Manage Risk with Product Recall Coverage for Metal Manufacturing Jobs



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Metal manufacturers take on significant risks every time they bid on and accept new jobs from original equipment manufacturers and value-added resellers. Fabrication shops build metal structures by cutting, bending, and assembling of raw materials. While the end products of other common types of metalworking, such as machining, metal stamping, forging, and casting, may be similar in shape and function, they are not classified as fabrication. Metal fabrication shops bid on jobs based on precise engineering drawings before moving into the fabrication stage and finally to the installation of the final project. This puts them at significant risk further down the road should any design or manufacturing defects occur during the production process, which makes product recall coverage for metal manufacturing jobs vital.

Product Recalls are at an All-Time High
Product recalls cost companies more than $1 trillion every year, according to the Consumer Product Safety Commission. The Canadian and American governments have both developed online resources to help consumers stay informed about product recalls and keep track of potentially harmful products in the marketplace. With products from seemingly every industry affected by inaccuracies in the production process, it is important for all companies in the supply chain of a given operation to obtain product recall coverage.

The Real Costs of a Product Recall
While governing bodies do their best to act quickly and remove defective products from the market or supply chain, product deficiencies can still slide through the cracks. Product recalls can have serious short and long term implications beyond the direct costs on a company’s bottom line, impacting a brand’s reputation and affecting future sales revenue. According to a report by Lockton, about 80% of the total financial losses incurred during a product recall take place long after the offending products have been discarded from store shelves.

When conducting a product recall, companies can expect to incur some direct costs right off the bat. Some of these direct costs include:

·       Notifying retailers and regulatory bodies,

·       Pulling products off of the shelves (reverse logistics),

·       Storing and disposing of contaminated or mislabelled products,

·       Any labour necessary to carry out these tasks and/or investigate the problem.

While these costs can certainly add up quickly, they are often miniscule in comparison to potential litigation costs, government fines, lost sales, and the long-term damage done to a brand’s reputation. In the event of a product recall, companies are encouraged to handle matters honourably and responsibly. Almost nine out of ten customers (87%) surveyed by Relational Capital Group said that they would be more likely to purchase and remain loyal to a company or brand that handles a product recall honourably and responsibly, even though they may have clearly made mistakes that led to a safety or quality problem.

When it comes time to conduct a product recall, companies should be transparent about their mistakes and take the necessary steps to remedy the situation as soon as possible. It is important to obtain product recall coverage for metal manufacturing companies that are looking to manage their perceived level of risk, as it protects them against any expenses associated with a product recall, including third party liabilities.

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