Your Best Recall is the One You Never Have to Do

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Regardless of industry, the best recalls are the ones that never happen. Recalls are not only costly to a company’s bottom line, but also to its reputation. Since so many entities are involved in the …

Regardless of industry, the best recalls are the ones that never happen. Recalls are not only costly to a company’s bottom line, but also to its reputation. Since so many entities are involved in the process of manufacturing, packaging, and distributing a finished product, it’s crucial to have insight into each link in the supply chain to avoid a costly recall.

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  • Here is what we traditionally think of when we think of our quality systems and EQMS vision. We think of quality inside our corporate culture and “inside our corporate 4 walls”

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    The fallacy is that we are now responsible for the extended supply chain. We are held accountable for supplier quality and we need to quickly and accurately report incidents and events to external regulatory agencies.

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    Additionally, companies have reduced headcounts or frozen hiring in such a way that the workforce has become more remote and mobile. Without a mobile quality capability, you are delaying your organization’s ability to respond.

Transcript

  • 1. Your Best Recall is the One You Never Have to Do June 2014 Kelly Kuchinski Industry Solutions Director, Consumer Products & Chemical
  • 2. Product Recalls on the Rise 2  Recalls across all industries have increased since 2006 and half of these can be traced back to supplier and contract manufacturer issues  Recall Statistics: • Recalls can cost between $10M - $90M or more. Removal and disposal costs make up 67% of costs.2 • Replacement delays can result in a 12% drop in sales, not including loss from brand switching.2 • A company’s stock price can drop up to 22% within 2 weeks after a recall.2 • The value of a brand can drop 24% or more due to a recall.3 52% Recall s Due to vendor issues 1 Rapid Alert System for Food and Feed. RASFF. 2012 2 Recall Execution Effectiveness Report. Deloitte, GMA, FMI and GS1. May 2010 3 Interbrand 2012 Brand Valuation Estimates, Toyota recall 1 2
  • 3. The Impact of a Recall Industry Example: Peanut Corporation of America 3 361 manufacturers used the raw material in 3,913 products Supplier distributed contaminated peanut products HEALTH & SAFETY IMPACT illnesses deaths LOST SALES $1Bn industry losses 25% drop in peanut butter sales SUPPLIER Supplier filed bankruptcy Executives face federal criminal charges
  • 4. Why do Recalls Still Happen? 4  Companies are focused on reducing costs  Multiple, disparate IT systems  Quality processes still managed in spreadsheets or paper records Global Supplier and Contract Vendor Network ofQualityManagers are using paper- based systems tomanagequality1 Company and Worldwide Facilities Disparate . IT Systems  80% 1 "Transforming Quality Management through Automation", Quality Digest. January 23, 2012
  • 5. The Cost of Poor Quality Deming’s 1-10-100 Rule 5 Identifying issues earlier in the supply chain reduces the impact on cost and brand reputation  Pre-production issues only impact cost by 1X the cost of the suspect ingredient  Post-production issues cost 10X the cost to resolve the problem  Release into the supply chain can result in issue resolution by 100x to 1000X the cost of raw materials
  • 6. Internal Risk Management Proactive Production Management 6 A cornerstone of many regulations in the Food & Beverage industry focus on Hazard Analysis Critical Control Points (HACCP)  1960s - NASA asked Pillsbury to design and manufacturer the first foods for space flights  Used in other industries outside Food & Beverage (i.e. Cosmetics and Pharmaceuticals)
  • 7. 7 Internal Risk Management HACCP Automation Phase 1: Assignment  Assign and track HACCP Team members in TrackWise  Manage and record employee training in TrackWise in the event of a compliance audit Phase 2: Identification  Construct and record process flow by product in TrackWise  Identify critical control points (CCPs) and minimum/maximum levels  Schedule HACCP audits to proactively manage process Phase 3: Management  Schedule internal audits to ensure compliance and monitor hazards  Reinforce SOPs and HACCP training  TrackWise integrates HACCP and CAPA processes  Task assignments sent and managed in TrackWise for faster resolution  TrackWise provides one central repository for exception and corrective action reporting
  • 8. External Risk Management Key Trends and Issues1 8  Outsourcing is one of the leading cost cutting trends in the consumer products industry  51% of respondents say that supply chain partners will characterize the future of innovation  50% of companies are working with more than 500 suppliers or manufacturers  50% of companies say they lack visibility beyond their Tier 1 partners  Outsourcing has resulted in: • Poor communications • Inconsistent auditing practices • Lack of visibility into supplier quality processes • Operational inefficiencies and poor product quality 1 Global Manufacturing Outlook. KPMG, November 2012.
  • 9. External Risk Management Supplier Relationship Management 9  Companies are looking to change their supplier relationships from adversarial to more collaborative  Adversarial relationships focus on price  Collaborative supplier relationships are focused on share goals associated with: o Mutual Success o Strategic Objectives o Balanced support o Dialogue on Ideas and Challenges
  • 10. 10 External Risk Management Case Studies: Supplier Collaboration  In 1990’s - Chrysler introduced Supplier Cost Reduction Effort (SCORE)  Fostered supplier relationships built on collaboration and trust  Results: • Generated >$5 billion in annual savings • Reduced product development cycle by 2 years  Major equipment manufacturer in North America developed a collaborative relationship with it component suppliers in Europe  Identified $5 million cost reduction opportunities in the supplier relationship including: Return/ Rework/Scrap 1 – 2% Warranty/ Cost of Quality 4 – 6% Supply Chain/ Logistics 2 – 4% Source Consolidation 1 – 2% Supplier Simplification 1 – 2% NA Equipment Manufacturer
  • 11. Extended Quality Enterprise  Trends  Approvals  Reports  Status  Audits Mobile Devices Mobile Employees 24 Quality R&D Regulatory Affairs Preclinical/ Clinical  Incidents  Investigations  Audits  Commitments  Product Complaints  Supplier Defects  Events  Corrective Actions  Change Control  Non Conformances Emerging Requirements & Capabilities Regulatory Affairs EHS Commercial Manufacturing Supplier & Contract Vendor Network  Commitments  Audit Observations  Corrective Actions  Incidents/ Events  Product Complaints  Certifications External Quality Views
  • 12. 12 External Risk Management Benefits of Supplier Visibility TrackWise enables: Information Sharing and Visibility Transparency is key to reducing waste, rework and recalls Data Analytics Identify issues and trends that jeopardize KPIs End-to-End Compliance Ensure quality throughout the value chain for brand protection, consumer safety and regulatory compliance Supplier & Contract Vendor Network Company & Global Facilities Sparta Systems Enables Quality Management Across the Supply Chain Airport Mobility Approve & close issues on the roadTrackWise EQMS Streamlines quality processes to reduce costs and ensure compliance Analytics Identify issues & trends earlier AEP Audits on the go Stratas Visibility across the value chain
  • 13. To learn more about strategies to implement a successful enterprise quality management solution to address quality across the supply chain, check out these resources: Whitepaper: From Typos to Trace Ingredients - The Need for Accurate Product Packaging and the Role of EQMS Whitepaper: Protect Your Brand - Ensuring Food Safety and Compliance with a Quality Management System eBook: Four Best Practices to Improve Quality in the Supply Chain Resources 13 Or visit us at www.spartasystems.com
  • 14. Thank You www.spartasystems.com