Legislative loop: Debates continue over how to handle product recalls
Karen Dilger, contributing editor (kadilger@comcast.net) -- Manufacturing Business Technology, 2/25/2009 8:54:00 AM
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Product recalls are all over the news these days, with manufacturers and retailers under governmental scrutiny as they try to manage product tracking, label compliance, testing &certification, and recall notification.
Proposed legislation intended to better manage recalls would directly impact several industries, including grocery, consumer packaged goods (CPG); and food & beverage; as well as third-party logistics providers.
Meanwhile, many experts believe development of industry standards may be a more effective measure for compliance.
At the heart of these regulations is the ability to properly identify packaging, identify which customers have which products, and provide the government with appropriate reporting. “This legislation will bring more discipline to the table,” says Tom Kozenski, a VP for supply chain execution software provider RedPrairie.
Some systems have capabilities that can assist in the recall process, such as RedPrairie’s E2e system, with a recall database for CPG industries. The mandates outline permanent tracking labels and country-of-origin tracking for the food industry, as it is applied to lot codes and shelf life.
“Product genealogy can track a lot number for a box of cereal made at plant A on production line three on June 10 at 10 a.m.,” says Kozenski. “If a routine inspection found a contaminant in the sugar, the manufacturer must go to the raw material list and find out what other products were made with that sugar and trace it back to see which cereals went to each store.”
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Mandates also include requirements about the dissemination of recall notices for the food industry. Manufacturers would be required to send a series of notifications to their customers, such as electronic phone transmissions, emails, and letters, until there is a response. Web-based systems are available today that allow retailers to subscribe to an online posting service to receive notifications regarding recalls.
Last year, RedPrairie conducted a survey to gain insight to the industry’s perceptions about the impact of recall legislation. It also looked at the potential impact of self-regulation without legislation. Results indicate a lack of consensus on an easy fix for the issue, but most companies are interested in doing a better job preventing, managing, and communicating recalls.
The most telling result of the survey was that 75 percent of people believe industrywide standards would be more effective than legislation in managing recalls. “Some companies are taking a wait-and-see attitude before they make any costly changes to their processes, and many are skeptical of a silver bullet cure,” says Kozenski.
“Whenever inventory movement slows down, it adds cost to the picture because manufacturers must build up safety stock,” he adds. “Plus, more disciplined testing and inspections add more steps to the process.”
As with most developing standards, many companies are opting for the penguin strategy, says George Goodall, senior research analyst for Ontario-based Info-Tech.
“Penguins shuffle around the edge of the ice and no one wants to be the first to jump in—especially when it is difficult to justify the expense. All manufacturers complain about reverse materials authorization. Supply chain systems are designed to get things out the door quickly and efficiently.”
Goodall believes industry standards would be far more effective than legislation since legislation is very difficult to enforce.
“If there aren’t many violations, is it because the laws are difficult to enforce? Or, is the issue that there are not many people violating it? On the other hand, when there are specific guidelines, enforcement and cost are still major issues,” says Goodall.
A strict fine structure also may be a good deterrent for violating regulations, as debated in Canadian legislation.
“The questions remain how to assess risk if manufacturers do not protect the public welfare,” says Goodall. “There is not a clear set of guidelines such as with Sarbanes-Oxley, so it is more difficult to prove liability.”
Goodall adds that the importance of tracking components in the high-tech electronics market, where capacitors and computer chips may used in many different devices. When a problem occurs—such as it did a few years ago with burning laptop batteries—numerous suppliers can easily be affected.
“Lot and batch traceability isn’t just for the pharmaceutical industry anymore. Many more industries will be affected with product recall legislation.”
