Heading Off Recall Risk

Recalls are rising: Exploring why and how

According to a 2024 survey¹, 73% of senior-level quality professionals reported experiencing a product recall in the last five years. Nearly a third of these leaders noted that their organizations had suffered a range of impacts because of recalls, including diminished brand reputation, organizational disruption and delayed product introductions.

More than 60% of these respondents attributed supply chain complexity — and a lack of transparency — to rising recall rates.

UL Solutions expert Paul Condeelis, senior director of Global Retail Solutions, shares wisdom gleaned from decades of experience at global retail giants and product manufacturers on how to reduce risk of recalls, stop quality issues in their tracks and boost overall consumer experience.

Recall basics: How recalls cause ripples across the retail ecosystem

Retail recalls are a headache for both the retailer and the manufacturer or brand owner, and while these two stakeholders may be impacted in similar ways, their challenges are distinct.

Retailer

For a retailer, a recall represents an immediate disruption to standard operating procedures. Stores invest heavily in training frontline employees to stock and sell, not pull product off shelves and out of customers’ carts. When a retailer is notified of a product recall, they put into action procedures including flagging a stock-keeping unit (SKU) or universal product code (UPC) in their inventory and point-of-sale (POS) systems, informing staff and posting notices for consumers.    

Next, staff must remove products from store shelves, staged inventory and warehouses and sequester them so they can’t be accidentally sold and arrange for their return to the manufacturer or disposal. From a regulatory perspective, retailers are as responsible as the manufacturer for embargoing recalled goods and subject to financial penalties if they don’t take immediate action to protect consumers.    

This cost of both time and money frustrates well-oiled store teams used to standard operating procedures. Additional labor is needed to reshuffle retail shelves to avoid looking empty. Recalls can even lead retailers to strategic vendor decisions that may result in no longer carrying that product (or potentially all products from that manufacturer) going forward.    

Manufacturers

For manufacturers, the harm is not only about operational disruption but also serious, immediate financial and reputational impact. From an operational standpoint, a recalled product will need to cease production while teams — including quality assurance, compliance, design, engineering and supply chain personnel — work together to identify what issues are responsible for the recall. This may result in lengthy delays while new suppliers are vetted and new prototypes tested.    

Certainly, manufacturers are charged with paying financial restitution to the retailers and consumers who have purchased recalled goods, but they’re also responsible for costs, including shipping back recalled goods, storing product securely and/or disposal. Depending on how broad the recall is, these costs can be significant. Additionally, manufacturers may also incur financial costs through increased insurance rates, regulatory fines and required actions such as corrective action plans.  

Perhaps the most serious, long-term impact for a manufacturer or brand owner is negative perception. Not only are consumers likely to shy away from products after a highly publicized recall, but retailers may eliminate shelf position for a recalled product, which can produce ripple effects that impact profitability in both the short and long term.

Main drivers of recalls  

Greater dedication to transparency

Corporations are shifting toward proactive, voluntary recalls to get ahead of media amplification (especially through social media) or consumer confusion regarding potential product defects. This helps preserve brand reputation and reduce risk.

More vigilance, better detection

Retailers, manufacturers and suppliers are tapping third-party laboratories as a core means of detecting quality- and safety-related issues. These providers often bring a deeper level of insight and offer vigilance that helps spot defects before they impact consumers.

Regulatory change at local, state and national levels  

Laws are changing to help advance consumer safety and security. For example, PFAS restrictions are growing but lack uniformity, so manufacturers and suppliers need to understand every nuance of applicable regulations, and this can increase risks for noncompliance and recall.

Supply chain shifts to emerging markets  

As manufacturers and retailers respond to economic realities and geopolitical friction, they may shift to supply chain partners in markets with less oversight and less established technical acumen, which may compromise quality.

What’s driving supply chain shifts? Product development, consumer expectations and diversification  

Working at retail metabolism — the product of speed to market and product innovation — is a core driver of supply chain complexity as product development, distribution and delivery expand in an omnichannel environment. Consumers are looking for goods that offer personalization, which results in more individual SKUs for the same range of products and introduces the risk of defects.  

But at the same time, value-driven consumers are flocking to private-label brands, which makes the supply chain more complex as retailers move to direct-sourcing models that require a lot of oversight of sourcing, manufacturing and distribution — all distinct pools of risk that impact overall retailer reputation.  

Supply chains are also becoming more diversified, with a mix of Tier 1, 2 and 3 suppliers and, in some cases, domestic design or assembly. Recall prevention programs tend to focus on those Tier 1 suppliers — direct vendors contracted by the retailer or brand owner — without extending due diligence to Tier 2 and Tier 3 suppliers. These upstream suppliers may switch or substitute materials, methods or even product formulations without the knowledge or permission of the Tier 1 supplier. Without consistent oversight, this drift can lead to defects.  

This complexity doesn’t just add to risk — it multiplies it.

Screening suppliers: Audits, testing and inspection as the first line of defense for retailers

While there is no single silver bullet, third-party audits provide retailers, brand owners and manufacturers with sure footing to screen suppliers. Common types of operational and quality audits assess management systems, appropriate equipment and overall ability to support capacity of products needed. Social responsibility audits that look at issues including responsible sourcing and labor conditions are also increasingly important. Bringing in independent auditors helps reduce the risk of bias, improves consistency across regions and flags deeper issues for follow-up from internal teams. On an ongoing basis, this information is key for developing corrective action plans.  

Along with a solid supplier screening strategy, product testing is an important pillar in a recall-prevention strategy, which includes compliance-focused regulatory testing as well as testing aligned with retailer requirements, which can include before production, during production and after production. Chemical content, for example, can impact performance, packaging needs, transportation restrictions and overall regulatory compliance. Some retailers and brand owners perform internal testing but still use third-party laboratories to verify those results.  

Most inspections take place at factories before retailers accept product but can also happen after products are in market to see how products are performing on an ongoing basis. Post-market inspections also look at defective return ratings, star ratings and overall customer sentiment. If products start to fall short, items can get pulled for additional testing, inspection or verification. These indicators can help retailers and brand owners get n front of quality issues that can eventually lead to a recall.

From whispers to whistles: Danger signs that may lead to recall

Many retailers and brand owners have strong ties with consumer-focused regulatory agencies, such as the Consumer Product Safety Commission (CPSC) in the U.S., which collects complaints from consumers. Often, these stakeholders have visibility into these reports, and while the CPSC may initiate an investigation, retailers and brand owners may start digging around as well, by interviewing customers, evaluating products, etc.  

This early engagement is helpful, but so too are internal quality-review efforts. Based on return rates, reason codes and customer reviews, this data can be scanned using artificial intelligence (AI) tools for keywords, such as “cut” or “hurt,” that indicate safety concerns. A report must be made to the CPSC within 24 hours of identifying a safety issue, or risk penalties.

Managing data: Unlock patterns through robust information sharing  

Data ownership is a complicated puzzle. For example, supply chain data may include sourcing, product development, quality and compliance data. Many teams might own data, including store operations, reverse logistics, e-commerce, compliance and more. But those teams may not work closely together or share a unified dashboard that links master UPC codes, child codes, attributes and other parameters. Having 100% visibility and confidence just isn’t likely. A former colleague, a retail executive, likened this uncertainty to “living in the gray,” which means that retailers and brand owners need to get comfortable working with a measure of uncertainty.  

Customer complaints and return rates can be an incredibly useful source of quality-control data, but all too often, retailers and brand owners can’t make the most of it because of issues with data cleanliness, ownership, taxonomy and general “noise” such as improperly coded reasons for return. That’s why reviews can reveal more useful qualitative data, especially since younger generations are keen to leave feedback via social media and online.  

The combination of data — sales volume, defective return rate as a percent of units, ratings and reviews, feedback from frontline workers and assemblers — analyzed by retail experts and AI can uncover quality trends to find those “needle in a haystack” problems and prioritize work that can have the most impact.

Impact on speed to market: How to maintain retail metabolism while minimizing recall risks  

Consumers want products delivered faster and faster. For example, if you have a backache and order a heating pad from a major retailer for home delivery, in some markets it can arrive within minutes. Think about the level of coordination behind the scenes at the retailer to support fulfillment, but also throughout the entire supply chain from raw materials through production.  

Throughout my career, on previous teams and here at UL Solutions, it’s important to help retail customers continuously iterate based on lessons learned. However, we can’t deprioritize consumer safety to achieve greater speed, but retailers and brand owners can adopt a risk-management approach that balances the inherent risk of a product with the body of knowledge about that product.  

Take a bedsheet, for example. We may help a retailer evaluate colorfastness and other attributes, and if the results of those tests meet acceptable standards, they may proceed into market while continuing to perform other tests. However, for more complex products with a greater potential for risk of harm, such as power tools and other items with lithium-ion batteries, we may conduct more comprehensive testing, informed by our independence and in-depth experience. Data-driven insights can keep the flow of goods going while also minimizing risk.

Responding to drops in quality: How a teams-based approach can make the difference  

Preventing recalls should take an interdisciplinary, all-hands-on-deck approach. Here are some ideas for how to bring all the pieces together: 

Look through the consumer lens

Market surveillance activities (which we can provide or support) include sourcing an appropriate sample of products from stores, online or distribution centers — wherever consumers are, but suppliers aren’t. This data helps quality teams within retailers and brand owners identify problems with assembly, packaging or shipping.

Ongoing third-party testing

Many suppliers, retailers and brand owners have in-house quality teams, but our customers rely on us for critical, unbiased testing and results for regulatory compliance, retailer requirements or verification of performance attributes like energy efficiency.  

Retail teams act quickly

If third-party testing uncovers performance problems, tap in the quality team. For example, if we found that the product had performance-based issues, then the quality team can issue a stop-sale order.

Loop in suppliers

Retail ecosystem participants need to work together to improve overall consumer experience, bringing together product development, sourcing teams and the supplier to have a meaningful conversation about expectations and how to align product quality with retailer and consumer needs. Identify fixes and make sure they’re applied in a timely fashion. If a supplier won’t, or more likely can’t, meet these expectations, it’s time for tougher commercial conversations about needed changes that can impact profit.

Keep compliance at the center

For issues that go beyond performance and impact safety, compliance teams should report to the CPSC, issuing stop sales and even removing products from the assortment.

Bringing in senior leadership

For both private-label and national-brand products, it’s critical that senior leaders are included to address gaps in the assortment, chargebacks to the supplier or making substitutions in the supplier mix.

About the author

Senior director of Global Retail Solutions Paul Condeelis brings decades of retail innovation, leadership and engineering experience to UL Solutions. Throughout his career, he has led global teams within manufacturers and top global retailers to rise to customer expectations, adapt to emerging commerce models and support safety, quality and success.