Managing Product Recalls

There is a global legislators’ move towards greater enforcement of accountability to manufacturers, importers, and distributors of consumer products, which may be attributed to numerous product recalls with public safety concerns in recent years. 

The Government of Canada is evaluating a proposed legislation, named Bill C-6 (refer to Health Canada website for more information:
http://www.hc-sc.gc.ca/cps-spc/legislation/acts-lois/bill_c6-loi-eng.php) or Canada Consumer Product Safety Act (CCPSA) with the aim to keep Canadians safe from dangerous consumer products. It will introduce necessary, concrete measures to make consumer products safer for Canadians by prohibiting the manufacture and importation of unsafe products. Additionally, it will give the government the power to order recalls of unsafe products. It will also encourage compliance through higher fines and increased penalties for violators.

What is a product recall?
Withdrawal of a product from the marketplace owing to:
• Design fault
• Safety concern
• Defect
• New evidence of a danger not previously known   
• Tampering
• Potential misuse
• Any other reason to withdraw a product

What are some of the challenges of a product recall?
• Reaction time is probably one of the most challenging issues. In effect, the quicker a non-compliant product is identified in the supply chain, the more an organization can reduce or eliminate the collateral damages. The opposite is also true; in the event the defect is identified by the consumer at time of product use, consequences can be dramatic:

•   The recall process is not standardized (policies, procedures, and controls). Alignment of quality, compliance, traceability, and distribution processes; technology interoperability across the global supply network; leverage existing systems for real time measurement; and consistent enterprise risk management process are other challenges faced by organizations.

•   Cost of recall is direct or indirect. Direct costs can be investigations, testing, communications, cost of physical distribution to recover, incentives to consumers, personal injury claims penalties. Reverse logistics, when not previously organized, usually costs 10 times more than regular logistics. Therefore, it can have major consequences on operating costs. Indirect costs are represented by stock price value, and harm to reputation.

How to integrate the function of product recall?
• Duties of a recall coordinator, at a high-level:
– Classify the recall, review your past history
– Prepare a draft recall plan, and appropriate documentation
– Test the plan
– Know who to notify in government – include all levels
– Prepare a communication plan
– Prepare a monitoring and continuous improvement plan

• Prior to announcement:
– Is there a recall committee? Is it appropriate?
– Is there a recall coordinator? Is there a recall plan?
– Is the product evaluated for safety? Is the process documented?
– Do you have a communication plan?
– Do you maintain detailed serial and lot numbers?
– Do you maintain an effective client database?

• During recall:
– Is the problem continually evaluated?
– How effective is the communication plan?
– Is the product being removed from the supply chain?
– Is the recall budget appropriate?
– How is the consumer doing? What are the hazards? What is his point of view?

• Post recall:
– What did you learn and have you implemented process changes quickly?
– What is the likelihood of repeat?
– Can you differentiate new vs. old products?
– Are you using new serial, model, or lot numbers?
– Have you conducted a customer satisfaction survey?
– Have you applied these audit results to the existing procedures?

We can help you define the current status of your import and recall processes, contact us for a discussion on this matter:

Jérôme Thirion
Associate Partner
National Leader, Business Effectiveness
KPMG
(514) 840-2316
jthirion@kpmg.ca

Joseph Brick
Associate Partner
National Leader, Trade & Customs
KPMG
(416) 777-8413
josephbrick@kpmg.ca

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative.
© 2009 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. Printed in Canada. 2076SB