Identify a retail company within the food and beverage industry that has been involved in a recall.
Examine and evaluate the success or failure of their reverse logistics program. In doing so, what are the
financial implications of the recall?
Product recall
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Product recall refers to the process of removing and replacing defective products from
shelves to protect consumers from illnesses (Dai, Tseng, & Zipkin, 2015). When a firm issues a
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recall, it absorbs the cost or replacing or repairing defective products. Big companies use much
money to replace and repair faulty commodities, which can lead to losses. Companies involved
in recalls suffer embarrassing consequences, which can cripple operations for a long time.
Recall can also affect the image of a company if it is not handled correctly.
A retail company within the food and beverage industry that has been involved in a recall
is Nestle. Glendale, CA-Nestle USA started a voluntary recall of its Nestle Drumstick Club 16
Pack and 24 Count Vanilla Pack due to possible health risks. The company initiated the recall to
minimize risks to unsuspecting customers (Dai, Tseng, & Zipkin, 2015). The two pack sizes
were made in California and transported across the country. Nestle received good reports after
tests were done for Listeria Monocytogenes (LM) in the production site where they were made.
However, there were no positive tests for Drumstick cones and products affected by the recall
were put in distribution indefinitely. It started the recall as a precautionary measure to prevent
consumer illness. No illnesses were reported before or after the recall. LM can cause fatal
infections in children and weak immune systems. While active and healthy people may only
suffer short-term symptoms such as nausea, headaches, stiffness, and abdominal pain, it is
essential to take precautionary measures. The recall was limited to the Drumstick Club 16 Count
Pack and 24 counts Vanilla Pack. Consumers who bought recalled products were advised not to
use the products, but return them to the initial seller.
Reverse logistics is the practice of organizing, executing and monitoring the movement
of raw materials up to the point of consumption, and disposal (Vijayan, Kamarulzaman,
Mohamed, & Abdullah, 2014). It provides an optimal flow of returned products, and good
management has a good impact on overall performance. Reverse logistics represent operations to
the re-use of materials that are essential in the supply chain. By enhancing the quality of life and
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encouraging a healthier future, Nestle delivers sustainable products and effective management of
returns. It understands consumer needs and adjusts to ensure a positive influence. The reserve
logistics program has been successful at building on its health, nutrition, and wellness strategy
(Vijayan et al., 2014). People know the importance of proper nutrition and health management.
The company promotes a healthy lifestyle by providing simple, natural, and tasty products
convenient for everyone. Nestle has a research network in the food and beverage industry which
innovates and renovates portfolio to meet the changing markets. By focusing on products with
nutrition, it produces quality products that experience a few recalls.
The food and beverage industry has always been a source waste due to packaging, which
harms the environment. Plastic wraps or containers are used for packaging food. Plastic harms
the environment because it is non-biodegradable and pollutes water and land (Vijayan et al.
2014). Measures have been adopted to reduce the number of plastics used in the food and
beverage industry, and Nestle has been on the forefront to champion the cause. The aim is to
encourage people to use food packed in biodegradable packing to protect the environment.
Furthermore, the company strives to provide quality and eco-friendly wrappings to
customers. It also prepares packaging materials that are recyclable and decompose quickly. The
changing market results from manufacturers’ decisions to use better packaging materials safe to
the environment. Moreover, worries about hygiene and health-related matters in the social
forces the company to drastic measures to protect the environment. Beverages served in plastic
cups causes anxiety and concern about the planet due to their non-decomposition properties. The
company has adopted edible cups that are changing the industry by enabling people to eat them
as food instead of throwing them away in the garbage. They are harmless to humans and are
prepared using food coloring, and organic sweeteners that make them suitable for consumption.
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Recyclable packaging products have been in the industry for a while, and Nestle is using them to
reduce environmental harm.
The world is moving towards sustainable development, and the reverse logistics program
of Nestle has strategies for responsible business operations. Water is one of the areas close to
nutrition and the most significant link between Nestle and society (Liu & Liu, 2016). Through
the program, the company ensures improved use of water in factories, and increasing access to
sanitation and clean water in communities. It has invested in factories to comply with
regulations and decrease water dependency in some areas. Furthermore, it also collaborates with
outside factories to ensure return on investment and reduce dependency. The reserve logistics
program at Nestle allows it to focus on problematic areas of operations, sales, and the
environment to have a positive impact. By proper use of resources and production of healthy
products, the company meets its sale targets while striving for zero environmental impact from
operations.
Moreover, Nestle is focusing on environmental strategies to become sustainable. For
example, it plans on tapping into one natural spring to get water for bottled products. It is also
trying to show that there is no harm presented to Sockeye fish being taken care of in Oregon
hatchery that must be taken to municipal water when the company siphoned off the water source.
Nestle has been accused in the past of mining water, thereby depleting sources, but it argues that
it does so in an environmentally sustainable way.
Furthermore, it has been accused of looking for springs in poor communities to prevent
opposition and pay less money. It only ends up paying less than two cents a gallon and sells the
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same for five dollars. However, Nestle explains that bottling logistics explain the pricing of
bottled water.
Nestle products’ recall had financial implications that the company bore. Protection laws
stipulate that suppliers and manufacturers must bear costs of a product recall. Although
insurance companies cover product replacement, it is not enough to cater for all expenses. Most
product recalls lead to lawsuits and strained relationships. Financial implications include
government sanctions, replacement and repair costs. Recall can accumulate billions of dollars by
the time the process is over. Nestle used thousands of dollars when it recalled products from the
market and running promotional adverts to win customers’ trust.
Product recalls causes financial burden and can make customers to lose trust in products.
Nestle recalled two products from the market when it suspected that it posed health risks to
customers. The reverse logistics program of the company includes strategies that ensure
sustainable development and management of returns. Financial implications of product recall
include replace and repair costs, losing public confidence in products, and government sanctions.
References
Dai, H., Tseng, M. M., & Zipkin, P. H. (2015). Design of traceability systems for a product
recall. International Journal of Production Research, 53(2), 511-531.
Liu, A. X., & Liu, Y. (2016). What drives a Firm’s choice of product recall remedy? The impact
of remedy cost, product hazard, and the CEO. Journal of Marketing, 80(3), 79-95.
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Vijayan, G., Kamarulzaman, N. H., Mohamed, Z. A., & Abdullah, A. M. (2014). Sustainability
in the food retail industry through reverse logistics. International Journal of Supply Chain
Management, 3(2).
