There may be so many helpful adages and stern warnings about putting safety first, but sometimes accidents happen. This can be especially true in the world of product recalls. You may not have to look further than the news or the United States Consumer Product Safety Commission's list of recalls to see there are a fair amount of well-intentioned companies unintentionally releasing hazards into the marketplace.
Mars Chocolate was recently in the news for its voluntary chocolate bar recall in 55 countries, after a consumer in Germany found a piece of red plastic in a Snickers bar. "We believe this is an isolated incident," the company's statement said. And 12,300 Valentine's Day themed mug manufactured by Illume and sold in Target stores were recalled because the mugs were labeled as being microwave safe. (The gold metallic print on the ceramic mugs caused sparks when microwaved—no injuries were reported.)
While most of us may know what happens on the consumer end when a product recall goes out, many small-business owners may not know about product liability until it's too late. It can be helpful to: 1) consult with a knowledgeable lawyer, and 2) have a basic understanding of product liability. There are two types of liability: negligence and strict liability. Negligence in product liability refers to a manufacturer or seller's "alleged failure to use reasonable care in some aspect when manufacturing or selling the product," according to Travelers Insurance. Strict liability looks at the product instead, focusing on whether or not the product is "defective, regardless of the degree of care exercised by the manufacturer or product seller." (A product can be deemed defective due to design, manufacturing or when its attached warnings and instructions lead to harm.)
How Can You Avoid Product Recalls?
To learn more about how small-business owners can avoid winding up on a product recall list, we talked to Mike DeHetre, VP of product development at Travelers Select Accounts.
What is a small-business owners' responsibility to its customers when a product they sell is recalled?
A product recall can damage both a small business’s bottom line and reputation, so staying on top of quality control of products and supplies should be at the top of the list. When a product is recalled, small-business owners must first get to the bottom of the defect. There are various types, including: 1) design defect, 2) manufacturing defect, 3) warnings and instructions defect. Once they understand the type of defect and are comfortable with the cause, small-business owners should confer with their attorneys about the ways in which to communicate the defect to customers.
From there, the situation should be communicated through various channels to employees and customers, explaining the defect and how you plan to remedy the situation.
How can they keep future product recalls from happening? What are the best ways to implement quality-control standards?
It starts from the very beginning of product development. When creating a new product, small businesses much pay attention to all design aspects to ensure they conform to industry code standards. Color, size and texture are all important.
Next, it’s about developing relationships with suppliers. Typically products have parts and materials coming from many suppliers, so every supplier transaction should be closely monitored. If the price on specific supplies seems too good to be true, the components could be of inferior quality or counterfeit. Always purchase from suppliers who are Original Equipment Manufacturer (OEM)-approved distributors. Businesses should check with others to see if they have has experience with a particular seller, and have formal agreements with legal review and specific language setting forth their expectations from the supplier and the consequences for not meeting those requirements.
In addition, businesses must implement quality control standards. Establish a system that is effective in screening out counterfeit or defective parts. Businesses should track where the materials are coming from and have a quality control system in place to address any non-conforming goods.
It is also important to review standards that have been set by organizations with expertise, such as the Independent Distributors of Electronics Association (IDEA) or the federal government, and decide which ones would be helpful in making your supply chain more secure.
How should small-business owners work with their vendors or manufacturers to keep these types of problems from happening? How should they convey those changes to their customers to keep them from jumping ship?
Keep close tabs on your suppliers. Work with a qualified attorney familiar with product liability law to draft these agreements at the beginning of a business relationship. Small businesses should also closely manage supplies and imported goods.
It is also critically important to enable and review customer feedback. A recall can be avoided by closely reviewing the complaints and feedback from their customers. Such information can help a business take positive steps at an early stage to minimize or avoid product issues and exposures.
The information contained in this article is for generalized informational and educational purposes only and is not designed to substitute for, or replace, a professional opinion about any particular business or situation or judgment about the risks or appropriateness of any financial or business strategy or approach for any specific business or situation. THIS ARTICLE IS NOT A SUBSTITUTE FOR PROFESSIONAL ADVICE. The views and opinions expressed in authored articles on OPEN Forum represent the opinion of their author and do not necessarily represent the views, opinions and/or judgments of American Express Company or any of its affiliates, subsidiaries or divisions (including, without limitation, American Express OPEN). American Express makes no representation as to, and is not responsible for, the accuracy, timeliness, completeness or reliability of any opinion, advice or statement made in this article.
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