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When recalls are about more than consumers: Managing up and down the supply chain

When there’s a recall, consumers think of the name on the package. Often that brand is the single company believed to be responsible, and that company is the one whose reputation is diminished. Perhaps nowhere is this more apparent than the food industry, where one ingredient from a supplier that consumers have never heard of can spark recalls across big brands and private labels.

While there are testing and safeguards in place to prevent contaminated products from making it to market, oftentimes producers and manufacturers take their suppliers’ word safety and quality assurance. This can cause particular trouble if and when ingredients are improperly labeled by suppliers, which is sometimes the way that allergens can sneak into a final product without being named on the label.

In other cases, bacteria like Salmonella or Listeria monocytogenes may be traced back to a single ingredient, or even more specifically to a single grower or supplier. We recently saw this play out in the recent Growers Express recalls of fruits and vegetables due to possible Listeria monocytogenes contamination – an announcement that actually impacted several consumer-recognized brands and even more retailers.

For these reasons, it’s important that we examine the upstream and downstream impacts of a recall. At the risk of still oversimplifying the supply chain, let’s take a look at the four general types of organizations involved in the Growers Express recall and take note of lessons we can learn about their primary concerns.

  • Grower / Ingredient or Component Supplier: In the case of food recalls, growers may be the origin of the contamination. In other cases, they may have nothing to do with the reason the product was recalled and may not be impacted by the action. Either way, don’t be fooled. They are concerned and they have their own purchasing power. If farmers learn that a cooperative fell short on its quality controls, they may send their crops elsewhere. The bottom line is that transparency and open communication throughout the supply chain is critical during a recall – it can either build trust or quickly erode it.
  • Packer or Manufacturer: Many times, these are the organizations that announce a recall. For that reason, they are directly involved in all facets of recall management – from regulatory compliance to consumer notification. It’s a process that is laser-focused downstream. At the same time, however, Growers Express should be looking upstream. If its growers or suppliers fail to take appropriate action to shore up the supply chain and follow safety or quality standards, the company may, and arguably should, cut ties, even if it means failing to meet customer demand.
  • Customer-Facing Brand Name: This may or may not be the same organization as the packer or manufacturer. In our example, while Growers Express is the company initiating the recall, it’s not the brand name consumers recognize on store shelves. Instead, Trader Joe’s, Green Giant, and Signature Farms – and retailers selling those brand names – are the names consumers recognize and brands on which they base buying decisions. Because of that, these brands will be asking Growers Express critical questions related to when it found out about the issue, how it responded, and what it is doing to prevent future crises. How Growers Express answers these questions will form the basis for whether Trader Joe’s, Green Giant, and Signature Farms keeps it as a supplier.
  • Retailer / Dealer: Retailers and dealers will be watching closely when a product they sell is recalled. After all, these organizations face the brunt of angry consumer questions and concerns: think the checkout line at Trader Joe’s or Wal-Mart. Retailers base business decisions on how companies upstream handle themselves during a recall. One wrong move could mean temporarily lost shelf space. More missteps could mean permanent banishment from retailer shelves.

While regulators focus on the responsible party during a recall, close collaboration up and down the supply chain is critical to effective recall execution and may determine whether a company can remain in business. Food companies are among those keenly aware of these upstream and downstream implications during a recall, but that doesn’t mean they don’t still create challenges for them – and they certainly aren’t the only ones to whom this applies. New and evolving technology like Blockchain provides part of the solution to these challenges, helping companies more effectively track products. Large shipping organizations like MAERSK, for example, are using Blockchain technology to trace shipments overseas, but even small businesses are using the technology to manage their supply chains.

While we’ve focused on food here, companies in any industry should consider the perspective of each trading partner throughout their supply chain when a recall event occurs. We know from experience that your suppliers and customers will make important business decisions based on what they see and hear from you during a recall. More than ever, makers of children’s apparel, toys, appliances, autos and medical devices all must act and communicate transparently with trading partners throughout the recall process.

This simplified look into supply chain challenges during recalls serves as a special caution to companies thinking about, or already breaking into, the cannabis and CBD oil marketplace. In that young, already ultra-competitive field, which is under scrutiny from lawmakers and regulators, ineffective supply chain communication during a nationally publicized recall could make or break the entire industry. As the cannabis market evolves, the companies that best manage their risk – from embracing technology like Blockchain to planning wisely for the inevitable crises – will have the greatest chance of success.

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