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Regardless of industry, the best recalls are the ones that never happen. Recalls are not only costly to a company’s bottom line, but also to its reputation. Since so many entities are involved in the process of manufacturing, packaging, and distributing a finished product, it’s crucial to have insight into each link in the supply chain to avoid a costly recall.
Citation preview
Your Best Recall is the One You Never Have to Do
June 2014
Kelly KuchinskiIndustry Solutions Director,
Consumer Products & Chemical
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Product Recalls on the Rise
Recalls across all industries have increased since 2006 and half of these can be traced back to supplier and contract manufacturer issues
Recall Statistics:• Recalls can cost between $10M - $90M or more.
Removal and disposal costs make up 67% of costs.2
• Replacement delays can result in a 12% drop in sales, not including loss from brand switching.2
• A company’s stock price can drop up to 22% within 2 weeks after a recall.2
• The value of a brand can drop 24% or more due to a recall.3
52%
Recall
s
Due to vendor issues
1 Rapid Alert System for Food and Feed. RASFF. 20122 Recall Execution Effectiveness Report. Deloitte, GMA, FMI and GS1. May 20103 Interbrand 2012 Brand Valuation Estimates, Toyota recall
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2
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The Impact of a RecallIndustry Example: Peanut Corporation of America
361 manufacturers used the raw
material in 3,913 products
Supplier distributed contaminated peanut products
HEALTH & SAFETY IMPACT700 illnesses 9 deathsLOST SALES$1Bn industry losses25% drop in peanut butter sales
SUPPLIERSupplier filed bankruptcyExecutives face federal criminal charges
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Why do Recalls Still Happen?
Companies are focused on reducing costs Multiple, disparate IT systems Quality processes still managed in spreadsheets or paper
records
Global Supplier and Contract Vendor
Network
of Quality Managers are using
paper-based
systemsto manage
quality1
Company and Worldwide Facilities
Disparate .IT Systems
80%
1 "Transforming Quality Management through Automation", Quality Digest. January 23, 2012
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The Cost of Poor QualityDeming’s 1-10-100 Rule
Identifying issues earlier in the supply chain reduces the impact on cost and brand reputation Pre-production issues only impact cost by 1X the cost of the suspect ingredient Post-production issues cost 10X the cost to resolve the problem Release into the supply chain can result in issue resolution by 100x to 1000X the
cost of raw materials
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Internal Risk Management Proactive Production Management
A cornerstone of many regulations in the Food & Beverage industry focus on Hazard Analysis Critical Control Points (HACCP) 1960s - NASA asked Pillsbury to design and manufacturer the first foods
for space flights Used in other industries outside Food & Beverage (i.e. Cosmetics and
Pharmaceuticals)
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Internal Risk ManagementHACCP Automation
Phase 1: Assignment Assign and track HACCP
Team members in TrackWise
Manage and record employee training in TrackWise in the event of a compliance audit
Phase 2: Identification Construct and record process
flow by product in TrackWise Identify critical control points
(CCPs) and minimum/maximum levels
Schedule HACCP audits to proactively manage process
Phase 3: Management Schedule internal audits to ensure
compliance and monitor hazards Reinforce SOPs and HACCP training TrackWise integrates HACCP and CAPA
processes Task assignments sent and managed in
TrackWise for faster resolution TrackWise provides one central
repository for exception and corrective action reporting
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External Risk ManagementKey Trends and Issues1
Outsourcing is one of the leading cost cutting trends in the consumer products industry
51% of respondents say that supply chain partners will characterize the future of innovation
50% of companies are working with more than 500 suppliers or manufacturers
50% of companies say they lack visibility beyond their Tier 1 partners Outsourcing has resulted in:• Poor communications • Inconsistent auditing practices• Lack of visibility into supplier quality processes • Operational inefficiencies and poor product quality
1 Global Manufacturing Outlook. KPMG, November 2012.
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External Risk ManagementSupplier Relationship Management
Companies are looking to change their supplier relationships from adversarial to more collaborative Adversarial relationships focus on price Collaborative supplier relationships are focused on share goals associated
with:o Mutual Successo Strategic Objectiveso Balanced supporto Dialogue on Ideas and Challenges
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External Risk ManagementCase Studies: Supplier Collaboration
In 1990’s - Chrysler introduced Supplier Cost Reduction Effort (SCORE) Fostered supplier relationships built on collaboration and trust Results:• Generated >$5 billion in annual savings • Reduced product development cycle by 2 years
Major equipment manufacturer in North America developed a collaborative relationship with it component suppliers in Europe
Identified $5 million cost reduction opportunities in the supplier relationship including:
Return/Rework/Scrap
1 – 2%
Warranty/Cost of Quality
4 – 6%
Supply Chain/ Logistics
2 – 4%
Source Consolidation
1 – 2%
Supplier Simplification
1 – 2%
NA Equipment Manufacturer
Extended Quality Enterprise
Trends Approvals Reports Status Audits
Mobile Devices
Mobile Employees
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Quality
R&D
Regulatory Affairs
Preclinical/ Clinical
Incidents Investigations
Audits
Commitments
Product Complaints
Supplier Defects
Events
Corrective Actions
Change Control
Non Conformances
Emerging Requirements & Capabilities
Regulatory Affairs
EHS
Commercial Manufacturing
Supplier & Contract Vendor
Network
Commitments Audit Observations Corrective Actions Incidents/ Events Product Complaints Certifications
External Quality Views
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External Risk ManagementBenefits of Supplier Visibility
TrackWise enables:
Information Sharing and Visibility
Transparency is key to reducing waste, rework and
recalls
Data Analytics
Identify issues and trends that
jeopardize KPIs
End-to-End Compliance
Ensure quality throughout the value chain for brand protection, consumer
safety and regulatory compliance
Supplier & Contract Vendor Network
Company & Global Facilities
Sparta Systems Enables Quality Management Across the Supply Chain
AirportMobility
Approve & close issues on the roadTrackWise EQMS
Streamlines quality processes to reduce costs and ensure compliance
Analytics Identify issues &
trends earlier
AEP Audits on the go
StratasVisibility across the value chain
To learn more about strategies to implement a successful enterprise quality management solution to address quality across the supply chain, check out these resources:
Whitepaper: From Typos to Trace Ingredients - The Need for Accurate Product Packaging and the Role of EQMS
Whitepaper: Protect Your Brand - Ensuring Food Safety and Compliance with a Quality Management System
eBook: Four Best Practices to Improve Quality in the Supply Chain
Resources
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Or visit us at www.spartasystems.com
Thank Youwww.spartasystems.com