RedPrairie survey reveals mixed views for product recall legislation and standards

79 percent of survey respondents say legislation is needed, but 75 percent say standards would be more effective in managing recalls

Jeff Berman, Group News Editor -- Logistics Management, 5/30/2008

WAUKESHA, Wis.—When it comes to the potential impact of legislation focusing on product recalls—versus industry standards for recalls—it appears there is no clear-cut winner, according to the results of RedPrairie’s 2008 Survey on Recall Legislation.

Data for the survey was based on feedback from nearly 80 retailer, grocery, consumer packaged goods (CPG) companies, food and beverage manufacturers, and third-party logistics (3PL) providers. And the survey’s results were decidedly mixed, with 79 percent of respondents saying recall legislation is needed, although 75 percent contend that industry standards would be more effective in managing recalls that legislation.

RedPrairie Vice President of Product Strategy Tom Kozenski told LM that there may be a few different explanations for this finding.

“We in the supply chain can make a lot of analogies can be made to what’s going on here,” said Kozenski. “There is this whole mystique around standards, which often is almost a misrepresentation, because in many areas there are so many variations for a standard that there is no standard…and this is playing into the responses we received for this survey.

Kozenski added that while survey respondents indicated they don’t expect significant improvement with product recall standards, the majority still believe they will help. He went on to say there are two camps in the marketplace regarding this topic, with the majority taking a “wait and see” approach. The main reasons are that they are hesitant to put something in place that is not yet a standard, with the fear that it may change, coupled with the fact that it will likely require a significant capital investment. And on a smaller scale, Kozenski said that some smaller companies want to use standards to differentiate themselves, but they are in the minority.

Some other data-based survey takeaways were:

·        56 percent of the respondents were not aware of the proposed legislation, but half of the respondents aware of it are preparing for it;

·        although 79 percent said recall legislation is needed, only 12 percent believe it would significantly recall the incidence of product recalls; and

·        brand management at 46 percent was the top reason respondents listed for improving recall processes and technology followed by consumer demands at 36 percent and competitive differentiation at 13 percent.

In terms of examples types of product recall standards that could be used by companies, Kozenski cited the requirement for companies to produce documentation that shows they have done the necessary inspections and checks in their processes to eliminate recalls. Another possibility for a standard he said could be for a situation when the government asks a company to provide a list of processes and procedures for how they plan to manage a recall if the situation arises.

“The first part is preventative and the second part is reactive, but those are where the rules [for standards] would likely be,” said Kozenski.  

Once legislation or standards are eventually enacted, it is likely that they will have a significant impact on companies.

“It is pretty evident things are going to change..and make things more challenging for shippers,” said Rick Jordon, director of global logistics services for ICG Commerce in a November interview. “This will bring more focus and more scrutiny, which will probably mean more time [spent on importing processes], which will ultimately mean more costs.”

The potential for increased costs resulting from these recommendations, noted Jordon, is likely to come from a buildup of inventory, although it may not occur initially.

Legislation in brief: In March, H.R. 5636, the Consumer Product and Food Safety Information Act of 2008 was introduced by Representative John Lewis (D-GA.). The objective of the bill is to inform American consumers about food and product recalls.

Last November, the White House established new incentives for importers that follow strong safety practices and demonstrate a good track record. These incentives were based on recommendations from an Interagency Working Group on Import Safety that was established last July on an executive order from President George W. Bush. The working group recommended that the U.S. needs to adopt a smarter and more effective approach that focuses on prevention and building safety into products from the very beginning of the supply chain.