Product recall coverage for metal fabrication companies is
the first step in managing risk when
agreeing to a contract with an original equipment manufacturer (OEM) or
value-added reseller (VAR). Each year, product recalls are costing companies
upwards of $1 trillion, according to the Consumer
Product Safety Commission. From cell phones to air bags and even household
appliances, high profile product recalls have affected a number of different
products and industries in recent years. Faulty products contribute to one of
the most preventable issues in the United States. An issue that mostly goes
unreported! When a product fails or does not perform as it is intended, the
repercussions are felt across the entire supply chain. Product recalls damage
brand reputation, increase expenses associated with conducting a recall, expose
the company to third party liabilities, and put the company at risk for the
loss of future earnings. In the event of a product recall, the brand, its
manufacturers, and suppliers are all affected adversely.
Mitigating Risk Upstream in the Supply
Chain
Risk mitigation is one of the most important aspects of the metal fabrication
process and arguably
the most undervalued. Metal fabrication jobs typically begin with shop
drawings that include precise measurements before moving on to the fabrication
stage and finally to the installation of the final project. Based on these
engineering drawings, a fabrication shop will bid on a job, and if awarded the
contract, will build the product. This can pose additional risk for shops
further down the line in the fabrication process. Metal fabrication shops need
to be proactive in protecting their business and its employees from financial
and legal liability in the event of a claim relating to a product or part it
produced. With the proper product recall coverage, a company can shield itself
from any expenses associated with a product recall, along with any third party
liability that stems from the use of a product that malfunctioned.
The True Cost of Product Recalls
Consumer products can be taken off of the shelf for health concerns, defective
operation, or inaccurate marketing. Ultimately, when a consumer product is
recalled, it is a decision made to protect the consumer from risking injury or
jeopardizing their safety. Several high profile product recall cases have
emerged in recent years that have cost reputable companies upwards of one
billion dollars. Samsung paid the price for rushing a product to market after
expanding its global supply with a more complicated product. Samsung’s fiasco
with the Galaxy Note 7 was said to cost the company $5.3 billion in earnings,
while doing irreparable damage to their reputation in the cell phone market.
The company vows to avoid any future battery problems with a new process that
includes more testing, inspections, and manufacturing quality assurances.
A number of high profile product recalls have heightened public awareness to
the safety and security of the products that people use on a daily basis.
Global supply chain risks and vulnerabilities present the need for product
recall coverage for metal fabrication shops and other manufacturers. Product
recall insurance is the most effective way to mitigate risk upon entering into
a contract with an OEM or VAR to build a part or product.