL™ is the industry leader in recall logistics and regulatory compliance for consumer product, pharmaceutical, medical device, juvenile product, and food and beverage recalls. ExpertRECALL’s professionals are experts in recall management who can help you streamline the entire product recall process.

Retail chains are becoming more aggressive in their approach to handling recalls from their stores. As their retailers become more active in the recall process, manufacturers need to have a better understanding of exactly how retailers will operate and communicate when they have to execute a recall.

A typical grocery retail chain handles between 75 and 100 recalls every year. They typically have recall plans in place to manage all that recall activity. For the big chains, the “Retail Recall Coordinator” has become a full-time job at corporate headquarters.  More and more retailers are taking advantage of new technology and third-party audits in order to reduce their risk and better manage the recalls they face.

For starters, big chain retailers are locking out the UPCs of recalled products from their registers so the products cannot be scanned at the checkout line. This precautionary measure ensures that consumers will not be able to buy any recalled products that may still be on the store shelves. As a result, manufacturers are under increasing pressure to make sure that shelves are cleared and replacement product delivered in a timely manner in order to minimize lost sales and valuable shelf space.

Over the last few years, a number of massive recalls have sparked a second trend in retailer recall management. Rather than take the risk of selling a recalled product, retailers remove all products from the manufacturer regardless of production codes. As a result, manufacturers and producers lose their entire retail supply in each store, along with the sales revenue they would have received from sales of all the unaffected product. Manufacturers must understand that their Recall Notification to Corporate Retail may be revised by the retailer to instruct store managers to remove all units regardless of production codes.

A third precautionary measure being implemented by more and more retailers is the hiring of third-party auditors to make sure recalled products have been removed from shelves and the back room. Documentation of the retail visits and the number of units inspected, removed and destroyed gives the retailer third-party documentation that every store location has been inspected and no recalled product remains. This information can be shared with the recalling firm to help them close out the recall faster and reduce the liability to the retailer.

Finally, retailers are taking consumer notification into their own hands. For example, big retailers now often use point-of-purchase data gathered by their loyalty card programs to identify individual consumers who may have bought a recalled product and inform them of the recall using Integrated Voice Response (IVR). To further protect consumers, recall announcements are also being posted on retailer websites and shelf tags are posted at the point of purchase.

Manufacturers can increasingly count on retailers to communicate with their customers. But they should be careful to make sure that the retailer is delivering the right message. Manufacturers are still on the hook for striking the right balance between making sure a recall is effective and minimizing unnecessary lost revenue.

An important part of recall preparedness is understanding the recall plans and procedures for every member of your supply chain, including retailers. Right from the start of a recall, manufacturers need to know exactly what their retailers are doing to communicate and protect consumers – and whether those steps are likely to help or hurt the company.

Stericycle ExpertRECALL™ is the industry leader in recall logistics and regulatory compliance for consumer product, pharmaceutical, medical device, juvenile product, and food and beverage recalls. ExpertRECALL’s professionals are experts in recall management who can help you streamline the entire product recall process.

We had the opportunity this week to help yet another client effectively manage a major recall.  No matter how many times I see it, I’m still amazed at how quickly the 200,000 square feet of shelves in our returns facility can fill up. Millions of units poured into our warehouse from consumers, retailers, and distributors. Each unit was processed, recorded, and appropriately marked as having been permanently removed from the supply chain.

That, in a nutshell, is the recall process.

Most products and processes are designed with a specific purpose in mind.  In a good design, form should always follow function. For example, as an avid cyclist, I enjoy the specialized design elements of my bicycle.  The titanium alloy used in its construction makes the bicycle’s frame very light, yet very strong. Its sleek, aerodynamic form cheats the wind. Each element serves a specific purpose, helping the bicycle, and the rider, move very fast in a forward direction.

But don’t try to spin the pedals backward. Nothing will happen. The bike was never designed to go in reverse.

Manufacturing plants and distribution processes are designed in just the same way. The process of turning raw materials into finished products and then delivering them to distributors, wholesalers, dealers, retailers and ultimately the consumer is designed to be fast and efficient. The management of that system is what we call logistics. But none of those systems was ever designed to be run in reverse.

During a recall, it is critical that a company understand and implement effective reverse logistics, or find someone who can help. As a start, manufacturers should be able to do the following quickly at any time of day during the normal production of goods:

• Identify each member of the supply chain and whether or not they received recalled products.
• Create recall notifications that will tell the supply chain where and how to return the product.
• Be prepared to help supply chain partners execute these returns quickly and efficiently.
• Receive and identify returned products as affected or non-affected and isolate affected products that must be removed from commerce.
• Account for every item returned and record the critical data needed to provide credits to the supply chain and report to the government regulators.

Understanding your company’s strengths and weaknesses in reverse logistics is as important as understanding what makes your business work in the first place.

Stericycle ExpertRECALL™ is the industry leader in recall logistics and regulatory compliance for consumer product, pharmaceutical, medical device, juvenile product, and food and beverage recalls. ExpertRECALL’s professionals are experts in recall management who can help you streamline the entire product recall process.

In addition to critical public scrutiny, class action lawsuits, congressional hearings, and Securities and Exchange Commission (SEC) investigations, Toyota and its executives now face the very real possibility of federal fines and indictments. Just another example of the risks a company can face today for failing to adequately address consumer safety issues and effectively manage a product recall. Recall management and regulatory compliance are the responsibility of risk managers and executives.

A major recall will impact all areas of a company – from marketing and communications to investor relations and, ultimately, the bottom line. Any regulatory body – the FDA, FSIS, CPSC and USDA – might take legal action against you.

Keep in mind: even an effectively managed recall still has the potential to attract negative public scrutiny and damage your brand. But there are a number of things you can do to mitigate the risk that your recall will result in criminal investigations, congressional hearings, indictments, or fines.

1. Make consumer safety your #1 priority – and mean it. Consumer safety is a number one concern for lawmakers and government agencies. Your company should follow suit. By failing to make consumer safety your top priority, you risk increased scrutiny by lawmakers, regulators, and the plaintiff’s bar. Understand that these individuals are working to protect people. By failing to do the same, you invite them to go after you.
2. Identify in a timely fashion any issues that may jeopardize consumer safety. That means monitoring any and all resources for trends in consumer complaints and credible reports of possible safety issues. Once identified, it is critical you appropriately address these issues – which likely includes informing regulatory agencies and undertaking a recall. Be sure to work with the regulatory agency to fully understand the problem and the quantity of products affected. Identifying the wrong problem or inaccurately gauging the scope of the recall can make the problem a lot worse than it otherwise needs to be.
3. Work with regulatory agencies. In our global economy, working with regulatory agencies can be difficult. Regulations don’t span borders. A product in violation of standards in one country may be in compliance in another. But that doesn’t mean you shouldn’t recall a questionable product in both countries. Be sure to understand the risks facing consumers and the importance of complying with international regulations. Failing to adhere to standards of reporting risk and executing recalls could result in congressional hearings and federal investigations.
4. Be honest about the problem – not only with regulators, but also with customers. Transparency is critical when communicating with consumers and retailers. Likewise, it is important to identify the right problem. If your initial efforts do not solve the underlying problem that led to a recall, you can count on lawmakers, lawyers and government agencies to get involved.
5. Communicate effectively, communicate often. During a recall, it is critical to communicate with all affected parties, including regulatory agencies, consumers, employees, investors and retailers. Regardless of the audience, it is critical that they receive new information as soon as it is available. Answer questions. Be responsive. It is how your company handles these challenges that will determine the full impact of the recall – on both public safety and your bottom line.

When it comes to risk management, there are many steps consumers and companies alike can take to protect themselves. We often overlook the role insurance plays in matters of product safety. The recent Toyota recalls are another reminder of how important it can be to have the right coverage. In this particular situation, three types of insurance coverage play a role: car insurance, product liability insurance, and recall insurance.

When it comes to identifying hazards that might threaten driver safety, government regulators rely on consumer complaints and reports from manufacturers to identify potential risks. Consumer groups and manufacturers use their own databases to track emerging problems. So do insurance companies. According to news reports, State Farm alerted the National Highway Traffic Safety Administration way back in 2007 about a trend in “vehicle-caused accidents” involving Toyota cars.

And this is certainly not the first time insurance loss data have helped identify automotive safety concerns. Remember Firestone? Manufacturers need to monitor as many complaint databases as possible for the early warning signals of a possible recall situation.

In the Toyota case, once State Farm’s data were corroborated by information from NHTSA and Toyota’s own investigations, recalls were announced. Now lawsuits are being filed one after another. The issues at the heart of Toyota’s recalls, at least in part, may be covered by product liability insurance. As long as Toyota has ample product liability insurance, the company may be able to survive class action lawsuits and eventually return to business as usual. But Toyota likely won’t be the only defendant in these cases. Auto parts manufacturers who supplied possibly defective components may also feel the heat. As a manufacturer or retailer of consumer goods, it is critical you have appropriate product liability coverage to cover manufacturing or production flaws, design defect, or defective warnings or instructions. Are you covered?

Whether or not your insurance covers all litigation-related costs, you will likely face extraordinary costs during the recall process itself. Announcing a recall, notifying consignees and consumers, and retrieving or repairing the defective product all cost money. Sometimes big money. And that’s before you even get to the stage of defending legal claims. That’s where recall insurance comes in. In the wake of recent regulatory developments and massive recalls, the demand for recall insurance is growing. Likewise, with the number of international recalls on the rise, recall expenses are increasing. It is critical that you plan for these risks and manage them with recall insurance.

Companies can purchase recall insurance to help cover not only the costs of the recall execution itself, but also the communication and crisis management expertise needed to protect their brand and reputation. When shopping for recall insurance, be sure to note whether the coverage will pay for the recall experts and communications specialists who will be critical to the smooth execution of what is always a complicated process.

A string of recalls like those Toyota is facing reminds us that recalls, if handled poorly, can put even the largest and most powerful companies at risk. It is a great time to review your recall preparedness and insurance coverage. Will you be ready when a recall strikes?

Stericycle ExpertRECALL™ is the industry leader in recall logistics and regulatory compliance for consumer product, pharmaceutical, medical device, juvenile product, and food and beverage recalls. ExpertRECALL’s professionals are experts in recall management who can help you streamline the entire product recall process.

The Obama administration has just appointed Michael R. (Mike) Taylor to a newly created position as Deputy Commissioner for Foods at the Food and Drug Administration (FDA). In his new job, Taylor will be responsible for guiding the FDA’s Office of Foods, a new office created last August to provide leadership, guidance, and support to meet the agency’s public health goals for food and feed safety, nutrition and related activities. Without a doubt, Taylor and his newly formed branch of the FDA will bring renewed attention to recall regulation and liability.

Taylor brings a wealth of legal and regulatory experience to the new position.  He has served in FDA’s Office of General Counsel, Office of Policy, and Center for Foods. In addition, he brings valuable experience as an administrator, having served as the Administrator of the United States Department of Agriculture’s Food Safety and Inspection Service.  The creation of the Office of Foods and Taylor’s position are viewed as alternative to congressional interest in creating an entirely new and separate food agency that would combine FDA and USDA responsibilities.  Current plans call for the FDA’s Foods Program to continue implementation of current food-related authorities and a number of ongoing initiatives to improve the program. 

After reviewing the list of initiatives outlined by the Foods Program, it is apparent that there is little new in FDA’s food safety goals. But there are indications that the FDA will considerably enhance funding and put increased emphasis on certain critical areas. In a recent interview, Taylor reportedly said that his biggest task will be to ready the FDA to handle the new powers that Congress will soon grant the agency. 

Specifically, legislation has been introduced that will give the FDA and USDA authority to order recalls.  Keep in mind these agencies rarely encounter a situation in which a recall order would be necessary. The food industry usually undertakes voluntary recalls without a federal agency formally requesting them to do so. The industry understands that failure to remove contaminated or otherwise harmful products from the market is potentially damaging to companies, brands, and reputations. It can also subject them to expensive litigation.

The food industry faces increased regulation as the FDA adopts a risk-based approach to inspectional activities. While that will continue, long-term goals of the Office of Foods appear to include tighter sanitation controls in all food areas, including family farms.  Food processors and distributors should not only exercise maximum safety controls but should also have in place a detailed, well-tested recall plan to recover product down to the consumer level should a recall ever be necessary.

Stericycle ExpertRECALL™ is the industry leader in recall logistics and regulatory compliance for consumer product, pharmaceutical, medical device, juvenile product, and food and beverage recalls. ExpertRECALL’s professionals are experts in recall management who can help you streamline the entire product recall process.

Over the last decade, thousands of products have been flagged as potentially hazardous under the Consumer Product Safety Commission’s (CPSC) Section 15b. In fact, the CPSC receives an average of about two such reports every day. As a result, the Agency initiates about 400 recalls every year, mostly under Section 15b. Your recall management team cannot afford to ignore trends in Section 15b reports and the recalls that follow, particularly when formulating your recall strategy and planning.

Generally, the Section 15b recall process requires a corrective action plan that includes halting the distribution and sale of the affected product. Recall requirements also typically include provisions requiring that the consumer receive a repaired product, a replacement, or a refund.

But this only scratches the surface of the safety impact of Section 15b.

Section 15b includes reporting requirements for manufacturers, importers, distributors and retailers of consumer products. Under the law, you are required to immediately report information that reasonably indicates that a product poses a substantial hazard to consumers. The theory behind Section 15b is that companies are likely to learn of potential hazardous products first. While the Consumer Product Safety Act provides many ways in which the Commission can learn of hazardous products, none of these tools are as effective at reducing these hazards as Section 15b. But Section 15b should not be the only way to make sure that potential hazards are identified and consumers warned.

The Commission cannot order a recall without considering the broader implications of the event. When a company reports a potential hazard and recalls its product, the industry can expect the Commission to investigate the possibility of the problem applying to similar products. Further, a recall that identifies a broad safety problem will be cause for the Commission to apply pressure to industry associations and voluntary standards groups to act on behalf of consumer safety.

We’ve seen this before and we’ll see it again. Over the past few months there have been massive recalls of strollers and cribs. Soon after, the CPSC moved to recall more strollers from various importers. CPSC Chairman Inez Tenenbaum also urged voluntary standards development organization ASTM to expedite changes in crib integrity standards.

As a responsible company, you must work with your legal counsel and pay attention to recalls involving your competitors and others in your industry. When one company recalls a product that creates a substantial hazard, you must carefully scrutinize the reason for the recall and determine whether the risk also applies to any of your own products.

Likewise, your industry associations should stay abreast of recall events and the impact those events may have on its members. To further assist member companies, industry associations need to fully understand the reasons for a recall and consider setting voluntary standards that will help the industry as a whole avoid similar risks in the future.

Stericycle ExpertRECALL™ is the industry leader in recall logistics and regulatory compliance for consumer product, pharmaceutical, medical device, juvenile product, and food and beverage recalls. ExpertRECALL’s professionals are experts in recall management who can help you streamline the entire product recall process.

International Consumer Product Health and Safety Organization’s (ICPHSO) 2010 Annual Meeting and Training Symposium

Washington, D.C.

http://www.icphso.org/conference/conf2010/index.html

ExpertRECALL™ is sponsoring the International Consumer Product Health and Safety Organization’s (ICPHSO) 2010 Annual Meeting and Training Symposium February 15-18, 2010 at The Capital Hilton in Washington, DC. The event will help educate attendees about international product safety, including recall effectiveness and information sharing. The meeting will also feature workshops and a plenary session led by Consumer Product Safety Commission staff discussing the Commission’s new initiatives, including the CPSIA. Howard Aughinbaugh and Dave Schmeltzer from ExpertRECALL will be attending this event.

Stericycle ExpertRECALL™ is the industry leader in recall logistics and regulatory compliance for consumer product, pharmaceutical, medical device, juvenile product, and food and beverage recalls. ExpertRECALL’s professionals are experts in recall management who can help you streamline the entire product recall process.

Toyota is now in the business of keeping customers safe, calming fears, and quickly coordinating repairs. That can be difficult when distributors and mechanics around the world become the face of your brand. In these situations, you must communicate early and communicate often with those individuals so they have the right messages to calm the fears of consumers. Recalls are inevitable and having a tested recall plan in place will help your company react with the speed necessary to avoid some of the most common missteps.

As I told AOL News, Legal Talk Network,  and WDEL 1150 AM earlier this week, companies experiencing a recall must get out in front of the news. If your company is always playing catch up, someone else is dictating the narrative and putting the brand on the defensive. And if you aren’t working closely with regulators, they will write the narrative for you – and you may not like the outcome. Instead of demonstrating your company’s effectiveness and commitment to customers, a poorly executed recall plan will tarnish a reputation that took decades to build in a matter of days.

Before your company finds itself in Toyota’s shoes, develop and test a recall plan. Performing mock recalls will help your risk management and response teams rise to the occasion during a real event and could not only save the company money but also avoid risking consumer trust.

Stericycle ExpertRECALL™ is the industry leader in recall logistics and regulatory compliance for consumer product, pharmaceutical, medical device, juvenile product, and food and beverage recalls. ExpertRECALL’s professionals are experts in recall management who can help you streamline the entire product recall process.