Product recalls occur when faulty products are taken off the market for reasons related to health and safety, and not meeting technical specifications or quality standards.
Several brands trading in South Africa have issued product recalls in recent years, including Nestle, Toyota, Garmin, Dettol, and Lucky Star. For small business owners in the manufacturing sector, the impact of a product recall can range from mild reputational damage to bankruptcy, depending on the number of products affected and the nature and severity of the problem.
Managing the product recall process can be expensive and time-consuming – steps include arranging for return shipping, setting up a dedicated hotline to deal with customer queries, refunding customers or offering replacement goods, and destroying or disposing of returned goods.
In order to retain consumer trust and loyalty, it is important for small business owners to be open with their customers, explaining the reasons for the recall and what the business is doing to avoid similar incidents in future. Relationships with retailers and distributors may be more difficult to repair, and small business owners may have to find alternative distribution channels in the aftermath.
To protect themselves, small business owners can ‘recall proof’ their business by:
• Building a system of checks and balances into the manufacturing process, including ensuring traceability (e.g. allocating batch numbers)
• Developing a product recall strategy (based on a risk assessment to determine the likelihood of a product recall) that covers internal and external communications and supply chain management during the product recall
• Paying for product recall insurance cover
To assist manufacturers and other key role players in the product supply chain, the Consumer Goods Council of South Africa has issued guidelines for product recalls in the food industry. In addition, draft guidelines for product recalls have been developed as part of the implementation of the Consumer Protection Act 68 of 2008.
These guidelines apply to manufacturers, importers, distributors and wholesalers in all industries, and distinguish between compulsory and voluntary product recalls. Small business owners therefore need to familiarise themselves with the new Consumer Protection Act (in particular, section 60 of the Act) as well as the guidelines in order to be fully compliant with the existing laws and regulations concerning product recalls.