In Part 1 – Five Components to a Recall Action Plan it was pointed out that there are many reasons for product recalls. Causes range from poor buying decisions to mandatory recalls ordered by government authorities.  Product recalls are a fact of life for both resellers and manufacturers.  If your company sells products of any type, it isn’t an exaggeration to say it is only a matter of time before you will have recalled products to deal with.  Therefore it is every organization’s responsibility to be prepared and to have a plan in place to deal with this inevitability.

Whether you are a pharmaceutical manufacturer, infant toy maker, an electronics retailer, or grocer who sells ground beef, recalls can impact both short term costs and long term relationships that your business depends on.  Like many things in life, companies get to choose how they will deal with these recall issues and whether the impact on their organization will be positive or negative. 

When talking about how a recall impacts an organization, we are talking about not only the cost of pulling the product off the market and writing off the inventory, but we are talking about how a company’s reputation with employees, customers and shareholders can be harmed.  Often, these indirect consequences can cost a great deal more than the cost of processing.  In order to minimize the risk of a recall and the unknown product liability you could face, a company must have a comprehensive plan of action to deal with recalls.  This “Recall Action Plan” must include guidelines for:

1. Internal communications procedures

2. External communications procedures

3. Physical process of removing the recalled goods

4. Product sorting, accounting and disposal process

5. Data gathering, reporting and record keeping

In  Part 1 – Five Components to a Recall Action Plan internal and external communications were discussed in detail.  In Part 2 physical processing, sorting and reporting will be addressed.

The first step in the physical process of removing the recalled goods must start with the internal notification of the customers, stores, distribution centers and other partners concerning the recall.  This notification must be designed to standout from the other notifications.  In the old days when everything was on paper, we put all recall notifications on red paper.  Today with emails, companies should designate a specific subject heading such as”

Subject: RECALL NOTIFICATION – IMMEDIATE RESPONSE REQUIRED

You must get everyone’s attention and you must send out notification repeatedly.  I recommend that notification be sent out through a series of six different communications.  In some cases, such danger to the public, potential fines, emanate litigation,  or over exposure in the press, companies will want to have a combination of verbal and written communications.  I’ve had some recalls that were so serious that all parties were required to call in on conference calls twice a day for over a week until it was clear all products had been returned.  Remember, when it comes to product recalls, you cannot over communicate when it comes to providing direction and support when pulling product off the market. When in doubt, repeat.

When developing transportation channels and packaging instructions, do not overlook the normal regulatory requirements.  If a government agency is involved, it is advisable to get their approval on all instructions and logistics arrangements.

Once the product is physically removed from the market, it must be taken to a secured location for processing.  Many companies ship product back to their return center, some use recall outsourcing specialists, and others simply send the product back to a warehouse or storage facility within their supply chain.  Regardless of where the product ends up, the receiving facility will need to know:

1. When the product is going to start arriving
2. When is the last date they should receive any new inbound shipments.
3. What are SKU’s, model numbers, serial numbers, or other identifying codes that are to be received and processed.
4. What is to be done with any receipts that are not included in the list of product on the recall.
5. What are the condition requirements for the recalled goods.  Examples would be sealed cases, or opened box, de-ticketed, or other similar conditions.
6. How is the product to be stored.  (Pallet quantities, in the DC, off site, storage trailers, etc.)
7. What information is needed from the product. (quantities, condition, diagnostics, sender information etc.)
8. What will be the final disposition of the product. (return to OEM, landfill, incinerator, modified, shipped to location etc.)

NEVER destroy or ship any government mandated recalled product unless given approval by internal council and the government agency involved.  When developing these instructions, give thought to the amount of reporting that will be required.  It is better to track to much information and a lot cheaper than it would be to have to go back and get addition information on processed goods.

The last component of a Recall Action Plan is record keeping.  You must keep good track of when, where, and how much was received and processed and where did it come from.  For most recall processes, the information is the only thing an attorney or government inspector will want to see.  You must be prepared to give regular updates throughout the recall and a complete report at the conclusion of the recall.   For the vast majority of recalls a written report is not required but you may be asked to provide quantities and other basic product information.  Failure to be able to produce this type of information could result in fines and a lot more attention from regulators.

It is important to keep detailed records of all activities related to a recalled product.  Many times, companies are able to file claims against another party, and file insurance claims to recoup financial damage.  A companies ability to show how much money, time and effort was spent to ensure they processed a recall “properly” can reduce risks of shareholder suits, customer suits, and employee issues.

As you can see, developing a Recall Action Plan cannot be done on the fly.  Companies must know who is going to process the recall, where it is going to be processed, who is going to provide oversight internally and who will be responsible for reporting on all recall activities.  Companies must plan ahead.  You Recall Action Plan must be thought through and completely locked down before you have a major recall to deal with.  It is like installing the red phone in White House.  You hope you never have to use it, but if you ever do need it, you won’t want to waist any time on details and you will have no time to lose.