While recall trends fluctuate by industry, many food safety professionals expect product recalls to continue increasing. Increased automation, complex global supply chains, inconsistent regulations, personnel shortages, and evolving business models all contribute to a more complicated risk environment.
And when something goes wrong, the consequences go well beyond the product itself.
What Is Driving Product Recall Risk?
There are several factors food manufacturers should be thinking about when evaluating their product recall exposure.
Increasingly Complex Supply Chains
There's immense strain on global supply chains right now. Manufacturers and suppliers are working to meet demand for everyday consumer goods while also adapting to new ways of getting those products to consumers.
For food and beverage suppliers, that can mean increased demand and urgency, labor instability, and additional pressure to comply with safety protocols.
When you’re working with a global supply chain, there is also the question of whether your partners are compliant with their local regulations. Cross-border regulations aren’t always consistent and add an extra layer of exposure you may not be prepared for.
Are you sure your supply chain is compliant throughout the world?
That’s an important question to ask because a problem anywhere in that chain creates problems for your business.
Automation Creates New RisksAutomation Can Create New Risks
Automation is fantastic for producers. It allows manufacturers to produce goods more efficiently and at a much greater scale. But, automation also creates complexity throughout the supply chain.
When you’re producing products at scale, a quality-control issue can impact a significant amount of inventory before the problem is even identified.
As you build out automated systems, are you hitting your quality-control targets? Are things slipping through?
These are the types of questions manufacturers need to ask as they evaluate their processes.
Personnel Changes and Human Error
Even with increased automation, there is still a lot of human interaction throughout manufacturing processes.
Personnel changes lead to human error, which is another major factor in product recalls.
Maybe you’re experiencing a lot of personnel turnover. Maybe you’ve had to adjust your shifts to make a smaller workforce more efficient. Maybe you’re working through the night on three different shifts and bringing in new people who need to be trained.
A lot of processes may be automated, but there are still people involved along the way. And human error will always be a factor to prepare for when people are involved.
Evolving Business ModelsChanging Business Models
For some businesses, a change in business model means learning how to do old things in new ways—with unintended consequences.
For example, some suppliers that traditionally sold wholesale to large restaurant chains may now be selling directly to consumers in their homes. That’s a significant change.
When you’ve changed how you’re selling your product, you’ve also changed the risks associated with your business.
You may be dealing with new customers, new distribution channels, new processes, and new responsibilities you didn’t previously have.
Those are risks that might not have been considered when the original business model was developed.
Why Product Recall Preparedness Matters
All these changes put additional pressure on quality-control measures.
During previous lockdowns, for example, difficulties arranging onsite inspections may have contributed to an unexpected, temporary drop in the number of product recalls.
You would think we would have seen recall numbers go up during COVID, but we saw them go down. That seems counterintuitive. What it reflected, however, was a deep gap in oversight.
As things returned to normal and authorities were better able to do their jobs, we began seeing product recalls increase again.
Some of the risks associated with product recalls aren’t likely to disappear as businesses move forward.
In fact, some of the changes we’ve seen in manufacturing and distribution create entirely new areas of exposure.
What Can a Product Recall Mean for Your Business?
A product recall can affect much more than just the product being removed from the market.
Depending on the circumstances, a recall creates new expenses for the business and impacts the relationships consumers have with the brand.
That’s why product recall risk should be considered as part of an overall risk-management strategy.
The question isn’t necessarily whether you can eliminate the possibility of a recall.
The better question is:
If you have a recall, are you prepared for what comes next?
How Product Recall Insurance Can Help
One risk-management approach that can help protect a company’s balance sheet and brand name is Product Recall Insurance.
Product Recall insurance covers certain first- and third-party expenses associated with recalling a product from the market, of course subject to the terms, conditions, and exclusions of the policy.
For food manufacturers and suppliers, understanding your recall exposure—and whether your current insurance program addresses that exposure—is an important part of being prepared.
Your business may have strong quality-control processes in place, but that doesn’t necessarily mean you have eliminated every possible recall risk.
Is Your Food Business Prepared for a Product Recall?
Food manufacturers are navigating increasingly complex supply chains, greater automation, workforce changes, regulatory differences, and evolving business models.
All of those factors can create new challenges.
So take a look at your business and ask yourself:
- How would a product recall impact our operations?
- What would happen if a problem affected a large volume of products?
- Are our suppliers and supply-chain partners meeting their requirements?
- Have changes to our workforce or business model created new risks?
- Does our current insurance program provide the protection we need?
You may not be able to predict when a recall will happen. But you can prepare for the possibility.
Let’s Talk About Your Product Recall RiskLet’s Talk About Your Product Recall Risk
If you’re a food manufacturer or food and beverage supplier, Angel Ross can help you evaluate your product recall exposures and discuss whether Product Recall insurance may be appropriate for your business.
Have questions about Product Recall insurance? Contact Angel Ross, Food/Bev/Ag Risk Manager at Spotts Insurance.
610-680-4843 angelr@spottsins.com
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