With every new year, consumers expect bigger and better-than-ever products. The consumer products industry is expected to deliver deals with high demands from consumers and face a greater chance of recalls. Wrapping up our series on Quality in 2013, Kelly Kuchinski, industry solution director at Sparta Systems, discusses how a product recall can cost a company more than just profit, and how emphasizing quality can meet consumer expectations.
What quality-related challenges are facing your industry in 2013?
With endless options on store shelves today, consumer product companies have the challenge of differentiating their products in the market so they can obtain the interest and loyalty from customers. Constantly changing consumer preferences are forcing companies to quickly make new items available to meet demand. This type of “speed to market” can sometimes result in lapses in quality processing and increased product recalls.
With all the technology available today, consumer product companies’ processes are still fragmented and often not integrated into existing IT pillar systems. To reduce production costs and streamline processes, companies are using outsourced manufacturers and packagers from all over the world. As a result, organizations lose oversight into operations resulting in increased product costs and lost revenues.
To address the globalized supply chain, government regulators are beginning to get more involved and tighten up manufacturing processes. The Food Safety Modernization Act was introduced in January 2011 to shift the focus from responding to contaminated food issues to preventing them. However, the FDA currently does not have the bandwidth to conduct regular audits to ensure manufacturers are meeting the standards required.
News of contaminated and/or defected goods is easier to find from social media and 24-hour news networks, which could result in a product recall and harm a brand’s reputation in a matter of minutes. While the consumer products industry is years away from being as highly regulated as the pharmaceutical industry, companies need to implement quality processes to shift gears from responding to recalls to preventing them.
What problems arise in this type of situation?
A product recall can cost a company $10 million to $1 billion in returns and rework charges, and that doesn’t include regulatory fines, lawsuits or the impact on the health and safety of consumers. And product pulled from retail shelves can have a negative impact on consumer confidence and market share that could result in millions of dollars of lost revenue.
Because companies are using contract manufacturers, there is less visibility and traceability when a product leaves its location. Distributors can break units apart, repackage them, and then ship the goods out individually. With lenient quality assessment processes, organizations do not have the sufficient workflows established to handle the data needed to refer back to, when required by authorities.
How does this type of situation affect quality control?
Since the industry is not as heavily regulated as the pharmaceutical industry, sometimes consumer product manufacturers are rushing to get their products out the door without doing a substantial check. When a company opens itself up for a recall that affects consumer safety, its brand is jeopardized.
The consumer products industry is constantly innovating and faced with increased public scrutiny. Outdated technology like homegrown databases and Excel sheets raise a communication roadblock and are not capable of tracking discrepancies, customer feedback, changing demand and operating margins.
What are some best practices for managing and identifying risk across the industry?
Product recalls due to quality issues and inefficiencies are the leading revenue drain for consumer organizations. Consumer product companies can benefit by implementing an enterprise quality management system (EQMS) to automate reporting processes and connect disparate systems from supplier partners to gain visibility into product development. Stronger quality processes can help internally by checking the machinery flagging any maintenance and repair requests, preventing a halt in production.
An EQMS can help organizations externally by tracking raw materials from suppliers and audit the inventory for quality issues before they are used in production. This will help consumer product companies identify high-risk suppliers and gain the confidence needed to ensure the label represents the high standards set by the company and consumer expectations.
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