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Product Recall: What food brands must know

To explain the Product Recall, I will start with an actual incident. Once upon a time, or to be more precise: in the 21st century, there was a reputed chocolate manufacturer, Choco Inc. The company sold chocolate bars and other chocolate goodies, which were in popular demand in over 50 countries. Choco Inc was a […]

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To explain the Product Recall, I will start with an actual incident. Once upon a time, or to be more precise: in the 21st century, there was a reputed chocolate manufacturer, Choco Inc. The company sold chocolate bars and other chocolate goodies, which were in popular demand in over 50 countries. Choco Inc was a trusted brand and made millions from its products, the primary target audience being children worldwide.

One fine day, the French discovered a piece of plastic in chocolate bars produced by Choco Inc. The bars in question were manufactured in a factory based in the Netherlands. And all the batches had already been shipped to more than 40 countries.

Choco Inc had to declare the mishap and immediately set out to recall the chocolate bars. The recall involved tracking and retracing the movement of the chocolate bars across numerous players of the value chain, spanning 40+ countries.

The price of this recall was a substantial monetary loss and reputational damage to the brand, impacting investor confidence and the value of the business as a whole. To summarize, the recall cost Choco Inc approximately $10 million.

Apart from that, since the products of Choco Inc are perishable food items that cannot be restored or corrected, the bars had to be destroyed, resulting in food wastage in large quantities worldwide.

If only Choco Inc had implemented a Traceability solution, that would have helped substantially reduce recall costs by double-digit percentages.

Let’s read on to know more.

What is a product recall?

A Product Recall involves the removal of a product from any stage of the value chain. It could be initiated due to several reasons, including Product or raw material defects or contamination, Product tampering, Mislabeling of a product that contains allergens, Expired produce, Quality Test failure from regulatory sampling and inspections, Complaints from consumers, distributors, or retailers (verified and potential), Any threat to consumer safety.

This is not a comprehensive list; companies have even been mandated to recall products because consumers and regulatory authorities learned of child labor employed in their supply chain.

Recalls are often thought of with dread since they involve substantial monetary and non-monetary losses for the businesses involved. However, recalls are a fundamental tool used to manage and avert the risks consumers face due to possible defects or contamination.

An interesting observation is that the number of recalls is increasing year on year. However, this does not imply that more and more products are unsafe; the spike in numbers is because most recalls are precautionary.

Therefore, companies have a vital responsibility to, Firstly, engineer and distribute safe products. Secondly, to recall hazardous products from across all stages of the value chain to protect the public from injury or death in case of potential defects and contamination.

The food and beverage industry often faces stringent scrutiny. This is because the impact of contamination is magnified due to immediate consumption and the large user bases that companies often have. Unsafe food containing harmful bacteria, viruses, parasites, or chemical substances, causes more than 200 diseases – ranging from diarrhea to cancers. An estimated 600 million – almost 1 in 10 people in the world – fall ill after eating contaminated food, and 420 000 die every year, resulting in the loss of 33 million healthy life years (DALYs). (WHO)

Therefore, traceability and recalls are critical components of a food regulatory system.

Impact of Product Recall

product recall
Product Recall card with colorful background with defocused lights

Executing a recall can be a cumbersome task, considering the length and complexity of supply chains. It also involves loss of money, reputation, and time. On average, companies face up to $10M in recall costs, excluding the reputational damage that accompanies most recalls.

One of the world’s largest smartphone companies, Samsung, had to recall the Galaxy Note7 after some of them started bursting into flames. Ninety-six reports of overheating batteries and fires came up within two months of its launch. 2.5 million devices were recalled, costing Samsung an estimated $17 billion.

The food industry has to deal with recalls more sensitively. As we saw with Choco Inc, the perishable nature of the products and the stringent environment and handling conditions often result in massive food wastage for the industry since the products cannot be resold and must be destroyed. The decision not to recall an outcome could result in severe illnesses and deaths.

Additionally, due to a lack of traceability, the origin of the quality issue often goes unidentified, resulting in the retailer bearing the major part of the losses instead of the cost being distributed across the value chain. The retailer, who, often, is the most recognizable link of the supply chain, also ends up bearing the burden of the related loss of reputation, and in turn, market share.

Recalls are not limited to brands with questionable reputations; popular and well-loved food brands like Hershey’s, Frito-Lay, and Maggi are subject to stringent regulations and quality checks that have resulted in recalls. An added issue that businesses face is the lack of visibility across the supply chain. When a product is recalled, often, due to the complexity of the supply chain, retailers struggle to identify the exact location and stage of the defective shipment/batch. Without a well-established system in place, inventories are impacted since companies often recall and destroy even batches that are not contaminated. Doing this faces a loss of sales due to stock-outs. Smaller companies may not be able to recuperate from recalls since they operate with a limited cash flow. At the same time, more giant corporations are better equipped to deal with the short-term impacts of recalls due to diversification and deeper pockets, as in the case with Samsung.

Another ancillary concern of product recalls is the time taken to respond, especially to food-related emergencies. More than 50% of companies surveyed stated that tracing defective/contaminated products took days/weeks. The longer it takes to track the shipment, the more challenging it is for a successful recall.

Can Traceability mitigate the cost of Product Recall?

Traceability can minimize the scope of the impact by swiftly identifying the origin of contaminants and defects backward and forwards across the supply chain, especially in industries where the inability to identify the same precisely can be costly. Apart from being financially draining, recalls, especially in the food industry, contribute towards the 133 billion pounds of food waste that go to the landfill each year due to the lack of precise targeting that leads to the recall and disposal of food batches are not even contaminated.

Global recalls have become increasingly common to combat growing product safety threats. In addition to the risks and regulations associated with recalls, the demand for greater visibility and accuracy has led to the development of traceability technologies across the value chain as a critical theme in risk regulation.

The capability to trace products and raw materials back to the origin and throughout the journey to consumers is critical for companies. It allows them to respond faster to recall investigations and perform precise, leading to minimal monetary loss, ailments, and death. Cargill, the third-largest turkey processor in the United States, faced a recall of 36 million pounds of processed turkey products for Salmonella after being distributed to 26 states. Due to the length and complexity of the supply chain, the source of contamination was identified only after five months.

Food traceability uses blockchain to store immutable data, meaning the data cannot be modified but can only be added.

Here is where traceability can step in to reduce food wastage significantly.

So, how does it work? Traceability starts from the defective/contaminated product and works backward, from the distribution chain to the warehouse, through the manufacturing processes to the raw materials and components, to their origin. Through this end-to-end tracking, both upstream and downstream, companies can precisely identify the defective products, batches, and ingredients, as well as the stage of the value chain when the defect was first detected, be it manufacturing or distribution. Reputed solutions can provide detailed historical information related to production, inspection, genealogy, and usage. By digitizing and recording the data right from the raw materials to retail distribution, companies can significantly reduce the risk of recalls, the need for product redesigns, and other ancillary costs.

Technologies such as Barcode printing & scanning, Radio Frequency Identification, IoT are in wide use, either independently or in combination, to track all inventory, even in complex value-chain environments. Based on the requirement per industry and company, the solutions can be configured even to record receipt history, production, movement, inspection, rejection/sorting, and shipment and provide a visual representation of a particular batch across the value chain. The advent of blockchain technology has also significantly impacted traceability solutions since it adds another layer of authenticity in making supply chains transparent, helping in recalls. The core feature of Data immutability makes sure that transactions are verified and secure.

The Effectiveness of Traceability

Implementing a Traceability solution can drastically reduce production and quality control costs, often by double-digit percentages, because companies have accurate visibility of the movement of ingredients and products along the entire supply chain.

The effectiveness of a traceability solution, when it comes to product recalls, depends on its ability to:

  • Prepare a business for a recall situation by providing clear E2E visibility.
  • Minimize the impact of a product recall
  • Reduce the time to trace the defective/contaminated product and raw materials, enabling a faster response
  • Reduce the time to recall products
  • Mitigate the threat of civil legal action
  • Real-time inventory management enabled quicker and accurate order fulfillment.
  • Recall accuracy – minimizing the recall of safe products.
  • Decrease the cost of implementing the recall process
  • Prevention of relapse of a recall by identifying the source of the defect/contamination

Companies that have adopted traceability are privy to a wide range of benefits, including targeted withdrawals and even providing accurate information to the public. Traceability has also been shown to reduce the recall scope by between 50% and, in some cases, up to 95%. It has also significantly reduced the time taken to trace the defective products from hours to minutes. Additionally, in cases where the product has traversed the retail boundary and has reached the end consumer, traceability can enable communication with them, in collaboration with retailers, and persuade them to hand back the deviant products.

TRACEX AND TRACEABILITY

How TraceX can help your Food Brand with Traceability & Product Recall?

TraceX enables end-to-end traceability with our blockchain-based solution. We can help you track and visualize your products as they move up the value chain. When it comes to product recalls, our solution can help you capture information for every ingredient and process and store and process this information, enabling you to track every product batch forwards and backward. We can also help you answer critical questions related to quality issues, sourcing, processing, transportation, and storage. TraceX connects all the value chain players, allowing for quick communication, especially in times of product recalls. Since our solution can record pre-harvest and post-harvest data for food products, it can help predict and pre-empt food contamination to minimize the time to recall.

Traceability solutions enable businesses with information critical to analyze a product recall like production quality inspection, supplier quality management, and audit management, ensuring real-time visibility and security across the entire value chain. With greater traceability, companies can alleviate the impact of product recalls, assess existing materials, products and processes to reduce the recurrence and implications of such events in the future. The old saying, “Better to be safe than sorry,” has never been more applicable.