Safety hazard and time to recall: The role of recall strategy, product defect type, and supply chain player in the U.S. toy industry

Abstract

This research identifies and tests key factors that can be associated with time to recall a product. Product recalls due to safety hazards entail societal costs, such as property damage, injury, and sometimes death. For firms, the related external failure costs are many, including the costs of recalling the product, providing a remedy, meeting the legal liability, and repairing damage to the firm's reputation. The recent spate of product recalls has shifted attention from why products are recalled to why it takes so long to recall a defective product that poses a safety hazard. To address this, our research subjects to empirical scrutiny the time to recall and its relationship with recall strategies, source of the defect and supply chain position of the recalling firm. We develop and verify our conceptual arguments in the U.S. toy industry by analyzing over 500 product recalls during a 15‐year period (1993–2008). The empirical results indicate that the time to recall, as measured by difference between product recall announcement date and product first sold date, is associated with (1) the recall strategy (preventive vs. reactive) adopted by the firm, (2) the type of product defect (manufacturing defect vs. design flaw), and (3) the supply chain entity that issues the recall (toy company vs. distributor vs. retailer). Our results provide cues that could trigger a firm's recognition of factors that increase the time to recall.

Trend Analysis of Car Recalls: Evidence from the US Market

“…Recent recalls of numerous products in multiple industries suggest that firms are not immune to product recalls [4]. Realizing the importance of recalls within the product supply chain a detailed review of recalls literature is compiled with a particular emphasis on car recalls.…”

“…The products are either hazardous or defective or are not according to the specification or do not comply with government compliances. The recall process typically entails an official announcement (recall notice) outlining the reason for the recall and a remedy offered to the customer [4]. If customers encounter problems, they inform the retailer or local supplier.…”

“…Recalls are a consequence of non-conformance to qualitystandard or specificationor due to health and safety risk to use the products, which the manufacturer did not address or was unaware of before distribution and sales in the market [2,3].Recent recalls of numerous products in multiple industries suggest that firms are not immune to product recalls [4]. A good example is Toyota's large number of car recalls in 2009 and 2010 due to floor mat and sudden acceleration problems, resulting in high recall costs to Toyota and its supply chain members and stakeholders.…”

“…A good example of lengthy recall process includes the Ford Motor and Firestone Tyre recall 2000, that took more than seven years from the first report until a final decision was reached [7]. The recent increase in product recall has shifted attention from why products are recalled to why it takes so long to recall a defective product that poses a safety hazard [4]. Companies are still not prepared to deal with recalls nor do they recognize how great an impactrecalls can have on an organization's reputation.…”

“…Product recalls due to safety hazards entail social costs, such as property damage, injury, and sometimes death [4]. Costs of product recall through the reverse distribution channel are at least two or three times higher than costs incurred in forward distribution, often due to small quantities of shipments, fluctuating and uncertain demand, and the urgency involved in the recall process [9,10].Costs to customers sometimes amount to death or physical disability.…”