This document discusses product recalls and the importance of managing quality across the supply chain. It notes that recalls have significantly increased since 2006 and about half are due to issues with suppliers or contract manufacturers. Recalls can cost companies between $10-90 million on average. The document then provides an example of the peanut corporation of America recall that cost over $1 billion. It emphasizes that identifying issues earlier in the supply chain reduces costs according to Deming's 1-10-100 rule. The rest of the document discusses how companies can implement strategies like HACCP and supplier relationship management to proactively monitor quality and ensure compliance across the extended supply chain using a quality management system.

1. Your Best Recall is
the One You Never Have to Do
June 2014
Kelly Kuchinski
Industry Solutions Director,
Consumer Products & Chemical

2. Product Recalls on the Rise
2
 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. 2012
2 Recall Execution Effectiveness Report. Deloitte, GMA, FMI and GS1. May 2010
3 Interbrand 2012 Brand Valuation Estimates, Toyota recall
1
2

3. The Impact of a Recall
Industry Example: Peanut Corporation of America
3
361 manufacturers
used the raw
material in 3,913
products
Supplier
distributed
contaminated
peanut products
HEALTH & SAFETY IMPACT
illnesses
deaths
LOST SALES
$1Bn industry losses
25% drop in peanut
butter sales
SUPPLIER
Supplier filed bankruptcy
Executives face federal
criminal charges

4. Why do Recalls Still Happen?
4
 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
ofQualityManagers
are using paper-
based systems
tomanagequality1
Company and
Worldwide Facilities
Disparate .
IT Systems 
80%
1 "Transforming Quality Management through Automation", Quality Digest. January 23, 2012

5. The Cost of Poor Quality
Deming’s 1-10-100 Rule
5
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

6. Internal Risk Management
Proactive Production Management
6
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)

7. 7
Internal Risk Management
HACCP 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

8. External Risk Management
Key Trends and Issues1
8
 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.

9. External Risk Management
Supplier Relationship Management
9
 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 Success
o Strategic Objectives
o Balanced support
o Dialogue on Ideas and Challenges

10. 10
External Risk Management
Case 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

11. Extended Quality Enterprise
 Trends
 Approvals
 Reports
 Status
 Audits
Mobile
Devices
Mobile
Employees
24
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

12. 12
External Risk Management
Benefits 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
Airport
Mobility
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
Stratas
Visibility across
the value chain

13. 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
13
Or visit us at www.spartasystems.com

14. Thank You
www.spartasystems.com