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Safeguarding your customers, company, and brand
AS GLOBAL SUPPLY CHAINS become increas-
ingly sophisticated and complex, product safety
proves to be a vital pursuit for every business.
Internationally, a number of emerging economies
currently do not have laws to force recalls of dan-
gerous products, putting consumers at considerable
risk. Meanwhile—and in stark contrast—the rest
of the world seems to see recall alerts at a startling
rate. The European Commission posted 2,435
non-food consumer product notifications in 2014,
compared with 388 just a decade earlier in 2004.
The number of recalls in South Korea increased a
full 25 percent between 2011 and 2012, according
to the Organisation for Economic Cooperation and
Development. And the US Consumer Product Safety
Commission (CPSC) reports that consumer goods
incidents alone cost the United States economy more
than $1 trillion annually.
The indirect effects of a recall can be even more
severe. Loss of consumer confidence and regulatory
actions devastate brand image and shrink revenues for
years after an event. Moreover, the vast reach of today’s
social media makes shrewd product recall management
a tactical necessity.
A survey by the Grocery Manufacturers
Association, “Capturing Recall Costs,” revealed that
81 percent of companies deem the risks associated
with a product recall to be “significant” or “cata-
strophic.” In addition, 58 percent of respondents have
been affected by a recall event in the past five years,
with their greatest losses coming from business inter-
ruption and product disposal.
“From my experience and observations, costs to
recover, repair, or replace impacted products and to
retain existing or regain lost customers—as well as
defamation of the brand name and reputation, loss of
earnings, and other financial and economic losses—are
the most common impacts,” explains Barbara Randall,
divisional vice president of Great American Insurance
Group’s product recall unit. “A product-recall event
By Elizabeth Rennie
apics.org/magazine 45
4. can cause a company to lose everything it has struggled
to build for an entire lifetime.”
Warning bells
One company currently fighting to survive a severe
recall event is Brenham, Texas-based Blue Bell
Creameries, the third-largest ice cream maker in the
United States. In April 2015, the Centers for Disease
Control and Prevention (CDC) reported that the
business recalled all of its products and shut down
every plant as a result of a listeriosis outbreak. This
life-threatening infection is caused by eating food
contaminated with Listeria. The CDC investigation
indicated that Blue Bell desserts caused infections
in 10 people from four states. All were hospitalized,
and three died.
CDC inspectors found that plant employees failed
to monitor the temperature of water used for cleaning,
which resulted in inadequate equipment-sanitizing
processes. Additionally, some of the plants’ build-
ings could allow drops of water and condensation
to contaminate ice cream and packaging materials.
Inspectors also observed employees not washing their
hands thoroughly.
Randall says employee error and carelessness are some
of the top causes she sees for product recalls. She also
has witnessed many cases that involve lack of preven-
tive and predictive maintenance, such as planning for
a foreign object falling from an employee’s pocket into
a vat of product, a pathogen entering a plant on an
employee’s clothing or shoes, and inadequate testing of
water quality.
At Blue Bell, the issues were compounded by the fact
that employees had found Listeria in a plant years ear-
lier but failed to properly address the problem. “What
was identified as an infection outbreak in 2015 was
actually sickening people as early as 2010,” writes Peter
Elkind in the Fortune article “How Ice Cream Maker
Blue Bell Blew It.” He describes the company’s actions
as “recall creep” and adds, “The episode reveals not
only how difficult it is to trace the source of foodborne
illness but also what happens when a company is slow
to tackle the causes.” The US Department of Justice
currently is investigating Blue Bell for its mishandling
of the contamination.
Despite Blue Bell’s arguably sluggish response
to its problems—not to mention the illnesses and
deaths—countless die-hard fans call, write, and post
messages on social media in support of the company
every day. These devotees have taken to stockpiling
ice cream and even posting it for sale on Craigslist
and eBay with outrageous price tags. It seems a
large population of consumers are undaunted by the
contamination and simply want to know when the
treats will be back in their grocery store freezers.
(See sidebar.)
Throughout the past 10 months, Blue Bell carried
out an intensive cleaning and training program at all
of its production facilities and outlined the steps it
would take to return its products to market. A root-
cause analysis was conducted to identify potential
and actual sources, and an independent microbiol-
ogy expert was hired to establish controls to prevent
future listeriosis outbreaks.
“Every department and employee was affected,”
says Jenny Van Dorf, Blue Bell public relations market
specialist. “Personnel from our offices, sales, produc-
tion, warehousing, and distribution all had responsi-
bilities in the recall process. We took a comprehensive
approach at all of our facilities that included thor-
oughly sanitizing each facility and making enhance-
ments to procedures and equipment.”
One improvement Blue Bell enacted during the
recall process is a test-and-hold procedure whereby
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“The key to loss mitigation and loss
prevention, like anything else, is to have a
strong business plan and strategy.”
46 May/June 2016
5. products are not distributed until their production
runs are tested. “[This is] designed to ensure that the
ice cream we distribute is safe for consumers,” Van
Dorf adds.
Hitting the brakes
Also in April 2015, Trek Bicycle recalled nearly 1
million bicycles after three incidents—one facial injury,
one fractured wrist, and one crash that left a rider
permanently paralyzed. According to the CPSC, a
quick-release lever on the bike’s front wheel hub could
come in contact with the front disc brake assembly,
resulting in complete wheel separation or the wheel
coming to an instant stop.
“We had never heard of a quick-release lever
becoming caught in a disc brake while riding,” says
Eric Bjorling, brand and public relations manager
for the Waterloo, Wisconsin-based company. “We
looked into it [and] determined that the cause was
the improper usage of the lever. After some further
analysis, we determined that the potential for this
happening again was there, as the part was widely
used throughout our bikes as well as a number of
other brands.”
Trek brought this finding to the CPSC, which was
previously unaware of the issue, and to executives at
the other industry brands using the part, urging them
to take collective action. Although the part itself was
not defective—the issue was the result of improper
usage—the supplier of the quick-release lever was
contacted as well. Trek has since stopped using the part
and found a suitable replacement.
“We were not going to wait for another accident,
another potential rider to get hurt, to decide what
course of action to take,” Bjorling says. “If [these noti-
fications] prevented even a single accident, it was worth
whatever costs would be incurred.”
Line of attack
During its recall event, Trek benefited from having a for-
mal strategy in place—one that relies on its partnership
with the CPSC and the cooperation of its independently
News travels fast and far these days, whether it’s good or bad.
Social media can intensify recall events, but it also can be used
wisely to avoid misinformation, give consumers a way to ask
questions or share information, and enhance the overall cus-
tomer experience.
The study “The Role of Social Media in the Capital Market:
Evidence from consumer product recalls” from the Journal of
Accounting Research found that “increased frequency of tweets
by other users exacerbates negative market reactions as dis-
gruntled users interject negative sentiment into the online dia-
logue, while increased frequency of tweets by the firm lessens
negative market reactions.”
Examining Blue Bell Creameries’ social media during its recall
event illustrates these points. The first post about the recall said:
“For the first time in 108 years, Blue Bell announces a product
recall. … For more information, click on the link below.”
The reactions of Facebook commenters showed overwhelm-
ing support for the brand. One person wrote: “Blue Bell is by
far the best ice cream in the world. Tainted or not!” Another
commented: “So sorry this happened! 108 years [is an] awe-
some record!”
Yet, many others felt that Blue Bell’s statement was ill-conceived.
One person wrote: “This is not a time to tout your rich history.
People are dead because of your product.”
A subsequent Blue Bell post said: “Unfortunately, our training
and repair efforts will take longer than we initially anticipated.
We don’t have a firm timeline for when we will be back, but it will
be several months at a minimum.”
And again, the responses were mixed. “Take your time and get
it right, Blue Bell Ice Cream,” one commenter said. “In the mean-
time, is there a program for withdrawal symptoms from Blue Bell
ice cream?!”
Interestingly, this time it was not the company but a social
media fan’s remark that stoked the fire. “People died, and we are
whining about not having ice cream? Sad state, truly, truly sad,”
one poster wrote. And another said, “It is a dirty company, and I
would never trust them again.”
The PricewaterhouseCoopers report “Are You Prepared to
Protect Your Brand?” notes that consumer reactions to the news
of a recall can result in lost revenues and substantial brand
damage. “The speed of social media [has] made effective recall
management a strategic priority,” author Sally Bernstein writes.
Barbara Randall, divisional vice president of Great American
Insurance Group, agrees. However, she also sees valuable oppor-
tunities for positive social media interactions. “Increased aware-
ness may help companies to more seriously consider pre-recall …
product safety measures,” she says.
In the age of social media, it’s imperative that the information
a company shares be delivered in a proactive, thoughtful man-
ner. Effective and deliberate delivery of the message can make a
big difference to the ultimate results.
SOCIAL MEDIA AND SHIELDING YOUR BRAND
apics.org/magazine 47
6. owned retailers. The plan enabled Trek employees to
work systematically and aggressively in response to the
issue, something that a recent PricewaterhouseCoopers
(PwC) report says can greatly improve a company’s
ability to manage recalls. The report, “Are You Prepared
to Protect Your Brand?” notes that taking prompt,
definitive action is critical to recall success.
“Many companies spend the crucial first 48 hours
scrambling to organize a recall team and to obtain the
necessary information for a senior individual to make
the decision to immediately prevent further distribu-
tion of affected product,” PwC’s Sally Bernstein writes.
“The result is the recall issue continues to grow.”
Bernstein says the foundation of recall success is a
predetermined “pivot point” team whose members
are empowered to oversee the process and report to an
executive sponsor. Team members are responsible for
assessing the scope of the recall; tracking and docu-
menting related activities, costs, and key performance
indicators; and quickly and accurately responding to
stakeholder requests for information. In addition, the
group allocates and manages resources and shares
progress. She adds that it is imperative for the team to
guide cross-functional collaboration throughout the
entire organization.
Bjorling says this was a key to Trek’s recall success as
well. “Without the cross-functional buy-in and teamwork
[of] communications, customer service, forecasting, legal,
logistics, marketing, retail, sales, and supply chain … this
recall could not have been as successful as it was; they all
played vital roles,” he says. “The biggest lesson is to make
sure, when embarking on something of this magnitude,
[that] all of your departments know the plan, buy into the
plan, and act in the best interest of the customer.”
In her work at Great American Insurance Group,
Randall regularly sees the value of having a for-
mal recall policy, full traceability procedures, and a
quality-control manual. “The key to loss mitigation
and loss prevention, like anything else, is to have a
strong business plan and strategy,” she says. “[This
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The US Food and Drug Administration (FDA) has three classes of recalls, according to the level of hazard the FDA believes to be involved.
PRODUCT RECALL CATEGORIES
Category Description Examples
Class 1
Dangerous or defective products that could cause
serious health problems or death
A food with undeclared allergens or a label mix-up
on a pharmaceutical
Class 2
Products that might cause temporary health
problems or pose only a slight threat
A drug that is under strength but not used to treat
life-threatening situations
Class 3
Products that are unlikely to cause an adverse
health reaction but do violate FDA labeling or
manufacturing laws
A minor container defect or a lack of English
labeling for a retail food
48 May/June 2016
7. DigitalExclusive: To hear an interview with
recall and crisis-management expert Rick
Crandall, PhD, professor of management
in the University of North Carolina at
Pembroke’s School of Business, visit the
APICS magazine tablet app. If you haven’t
downloaded the app yet, search for “APICS
mag” in the App Store or Google play.
should include] implementation of required and
necessary measures for food, consumer goods, or
component-part product safety. Diligence with testing,
regulatory compliance, implementation of plans, and
overall quality control are very important.”
Another essential aspect of a recall strategy is the
reverse logistics process. Daniel W. Steeneck, post-
doctoral associate at the Massachusetts Institute of
Technology Center for Transportation and Logistics,
says reverse logistics is, unfortunately, an afterthought
for many companies. “For recovered products, their
best-value recovery or end-of-life option—for example,
repair and resell, disassemble and salvage, or dispose—
should be determined in advance. Either in-house
operations should be prepared, or relationships with
third parties with the right capabilities should be
established,” he says.
On the bright side, he adds that the identification
of reverse supply chain strategies is not only essential
to effective contingency planning, but also can enable
professionals to identify business opportunities from
recovery of end-of-life products.
An organization’s specific reverse logistics process
will depend on the nature of the recall—whether
it involves repair, replacement, or return, Steeneck
adds. For example, when recalling toxic materials,
such as lead paint, companies must be compliant with
Environmental Protection Agency disposal regula-
tions. He also notes that a plan must be made for each
contingency. For recalls requiring replacements or
returns, the recovery channel and the processing of the
returns are the “critical decisions,” he says.
Adequate recall insurance also is necessary. “Most
business owners do not have experience implement-
ing a recall,” Randall explains. “The expertise of a
crisis consultant can drastically reduce the impact of
an incident.”
The PwC report draws a similar conclusion, noting
that poor engagement with insurance carriers leads
to cash flow difficulties and ultimately hampers the
recall process. “[Companies] should have a strategy
for addressing insurance recovery,” Bernstein writes.
“Immediately after a recall, the company should
communicate with its insurance carriers about the
recall process and identify all possible claim elements.
This will … safeguard cash flow by enabling prompt
insurance payments.”
She adds that the following points also are integral to
recall-event planning:
• Recall management should be a continuous pro-
cess that goes beyond an annual mock recall.
• The process should be embedded within each
business function.
• Plans should be actionable, with enough detail to
be effective but not so much that rapid execution
is impossible.
• Planning and process design should be updated
frequently to account for changes in suppliers,
manufacturing, distribution, and customers.
Finally, Bernstein advises recall team members to
make sure they can track product flow downstream,
upstream, and across the supply chain to allow for quick
identification of products. In addition, communication
with regulatory agencies and other key stakeholders—
including employees, suppliers, customers, insurance
carriers, investors, and board members—must be
thorough and swift.
As Trek’s Bjorling says, “The more flexible your supply
chain can be to react quickly, the better off you’ll be.”
Elizabeth Rennie is managing editor for APICS magazine. She
may be contacted at editorial@apics.org.
To comment on this article, send a message to feedback@apics.org.
apics.org/magazine 49
