Industry unveils methods to improve recall response

by Erica Shaffer
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WASHINGTON — A report intended to improve the recall process and provide recommendations for better recall execution was jointly released by the Grocery Manufacturers Association, Food Marketing Institute and GS1, a group working with the two trade associations to develop consistent standards.

The report, “Recall Execution Effectiveness: Collaborative Approaches to Improving Consumer Safety and Confidence,” is an effort to establish best practices for product recalls. The need to identify challenges associated with recalls and make recommendations on how best to meet them was inspired by many issues affecting the food industry, according to the report.

For example, the number of product recalls has doubled since 1999, and the pace of recalls is accelerating, in part because of improved early detection methods and enhanced testing techniques. Food and beverage recalls increased by 60% from 2007 to 2008. Salmonella was behind the largest number of recalls, according to the report.

The complexity and size of recalls also has expanded.

The financial cost of a recall has grown to an estimated $10 million, according to the report. That’s in addition to brand damage and lost sales. The day after a recall, the report authors wrote, the stock price of an affected company underperformed by 2.3%. Companies with poor recall execution might see a 22% drop in company stock price within two weeks of a recall, according to the report.

Consumption of raw products, such as spinach, is increasing. By 2015, one in five Americans will be over age 60 and 20% to 25% of Americans already are in high risk categories: elderly, children and pregnant women.

Finally, companies are facing increasing pressure from their trading partners to improve food safety systems. The report cited as an example Wegman’s, which conducts its own tests of mercury levels in tuna and swordfish it buys from suppliers. Other retailers are following suit, including a clause on testing products in transaction agreements or buyer specifications with suppliers, according to the report.

“Consumer confidence is the foundation of food, beverage and consumer products in the industry,” said Pamela G. Bailey, president and chief executive officer of the G.M.A. “Without it, nothing we do is possible. That means prevention is our first line of defense when it comes to product safety.”

Deloitte Consulting L.L.P. conducted the evaluation of current recall practices used by consumer product manufacturers and retailers. Survey responses came from 54 companies representing $152 billion in manufacturer sales and $329 billion in retailer 2008 annual sales and 29 interviews with industry executives (15 manufacturers, 10 retailers and four service providers).

What more can food and beverage companies do to improve their recall processes? The report focuses recommendations on communication and collaboration; processes, organization and metrics; and technology.
In the first area, companies may collaborate with trading partners to identify problems early, such as investigate consumer complaints and work with suppliers to find root causes of recalls.

Companies also may use multiple channels of communication to notify consumers, customers and regulatory authorities. For example, hotlines, consumer loyalty cards and press releases may be used to communicate information. Hotline agents should receive adequate training to handle call volume and consumer requests.
Companies should consider including trading partners in mock recalls, offer incentives for participation and develop mutual goals, and run mock recalls at vendor organizations.

Finally, companies should collect and share recall execution strategies internally and with trading partners, according to the report. Relationships between trade associations and government officials may be useful networks to disseminate information.

“The report emphasizes communication as a critical component to improving recall processes among trading partners,” said Leslie Sarasin, president and c.e.o. of the F.M.I. “It is equally important that we enhance our ability to communicate with the public to ensure that consumers get the information they need.

“Prompt, accurate and transparent information is a key element of communication that will move the entire industry forward in our shared goal of safeguarding consumers."

Regarding processes, organization and metrics, the report’s authors recommend companies implement and continuously refine recall procedures. This would include developing a communication strategy for consumer and customer notification, a manufacturing contingency plan to support customer restocking requirements and mock recalls.

Companies should also initiate quality tests at various points in the manufacturing process and consistently and rigorously use HACCP.

Ensuring accountability across the supply chain is also crucial. Recall teams should have defined roles and responsibilities. Use of incentive schemes may help with this. Also, the report recommends implementing technology to track the status of the recall process.

Companies should also invest in training at the corporate level and to store-level employees. Training materials should be updated during the feedback loop, according to the report.

Finally, responsible parties should discuss removal, destruction and replacement measures with business partners. The report recommends companies develop contingency plans to ensure immediate replacement of product, and track all metrics related to all steps of the recall execution process to find any performance gaps.

In the area of technology, the report authors recommend that companies automate and integrate technology in their processes. For example, use the Reportable Food Registry to notify the Food and Drug Administration with recall information. The Rapid Recall Exchange system may be used between manufacturers and retailers. Also, companies should use an automated data capture and reporting system to track products during the identification process.

“Rapid Recall Exchange is a game-changer with its ability to facilitate and expedite communication in a situation where every second counts,” said Bob Carpenter, president and c.e.o. of GS1 U.S.
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