What is a product recall?
A product recall can be defined as the process in which the customers retrieve defective products and get compensation. This product recall occurs when your company has sold a bad-quality item to the customer. Generally, product recalls are expensive. Whenever the manufacturer is about to send a product to the market, they do quality checks to ensure that the product quality is optimum for use by the people or not. It is a great way to prevent charges from your customers if they get a bad quality product. The main reason behind this is the safety issues and product defects which can put you at the risk of getting a bad response from your customer. Thus, product recalls have negative effects on the image of the company.
Consequences of a product recall on the company
Product recalls have many effects on the company such as financial losses due to fines and lawsuits. Let us go into details of these effects of the product recall on the company:
It takes a lot of money on product recall. There are huge sums of money lost in product recalls and can be big enough to bring the whole company down. There are various costs in the mind of the company such as:
- Alerting the relevant regulators
- Alerting the entire supply chain
- Inform the consumers
- Retrieval of the product from all the locations where it has reached
- Destruction of the bad product
- Extra labor costs associated with this whole process
- Investigation of the cause of product recall
Even in lawsuits, all lawsuits are not equal. Some lawsuits can be really expensive and maybe lead to permanent damage to the reputation of your company. A product recall example is when the manufacturer Merck (MRK) recalled its arthritis medication Vioxx. The company had to settle claims and lawsuits worth $4.85 billion due to this recall. The reason for the recall was the arthritis medication Vioxx had increased the chances of heart attacks in the consumers. This is a devastating example of the drug industry.
Damage to the reputation
Product recalls have a direct impact on the company’s image. There is no doubt that this is gonna affect the reputation and eventually the sales of your company. Reputation is one factor that customers always look at before making any purchase. In the pharma industry, reputation is based on quality, authenticity, customer satisfaction, trust, and safety. Product recalls are therefore dangerous to brands. The damage to reputation has the following consequences:
- Increases liquidity risk
- Affects stock price
- Cuts the market capitalization
- Decreases customer retention
- Make it hard to hire new employees
- Decreases the profits
- Approaches operating margins
No doubt company’s reputation has a close tie with the financial loss and reputation of the company. In the pharma industry, reputation is taken far more seriously. Once the reputation is gone, customers have barely any trust in your company left.
Strategies for reducing product recalls in the pharma industry
Quality is far the most important aspect when it comes to products. There are various elements when it comes to business starting from procuring the raw materials to the final products. In the pharma industry, this part is a crucial part. If the product quality is top-notch, the chances of a product recall will be low. The bottom line is that quality matters. Let’s look at the strategies to lower the chance of product recall:
- Set the product specifications and requirements
While creating every medicine, it is crucial to maintain the same formulation in every batch of medicine. Pay close attention to the design of the pill such as the color, size, and texture. Make sure that the medicine also lays within the industry standards. Adhere strictly to the Current Good Manufacturing Practice (CGMP) regulations
- Assign a team to assess the supply chain
This can prevent your company from product recall procedure, which is expensive and a complete loss. This includes managing the quality of ingredients before manufacturing the medicine. Hire people with the proper skill to make this happen. After the manufacture of the medicine, the supply chain should be kept intact at each stage. This reduces the chances of mixing counterfeit products in the supply chain.
- Use methods to maintain drug integrity
Because drug quality is far the superior thing in pharmaceuticals, make sure that the product retains its integrity till the final destination. The drug should maintain its quality, composition, texture, color, and shape till the point of reaching the final destination. Sometimes, the people in this supply chain are corrupt and cause the mixing of counterfeit drugs or give altered data to the manufacturers. To stop this from happening, you can use a QR code system that will give real-time details at every stage of the supply chain.
A product recall is a process in which the customers retrieve defective products and get compensation or sue the company. There are huge sums of money lost in product recalls and can be big enough to bring the whole company down. Furthermore, Product recalls have a direct impact on the reputation and eventually degrade sales of your company. The procedure for product recall can cause hefty damage to your company.