Minimize Risk Upstream with Product Recall Coverage for Machine Shops


Product recall coverage for machine shops is essential for companies that want to minimize risk upstream in the supply chain. When entering into a contract, every manufacturer incurs specific risks. In the manufacturing industry, managing risk effectively is one of the most important factors for long-term success. Products that don’t perform as they are intended can lead to significant injuries or even death and manufacturers are growing more aware of the great responsibility before them. Defective parts and products can lead to recalls that damage the reputation of the brand, lost sales, and significant expenses related to conducting a product recall. While the automotive industry has been at the forefront of the conversation in recent years, product recalls are not limited to vehicles. Product recalls may involve industrial or consumer products including tools, machines, foods, drugs, household appliances, and children’s products.

What are the Causes of a Product Recall?
Product recalls can occur for any number of different reasons, including defective operation, health concerns, and even inaccurate marketing. Despite the best efforts of original equipment manufacturers, design and manufacturing defects remain continuous causes of product recalls. Manufacturing defects include the use of parts contaminated by toxic materials or manufacturing errors that lead to malfunction or explosion, including the use of an inferior material, poor fitting parts, improper assembly, or batteries that overheat. Many of the defects that result in safety problems for consumer products can be attributed to a lack of quality processes during product development, including engineering and design.

How to Handle a Product Recall
There have been several high profile product recalls in the last few decades that have resulted in multi-million and billion dollar losses. While recalls generally generate bad publicity that can damage the reputation of a brand, it can also open the door for an opportunity to enhance consumer engagement. Almost nine out of ten consumers (87%) said that they would likely purchase from and remain loyal to a brand that handles a product recall honourably and responsibly. Product recalls can be costly, however, sometimes companies are willing to take a hit to the bottom line to help keep customers loyal to their brand. Offering full refunds and free repairs when possible are just some of the initiatives companies take in order to retain strong relationships with their customers.

Mitigating Risk in the Event of a Product Recall
In the event of a defect, product recall coverage for machine shops helps companies minimize risk upstream in the supply chain. Product recall insurance protects companies against any expenses related to the recall of a product, along with any third party liability caused by the product defect. Product recalls can open companies up to injury and class-action lawsuits that can be very costly, making it extremely important for companies to be proactive in managing risk appropriately.

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