Q1 2020 RECALL INDEX ALL INDUSTRIES EMEA EDITION - Stericycle Expert Solutions
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Q1 2020 RECALL INDEX ALL INDUSTRIES EMEA EDITION DATA , TR EN DS & P R ED I C TI O N S F O R E M E A I N D U S T R I E S
Welcome to the first Stericycle Expert Solutions Quarterly Recall Index of 2020. In this report you’ll find the most up-to-date recall data and insights from a range of sectors – automotive, food & beverage, electronics, clothing and toys. It also includes analysis on the macro environment and how this might have an impact on recall activity. As we all know, the current pandemic sweeping the world will have a certain impact on all industry. The magnitude of the impact is at the moment unknown, and some industries, particularly those with globalised supply chains and a heavy reliance on efficient manufacturing, will feel the effects more than others. Consumer confidence has plummeted to levels not seen since the last recession1 according to a new UK report, with confidence in the general economy also sinking. This negative outlook is mirrored around the world2, with purchase intents shifting and spending patterns changing. While some industries, including food & beverage and consumer goods such as freezers and kitchen equipment experienced an initial spike in sales, the long-term economic outlook for the majority of industries is not rosy. With the financial impact set to hit profits, one thing that businesses must not compromise on is recall readiness. The next few months will see industries change and evolve based on new regulations, innovation, shifts in consumer preferences and behaviours and the challenges brought by global supply chains brought to a standstill. Any organisation takes time to adjust following a period of change – and that’s when businesses without recall strategies are vulnerable. The following report will provide insight into how businesses can best prepare and protect themselves in these unprecedented times. For additional reading and reference, previous Quarterly Recall Index reports (as well as the 2020 State of the Nation analysis) are available for you to download for free on the Stericycle Expert Solutions website: https://www.stericycleexpertsolutions.co.uk/recall-hub/resources/spotlights-indexes 1 www.marketingweek.com/consumer-confidence-plummets-coronavirus/ 2 www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/the-coronavirus-effect-on-global-economic-sentiment Q1 2020 RECALL INDEX: PRODUCT RECALL DATA, TRENDS AND PREDICTIONS FOR EMEA INDUSTRIES 3
CONTENTS 3 SUMMARY 6 AUTOMOTIVE 16 PHARMACEUTICAL 26 MEDICAL DEVICE 34 ELECTRONICS 44 CLOTHING 52 TOYS 60 FOOD & BEVERAGE 69 ABOUT Q1 2020 RECALL INDEX: PRODUCT RECALL DATA, TRENDS AND PREDICTIONS FOR EMEA INDUSTRIES 5
AUTOMOTIVE With 133 recalls and notifications across Europe in the first quarter of 2020, the recall picture is much like the one we saw 12 months ago. Germany, as is almost always the case, dominates in terms of country of origin and is also the main notifying country. But while many things remain the same, the landscape has shifted – perhaps irrevocably – due to the pandemic which has led to automotive manufacturers shutting down production across the globe. How manufacturers navigate this period, and how they begin the recovery process in the second half of the year, is going to be vitally important to the long-term future of the sector.
While many things remain the same, the landscape has shifted – perhaps irrevocably – due to the pandemic which has led to automotive manufacturers shutting down production across the globe.” Q1 2020 RECALL INDEX: PRODUCT RECALL DATA, TRENDS AND PREDICTIONS FOR EMEA INDUSTRIES 7
FIRST QUARTER OVERVIEW No industry is untouched by the crisis which has China, the first country to be hit by coronavirus, engulfed the globe in the first few months of 2020. exports in the region of $34 billion in motor parts The spread of COVID-19 – at first in Asia and most to the global industry. That was having a colossal recently across North America and Europe – has been impact on manufacturers, even before they had to relentless and this public health emergency has quickly contend with COVID-19 affecting them within their become an economic one too. own borders. It is hard to think of any area within the automotive Now, the impact of COVID-19 is being felt everywhere sector untouched by coronavirus. Economic – and the force is unprecedented. But despite the uncertainty means that many people who may have industry being in a state of near total shutdown, the considered purchasing a vehicle will now not be doing importance of vehicle safety is unchanged. Recalls can so, at least in the immediate term. For those making be challenging at the best of times without expert monthly payments for their car, they face the very help and it will be particularly interesting to see real possibility of not being able to afford it as how prepared manufacturers are to handle a recall their jobs disappear for the duration of the crisis, emergency while restrictions are in place and so much if not beyond. of their focus is understandably elsewhere. N O T I F I C AT I O N S S U B M I T T E D B Y C O U N T R Y RECALLED VEHICLES BY COUNTRY OF ORIGIN 100 60 90 80 50 70 60 40 50 30 40 30 20 20 10 10 0 0 Germany UK Portugal France Belgium Italy Denmark Poland Austria Germany France Japan US Italy UK Spain Rep. of Korea Q1 2020 Q1 2019 Q1 2020 Q1 2019 Now, the impact of COVID-19 is being felt everywhere – and the force is unprecedented.”
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AUTOMOTIVE DEEP DIVE According to The European Automobile Manufacturers impact the pandemic has had – and will continue to Association (ACEA), “it is becoming increasingly clear 1 have – on the industry and the wider supply chain. that COVID-19 has led to the worst crisis ever to impact the automotive sector”. Factory shutdowns have put While sales are likely to start to grow in a few the brakes on the production of almost 1.5 million months’ time, consumer confidence will be at a vehicles, with grave consequences for workers in the potentially all-time low. With many people facing an sector – hundreds of thousands of whom have been uncertain future when it comes to their employment, placed on government schemes to cover their wages, at it is understandable that new cars won’t be at the top least in part. of their agenda. That means we can expect a surge in the number of people retaining their current models Clearly, shutdowns will take a huge financial toll on – and with that will come a greater need for repairs manufacturers. Research by AutoAnalysis suggests 2 and servicing. that the shutdown across Europe and North America will have cost the industry around $100 billion in lost This may be an area where OEMs can make their mark. revenues to the end of April. This is not simply an issue We have noted before the rise in demand for connected of production. Consumers simply aren’t purchasing cars, and the current crisis will not stop consumers in the numbers they once were. Indeed, car sales fell wanting their vehicles from having the latest tech under in Western Europe by two-thirds in March, while US the hood. By anticipating the needs of the consumer, sales are at the lowest level for a decade. In April, OEMs can position themselves ahead of rivals when it new car registrations dropped further by 78.3% to comes to positioning themselves as the best option for 292,182 vehicles in the European Union, Britain and people considering repairs and servicing. the European Free Trade Association (EFTA) countries, statistics from ACEA showed. Many OEMs will have concerns over liquidity problems. Thankfully, there is help being offered. The European Central Bank, European Investment Bank and European Commission have all taken significant steps3 to support businesses affected by the COVID-19 outbreak. However, while governmental and economic bodies are finding innovative solutions, the reality is that these measures will only go so far in arresting the staggering 1 https://europe.autonews.com/automakers/europes-auto-industry-sees- unprecedented-crisis-following-production-losses It is becoming increasingly 2 https://www.theguardian.com/business/2020/apr/06/car-plant-shutdowns- clear that COVID-19 has led to may-cost-auto-industry-more-than-100bn-covid-19 3 https://www.fleeteurope.com/en/financial-models/europe/features/covid- the worst crisis ever to impact 19-eu-supports-automotive-industry?a=FJA05&t%5B0%5D=European%20 Commission&t%5B1%5D=European%20Central%20 the automotive sector.” Bank&t%5B2%5D=ACEA&curl=1
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SAFETY GATE INSIGHT In total, there were 133 automotive recalls across the European Union in the first quarter of 2020. That is a decline of eight on the first three months of 2019, albeit a negligible one. As you may expect, Germany led the way in terms of recalls with two thirds - 66 per cent - being notified by the country. Behind Germany’s 88 notifications was the UK with 17, Portugal with 14 and France which had seven. By contrast, Germany was the leading country of origin for recalls in the quarter, accounting for more than one third (37%). That was followed by France (country of origin in 25 recalls) and Japan, the US and Italy rounding up the top five - and the UK sitting in sixth on the table.
Behind every recall is a recognised risk type. And, as is almost always the case in the automotive sector, the main risk type identified was injuries, which was noted in 110 of the 133 recalls. That was followed by fire, listed in 12 recalls. Other risk types included ‘fire and injuries’, cited in eight recalls, followed by environment (2) and electric shock and fire, which was noted in one recall case. RISK TYPE Q1 2020 RECALLS Q1 2019 RECALLS Injuries 110 107 Fire 12 12 Fire, injuries 8 1 Environment 2 5 Electric Shock, Fire 1 0 Our expectation is that recalls will drop in the second quarter of the year, a result of production grinding to a halt and new marques not being released to the public. But they will not disappear. For manufacturers, this will be a huge concern. Automotive recalls are high in comparison to other sectors, largely because there is an acceptance that should something go wrong – be it a faulty brake or unsafe exhaust – the consequences are potentially fatal. And manufacturers in the sector are hugely safety conscious, with most recalls being precautionary in nature. The current crisis cannot allow that mindset to shift. Implementing a recall will undoubtedly be more difficult during this period. People will be harder to reach, and lockdowns mean that carrying out necessary fixes will be exponentially harder. Manufacturers would be wise to engage with recall specialists who can support them through these unique challenges – while the public may be forgiving of a slower response to potential issues, they will not be forgiving of manufacturers who do not take their safety responsibilities seriously. Recalls are not a fundamentally negative experience. They can serve to strengthen the relationship between brand and consumer. But a poorly handled recall can break that bond, often forever. And with businesses in a fragile position, that is something they can ill afford. Q1 2020 RECALL INDEX: PRODUCT RECALL DATA, TRENDS AND PREDICTIONS FOR EMEA INDUSTRIES 13
AUTOMOTIVE ANALYSIS At the beginning of this year, Stericycle Expert The impact on the automotive industry cannot be Solutions published its wide-ranging State of the understated. Thankfully, governments appear to be Nation report which took an in-depth look at various rising to the occasion and supporting industries of all sectors including automotive – this can be downloaded types to varying degrees. Once the current period has for free on our website (links below). been overcome, we can look forward to entering the ‘new normal’, one where the value of connection has At the time, we highlighted two major trends. The never been greater. first, ‘The Greta Effect’, was the expectation that consumers, increasingly environmentally conscious, It will be particularly interesting to see how societies would put pressure on the industry to address those are changed by this shared experience. A greater concerns. The second trend was around smart tech, sense of community, perhaps an even-greater concern something which continues to grow in prominence for environmental issues. That will see manufacturers throughout the industry. having to focus even more on addressing the environmental responsibility they have, while dealing It is safe to say that both have been blown out of the with the economic fallout of the current crisis. water by the emergence of COVID-19 and the almost unthinkable consequences it has had on our daily lives. One thing is clear – the time we are living in now will Across cities and towns, country roads and motorways, shape the automotive sector for years and years to come. traffic has all but disappeared. Working from home has become the norm and most people are only using their vehicles to drive to the supermarket for essential supplies. Stericycle Expert Solutions’ 2020 State of the Nation report free downloads: EMEA edition: https://pages.stericycleexpertsolutions.co.uk/2020-state-of-the-nation-spotlight US edition: http://pages.stericycleexpertsolutions.com/2020stateofthenation Q1 2020 RECALL INDEX: PRODUCT RECALL DATA, TRENDS AND PREDICTIONS FOR EMEA INDUSTRIES 15
Never has the pharmaceutical industry had a greater weight on its shoulders.”
PHARMACEUTICAL Never has the pharmaceutical industry had a greater weight on its shoulders. There is huge pressure to develop a coronavirus vaccine, with many believing it is the only way we can fully emerge from the current crisis. That task falls to an industry at a time when it, like so many other sectors, is struggling with issues relating to its supply chain. And as always, the safety of its products remains of paramount concern. With the latest figures for Europe showing 78 recalls in the first three months of 2020 – almost all before COVID-19 took hold – it remains to be seen how the industry will handle the tumult that lies ahead. Q1 2020 RECALL INDEX: PRODUCT RECALL DATA, TRENDS AND PREDICTIONS FOR EMEA INDUSTRIES 17
FIRST QUARTER OVERVIEW Across the globe, billions of people rely on grow – will companies find themselves unprepared for pharmaceuticals. And now, with the onset of the the levels of innovation needed to successfully combat COVID-19 pandemic, the industry is in the spotlight COVID-19? like never before with a vaccine seen as the only way to restore life as we knew it before coronavirus. Underlying all of that is a need to ensure the safety of pharmaceutical products – brought into sharp focus And while brilliant minds do their very best to develop by the latest recall stats which shows there were 78 said vaccine, the industry itself is not immune from the products recalled across Europe in the first three chaos the virus has caused. Pharmaceutical companies months of 2020. are seeing real problems with supply chains, putting pressure on them to ensure products continue to reach Safety of pharmaceutical products will always be those who need them day in and day out. fundamentally important, and despite the supply chain issues facing the industry, standards cannot be allowed Innovation will be required to find a vaccine but, to slip. across Europe, spending on R&D has been slow to Pharmaceutical companies are seeing real problems with supply chains.”
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PHARMACEUTICAL DEEP DIVE While sectors including automotive and electronics are seeing huge drops in demand for their products – as consumers look to stop spending during the pandemic – the issues facing the pharmaceutical industry are different. The market for new cars or smartphones may have shrunk dramatically, but the need for pharmaceuticals remains as strong as ever. This crisis has revealed our morbid dependency on China and India with regards to pharmaceuticals.” With China and India being the world’s largest pharmaceutical exporters, the coronavirus has disrupted supply chains for medicinal products across the globe. In a startling statement, the European Commission’s vice-president Vera Jourova said that “this crisis has revealed our morbid dependency on China and India with regards to pharmaceuticals”. China, the first country affected by coronavirus, quickly implemented widespread lockdowns. That had a severe effect on their manufacturing facilities. While many companies have stockpiles which may last for up to one year, they will be concerned that even as China opens up, it will be some time before manufacturing output returns to its pre-COVID levels. India is reliant on Active Pharmaceutical Ingredients (API) from China - and the knock-on effect1 of slowed production of those APIs meant production costs in India increased. In turn, India has restricted the export of several APIs in a bid to avoid internal supply shortages – leading to risks of scarcity across the markets which rely on them.
One of the biggest issues facing Europe is a shortage of medicines used to treat symptoms of COVID-19. According to the European Medicines Agency (EMA), “the continued availability of medicines, in particular those used for patients with COVID-19, is of critical concern for EMA”. There has been a shortage of “vital drugs for the resuscitation of patients including muscle relaxants, sedatives and painkillers, which are being used up rapidly with ‘insufficient or non-existent’ restocking because of the pandemic”. Prior to the pandemic, one of the biggest issues facing the pharmaceuticals industry in Europe was Brexit and, while the issue has taken a backseat in the last few months, it remains of huge significance. Fears that the European market could worsen due to the UK’s exit from the EU have not gone away, and it remains to be seen how the EMA will work with the UK’s Medicines and Healthcare products Regulatory Agency (MHRA) in the years ahead. One of the biggest issues facing Europe is a shortage of medicines used to treat symptoms of COVID-19.” 1 https://www.europeanpharmaceuticalreview.com/article/116145/covid-19- update-coronavirus-and-the-pharmaceutical-supply-chain/ Q1 2020 RECALL INDEX: PRODUCT RECALL DATA, TRENDS AND PREDICTIONS FOR EMEA INDUSTRIES 21
LOCAL COUNTRY INSIGHT There were 20 pharmaceutical notifications submitted by the United Kingdom - more than any other country.” N O T I F I C AT I O N S S U B M I T T E D B Y C O U N T R Y 25 20 15 10 5 0 UK Germany Denmark Portugal France Italy Q1 2020 Q1 2019 Indeed, it marks a spectacular 900 per cent increase on the number of notifications reported by the UK in the same quarter of 2019 – where two notifications were made. This, perhaps, shows that the country is taking on more responsibility for notifications as it prepares to go it alone post-Brexit. Intriguingly, Portugal saw a significant reduction in year-on-year notifications. In Q1 of 2019 they were responsible for 21 alerts, whereas they only made 10 in the same period of 2020. In total, there were 78 recall alerts submitted in the first three months of the new decade. Five countries made more than ten alerts. In addition to the aforementioned UK and Portugal, we also saw Germany, Denmark and France on the list.
It wasn’t simply in terms of notifications where the UK Of course, it’s important to reiterate that recalls are dominated. In fact, they were also the leading country not inherently bad. Manufacturers across all sectors, of origin for pharmaceuticals recalled in Q1 of 2020, including pharma, have a duty to ensure the products with 18 of the 78 originating in the UK. Meanwhile, their consumers are using are safe. And recalls play Portugal halved the amount of pharmaceutical recalls a pivotal role in removing potentially unsafe or originating in the country, going from 20 to 10 year- dangerous products from those consumers. on-year. France, interestingly, saw its pharmaceutical recalls go from just five in Q1 of last year to 12 in the At Stericycle Expert Solutions, we know what a first three months of this year. Due to incomplete successful recall looks like – with a multitude of recording from Italy’s medical agency, recall data was experience in helping businesses get through what can incomplete at the time of publishing and only covered often feel like an impossible task. Clearly, the impact the period from 1 January 2020 to 19 February 2020. of the current global pandemic makes it harder, not easier, to perform a recall. The leading cause of pharmaceuticals being recalled was attributed to failed specifications - cited in 11 of But the need for recalls has not suddenly gone away. the 78 recalls in the quarter. This was closely followed Manufacturers may feel like they have bigger concerns by mislabelling, noted in eight recalls, and foreign at the moment, but under no circumstances can they materials/contamination – which was cited in four turn their gaze away from ensuring the safety of their recalls. The remaining 55 recalls were attributed to products. To do so could be catastrophic. ‘other’ reasons. RECALLS BY COUNTRY OF ORIGIN TOP REASONS FOR RECALL 60 25 50 20 40 15 30 10 20 5 10 0 0 UK France Germany Portugal Denmark Republic of Ireland Failed Specs Mislabeling Foreign Materials / Contamination Other Q1 2020 Q1 2019 Q1 2020 RECALL INDEX: PRODUCT RECALL DATA, TRENDS AND PREDICTIONS FOR EMEA INDUSTRIES 23
One likely consequence of the current crisis is a change in how pharmaceutical companies handle manufacturing in the future.”
PHARMACEUTICAL ANALYSIS The pharmaceutical industry will be under a spotlight in the coming months – and potentially beyond – as societies around the world pin their hopes on a vaccine for COVID-19. Much focus will fall on the task force established1 by the EMA which will deal with “the development, authorisation and safety monitoring of therapeutics and vaccines intended for treatment or prevention of COVID-19”. While there will undoubtedly be a rush to find a vaccine - not only to save lives but to enable the full re-opening of economies - it cannot happen without clear attention to safety. It is reassuring that the EMA has clearly underlined the importance of the safety element. While regulatory approvals for any vaccine will almost certainly be fast-tracked, the impact on supply chains to mass produce the vaccine will be tremendous. One likely consequence of the current crisis is a change in how pharmaceutical companies handle manufacturing in the future. According to J.P Duffy, a partner at Reed Smith, companies “are going to be looking at whether it makes sense to have lots of factories in any one market or if they should be attempting to diversify by building factories elsewhere”. While that won’t be a quick fix, it’s likely to be something under strong consideration as businesses attempt to ensure they are protected in the future. In our recent 2020 State of the Nation report2, we highlighted that while production increased from €194 million in 2010 to €260 million in 2018, research and development expenditure only increased from €27 million to €36 million. The coronavirus pandemic may see that R&D number shoot up – and if that happens, we hope to see the R&D figure remain higher than it has been rather than coming down once a vaccine has been found. 1 https://www.europeanpharmaceuticalreview.com/news/116780/ema-task-force-established-to-co-ordinate- rapid-regulatory-action-for-covid-19-medicines/ 2 https://pages.stericycleexpertsolutions.co.uk/2020-state-of-the-nation-spotlight Q1 2020 RECALL INDEX: PRODUCT RECALL DATA, TRENDS AND PREDICTIONS FOR EMEA INDUSTRIES 25
MEDICAL DEVICE The medical device industry, once of most interest to healthcare and pharmaceutical professionals, has been cast into the spotlight as the world responds to COVID-19. Equipment shortages, a pivot towards producing essential protective equipment and relaxing in regulations has resulted in a hotbed of activity as existing – and new – organisations rush to fill the gaps in global requirements. On top of this, a sharp rise in recalls over the past year, with figures topping 600 in Q1 2020, will be a cause of concern, and it’s crucial that safety is not compromised by manufacturers in a race to meet demand.
It’s crucial that safety is not compromised by manufacturers in a race to meet demand.” Q1 2020 RECALL INDEX: PRODUCT RECALL DATA, TRENDS AND PREDICTIONS FOR EMEA INDUSTRIES 27
FIRST QUARTER OVERVIEW Around the world, industries are pivoting to address While this will benefit the member states’ response the biggest disruption to life in a generation, with to the virus by ensuring the rapid production of none more so than the medical device industry. safe equipment within the EU, an influx of imported devices such as ventilators from countries such as China are already raising questions – with a Manufacturers are facing immense pressure as global number rejected by medical professionals. requirements for ventilators, specialist equipment and PPE skyrocket, causing huge supply chain bottlenecks Safety is paramount for consumer confidence, and vast global shortages. particularly during this fraught time. The first twelve weeks of 2020 saw 604 medical device recalls – almost double that of the same period of 2019 (309). This huge spike can be attributed partly to a 195% YoY Quality has been increase in recalls submitted by Germany, which called into question as submitted 221 recalls. As the world’s third largest the reason for 20% of medical device market, behind only the US and all recalls.” Japan2, Germany is always among the top of recall submission tables, however this spike will be a cause for concern for industry professionals. To help ease the pressure across the EU, the European Quality has been called into question as the reason Commission introduced a harmonised standard for for 20% (120) of all recalls according to the available all equipment and devices to adhere to and allow data. In Europe, manufacturers can place a CE companies “an easy and direct access to the internal (Conformité Européenne) mark on a medical device market for their products, while ensuring a high once it has passed a conformity assessment. However, degree of safety for users and consumers”1. this becomes trickier to track in a globalised market with millions of imports coming from countries around the world. To add to the seriousness of this, this was happening before we even considered a rise in new market entrants from companies who don’t traditionally manufacture medical devices and the potential complications that brings. The first twelve weeks One thing is for certain, the medical device story for of 2020 saw 604 2020 is only just beginning. medical device recalls – almost double that of the same period of 2019 (309).” 1 https://ec.europa.eu/commission/presscorner/detail/en/ip_20_522 2 https://www.emergobyul.com/resources/market-germany
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MEDICAL DEVICE DEEP DIVE The medical device market in the EU accounts for one third of the global market, with around $122.5 billion (est. 2011) in yearly revenue. The industry consists of over 22,000 companies all over Europe that employ around half a million people. According to The Global Medical Devices Testing Services Market Report, the market will grow at a significant CAGR of 10.81% during the forecast period of 2019-20291. As Europe’s biggest medical device market, Germany is known for its advanced and sophisticated approach to healthcare, championing innovation and modern technology to improve the welfare of its citizens. This early adopter approach, while for the most part drives positive changes in the market, does leave Germany exposed to the vulnerabilities that come with new devices – which may partly explain why its recalls are significantly higher. Even before the pandemic, the medical device market was attracting a growing number of tech-giants and software companies armed with intelligent solutions, including artificial intelligence and machine learning algorithms. With the world now exposed to the vulnerabilities in supply chains, these firms are doubling down on efforts to plug the gaps and produce efficient solutions. Indeed, GlobalData estimates that global demand for ventilators this year will be 880,000, about nine times current global production capacity2. These new systems, heavily reliant on technology, will be subject to increased testing measures, and recalls are expected to increase multi-fold in the future, according to The Global Medical Devices Testing Services Market Report. However, in the shorter term, we may see an increase in new products like ventilators quickly brought to market due to reduced registration rules following the postponement of Europe’s Medical Device Regulation (MDR) by one year, to May 2021. This means that manufacturers are able to quicker meet demand during the virus, as reported in Bloomberg Law3. Stella Kyriakides, European Commissioner for Health said: “We must not waste a second in our fight against the coronavirus. With the measures we adopt today, we speed up the entry of safe, essential medical equipment and devices such as masks, gowns
and suits in the EU market. This equipment is fundamental for our health professionals – the brave and resilient women and men at the front line - to keep saving lives”. When the EU MDR regulations are implemented next year, we can expect a rise in recalls of new products introduced earlier to the market during the virus due to the greater control and stringent monitoring of medical devices. Perhaps the biggest challenge that lies ahead for the industry is defective and sub-par equipment being imported into Europe – and how to keep a track of it. Already there are a myriad of headlines and reports, including the widespread coverage of rejected Chinese-made equipment such as testing kits and medical masks designed to combat the coronavirus outbreak. The pandemic has also seen an increase in fraudulent goods being sold to healthcare professionals, with a recent report revealing that speculators and popup brokers are finding customers on LinkedIn4. With medical and other institutions that need masks competing against each other, they’ve had to go outside their usual supply chains into untested waters – and this is where the danger emerges. While tech powerhouses such as Twitter, Microsoft, Reddit and YouTube have rallied in the fight against misinformation spreading online, the advice remains to conduct due diligence when purchasing from online sellers, with hotlines to report price- gougers set up and arrests already being made. With the industry under so much pressure and with so much at risk, a recall scenario without a proper strategy in place could be devastating for a business. While the challenges of facing a recall during a pandemic are significantly heightened, it’s crucial for any manufacturer to remain vigilant. With regulations and testing temporarily relaxed, the onus is perhaps placed even more so on manufacturers to ensure safety remains at the centre of all operations. 1 https://www.globenewswire.com/news-release/2020/04/28/2023333/0/en/Global-Medical- Devices-Testing-Services-Market-2019-to-2029-Focus-on-Tests-14-Countries-Data-and- Competitive-Landscape.html 2 https://voxeu.org/article/ramping-ventilator-production-lessons-wwii 3 https://news.bloomberglaw.com/health-law-and-business/pause-europes-new-medical-device- rules-amid-outbreak-industry 4 https://www.wired.com/story/linkedin-coronavirus-medical-equipment-ppe-shortage/ Q1 2020 RECALL INDEX: PRODUCT RECALL DATA, TRENDS AND PREDICTIONS FOR EMEA INDUSTRIES 31
GOVERNMENT DATA AND ANALYSIS The first quarter of 2020 saw a total of 604 medical course of 2019, so it remains to be seen if this year’s device recall alerts submitted in Europe – up from decline represents an anomaly or the start of a new 309 in Q1 2019. While this figure may be alarming, it trend as new testing processes are put in place. indicates that testing has become a priority as Europe moves towards its new regulatory standards for In a similar story to previous Index reports, the medical devices due to come into effect in 2021. world’s largest medical device manufacturer, the US, accounted for the country of origin for the highest Germany topped the list of countries recalling medical number of recalled devices, with 133 notices placed - a devices with 212 alerts placed – up from 75 in Q1 slight increase from 2019, which saw 114 placed. It was 2019. While Germany is no stranger to the top of the closely followed by Germany (117), again no surprise chart, placing the most notices over 2019 in its entirety, given its status as a manufacturing powerhouse, then this is a huge spike in the figures. The data suggests France (75) and Italy (67). no one reason can be attributed to the increase, rather a myriad of incidents covering everything from quality Some may have expected future recalls of US devices control and sterility concerns to software issues and to fall following Donald Trump’s March 25 statement labelling errors. that US medical technology companies can’t sell their products in European Union countries, citing the EU’s Following Germany in recall instances were Italy (146), MDR “specifications”. This statement has raised a lot Denmark (117), France (68), and Greece (19), which all of questions and confusion and is likely not the case. displayed slightly higher figures than the same period The MDR regulation is designed to replace the existing of 2019. The biggest surprise came from the UK, which directive and is not expected to prevent imports from saw a dramatic decline in notices placed – falling from the US, and as such we expect the US to continue to 91 in Q1 2019 to just 12 in 2020 so far. A closer look at chart highly in EU recall analysis. the data shows that the UK placed 405 recalls over the N O T I F I C AT I O N S S U B M I T T E D B Y C O U N T R Y RECALLS BY COUNTRY OF ORIGIN 140 250 120 200 100 80 150 60 100 40 50 20 0 0 Germany Italy Denmark France Greece Portugal UK USA Germany France Italy Republic of Ireland UK Switzerland Sweden Q1 2020 Q1 2019 Q1 2020 Q1 2019
The biggest surprise came from the UK, which saw a dramatic decline in notices placed.” One country of origin to note is Sweden, which more TOP REASONS FOR RECALL than doubled the number of medical devices recalled this year, jumping to 27 in Q1 2020 from just 10 in 450 Q1 2019. Sweden is home to a number of production facilities and offshoots of huge multinational 400 medical device companies, and its medical device 350 manufacturing industry is growing – which may account 300 for the rise in recalls. 250 200 ‘Unknown’ or ‘other’ reasons account for a clear 150 majority of notification reasons submitted in 2020 so 100 far (390), followed by quality issues (120), software issues (56), mislabeling (24) and products being 50 outside of specifications (10). 0 Quality Issue Software Issue Mislabeling Issue Outside of Specifications Other Recalls due to software issues have risen by 37% from Q1 2019, which saw 41 notices. The pandemic has given rise to technology companies who have been finding ways to adapt products that have not historically been used for medical purposes to meet the increased demand for telehealth, digital health and For seasoned medical device industry professionals, remote monitoring. This is where we may expect to the advice is not to become complacent as some see some challenges, as traditionally consumer-facing regulations are relaxed for the time being. The MDA companies get to grips with a different testing and will still come into effect, and with it a more stringent regulatory environment and struggle to understand what approach to testing and quality control. to report, when to report it and how to handle issues. While the above may sound like a cause for concern, It’s a crucial time for these companies to have a robust it’s worth remembering that more broadly, any recall strategy in place – particularly in an industry investment and innovation in an industry inextricably that’s under intense global scrutiny. Regulations linked to the welfare of society is a hugely positive and testing procedures must be understood, and thing and will in the long-term revolutionise entire manufacturers must be fully compliant with existing healthcare systems. industry standards. Q1 2020 RECALL INDEX: PRODUCT RECALL DATA, TRENDS AND PREDICTIONS FOR EMEA INDUSTRIES 33
The industry faces an uncertain future as it looks to overcome this turbulent period.”
ELECTRONICS China, as always, is the source of most recalls in the sector - an expected consequence of the sheer volume of products it exports across the globe. In total, 31 of the 44 recall notifications related to products manufactured in China which is almost identical to the same quarter in 2019. However, while those figures are to be expected, the coronavirus crisis that has engulfed country after country is anything but. The COVID-19 pandemic is hitting manufacturers hard and while electronics remain in high demand, the industry faces an uncertain future as it looks to overcome this turbulent period while protecting and positioning itself for what lies ahead. Q1 2020 RECALL INDEX: PRODUCT RECALL DATA, TRENDS AND PREDICTIONS FOR EMEA INDUSTRIES 35
FIRST QUARTER OVERVIEW Far from being simply a public health crisis, we are Innovation is fundamentally important to the facing an economic emergency perhaps unlike any electronics sector, and this is a time which calls that has come before. It is true that not every sector for genuine innovation. New products, long in the will face the same impact, but as the picture unfolds it planning, may have to take a backseat as businesses has become abundantly clear that, for most, there are focus on doing what they can to protect themselves. dark days ahead. Instead, innovation may come from how manufacturers and retailers get their existing products into the hands of consumers. After all, most bricks and mortar stores are closed and while many retailers can still operate online, it is a simple fact that the current crisis has Innovation is fundamentally made it harder for consumers to buy – and receive – important to the electronics the products they want. sector, and this is a time which calls for genuine innovation.” And it goes without saying that innovation cannot come at the cost of safety. As we’ll see in this report, USB chargers remain a problem. As the shutdown sees people turn to new sources for buying gadgets, manufacturers must do everything in their power to ensure these meet stringent safety standards in order to protect consumers as much as possible.
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ELECTRONICS DEEP DIVE From Mobile World Congress to E3, some of the biggest electronics shows have been cancelled in the wake of the coronavirus pandemic. This, of course, is not a problem limited to a specific sector. Indeed, the stark reality of COVID-19 is that just as no country is untouched by the deadly disease, nor is any business sector. Everything from smartphones and TVs to appliances and cars are likely to take a hit through 2020.” A survey1 of global electronics manufacturers and suppliers presents some interesting insights. 40 per cent of respondents “believed that consumer electronics were likely to be the most impacted industry due to the coronavirus (COVID-19) outbreak”. That was followed by industrial electronics, with 24 per cent saying it would be the worst affected by the crisis. It’s easy to see why consumer electronics is perceived as being most at risk. As an in-depth piece from Forbes2 states, there has been “controlled panic” which has seen consumer purchases pivot towards essential items. As their article states, “everything from smartphones and TVs to appliances and cars are likely to take a hit through 2020” with consumer sentiment negatively impacted by worries over the virus and its economic impact. As that economic impact is felt ever more keenly, with greater numbers of people either furloughed or made redundant, we can expect spending habits to shift dramatically. With many manufacturers shutting down operations – or operating at significantly reduced capacity – there is widespread concern about the financial blow being dealt by COVID-19.
Thankfully, we have seen robust responses by government and banks to the crisis. The European Central Bank, European Investment Bank and European Commission have all taken significant steps3 to support businesses affected by the COVID-19 outbreak. However, while these may help to stem the tide, they will not be a panacea – with the industry and wider supply chain facing a long road ahead. And while sales will undoubtedly rebound, likely in the second half of the year, it will still take some time for consumer confidence to be fully repaired. Buying the latest mobile phone or upgrading to that big-screen 4K TV simply will not be a priority. The hope for the sector will be that, come the major spending months of October, November and December, consumers will feel the crisis is behind them. Buying the latest mobile phone or upgrading to that big-screen 4K TV simply will not be a priority.” Then, the focus can perhaps shift to building on trends we have previously identified, including the rise of smart home devices and 5G, both of which are linked and were set to see huge growth this year – growth that may well have been stymied by events. While links between 5G and the pandemic are baseless conspiracy theories, it will still be interesting to see if there is any impact to its development across Europe. 1 https://www.statista.com/statistics/1106093/electronics-industries-impacted- by-supply-chain-delays-due-to-covid-19-worldwide/ 2 https://www.forbes.com/sites/tiriasresearch/2020/03/12/coronaviruscovid-19- consumer-sentiment-poses-bigger-threat-to-electronics-than-manufacturing- delays--part-3/#509f874c3cfe 3 https://www.fleeteurope.com/en/financial-models/europe/features/covid-19- eu-supports-automotive-industry Q1 2020 RECALL INDEX: PRODUCT RECALL DATA, TRENDS AND PREDICTIONS FOR EMEA INDUSTRIES 39
SAFETY GATE INSIGHT In the first quarter of 2020, there were 44 recall notifications. China continues to dominate the country of origin list for recalls in the sector. In the first three months of 2019, 32 recalls related to products originating in China - whereas in Q1 of this year it was 31. With China being the predominant manufacturer of electrical appliances, recall activity in other countries was low with second on the list - Poland - only accounting for two in Q1. Rounding off the top five in the country of origin list was Belarus, Czech Republic and Turkey. Leading the way in terms of notifications was Poland, which submitted 13 notices. This was followed by the UK, with nine notifications, and then Belgium (5), Finland and Cyprus (both 3). RECALLS BY COUNTRY OF ORIGIN 35 30 25 20 15 10 5 0 China Poland Belarus Czech Republic Turkey Q1 2020 Q1 2019
By comparison to the same quarter last year, Sweden was cited in 34 recalls - up on 24 in the equivalent has more than halved the number of notifications quarter last year. made, dropping from nine to three. The spike last year was attributable to a number of poor-quality USB In fact, electric shock was the main risk identified in 77 chargers entering their market - something that is a per cent of all recalls in the sector so far this year - and recurring issue in the sector. it was cited in 35 per cent of recalls of USB chargers. At Stericycle Expert Solutions, we know what a RECALLS BY PRODUCT successful recall looks like and have supported thousands of businesses through the complex process. 14 And it’s clear that the current crisis will make the 12 implementation of recalls harder, not easier. 10 While much of the world feels like it has stopped, the 8 need to recall potentially dangerous appliances from 6 people’s homes has not. Manufacturers, already under 4 unbelievable pressure, need to step up and carry out these recalls – while being cognisant that doing 2 so in a haphazard manner risks breaking the trust of 0 consumers at a time when that trust is more valuable than ever before. USB Charger Battery Charger Miniature Circuit Breaker Laptop Power Supply Hair Straightener Hairdryer RECALLS BY RISK 40 Q1 2020 Q1 2019 30 Indeed, USB chargers were the most recalled item in the quarter. Poland (6) and Belgium (5) submitted 20 the most alerts for faulty chargers, with the item accounting for 46 per cent of Poland’s recall alerts - 10 and all of Belgium’s. As you may expect in the electronics sector, the most 0 significant hazard identified was electric shock, which Electric Shock Environment Electric Shock, Fire Chemical, Environment Fire Q1 2020 RECALL INDEX: PRODUCT RECALL DATA, TRENDS AND PREDICTIONS FOR EMEA INDUSTRIES 41
We have significant concerns that recalls relating to electrical appliances will rise due to the COVID-19 crisis.”
ELECTRONICS ANALYSIS Moving forward, we have significant concerns that recalls relating to electrical appliances will rise due to the COVID-19 crisis. With most physical shops closed, we can expect to see more and more consumers look to the internet to buy the products they feel they need. And when you consider that many people will have seen a reduction in income, it is likely that a significant proportion will look to new sources, including online marketplaces which can often be fertile ground for unscrupulous sellers. Similarly, retailers – predominantly operating online at the moment – may not be able to maintain a steady flow of products from trusted suppliers. That could see them look to new suppliers, running the risk of purchasing goods which fail to meet safety standards. The sector at large is reliant on a global supply chain, but we have already seen some politicians suggest that a more localised approach may be required to protect countries in the longer term. Should that come to fruition, it may well be that companies have to find manufacturing solutions within their own borders in the future. That is likely to have an impact on the bottom line, in turn impacting consumers and potentially seeing product costs rise over the next few years. Automation has been high on the agenda for many years but will surely gain even greater prominence.” One major question is how will manufacturers respond? Automation has been high on the agenda for many years but will surely gain even greater prominence as manufacturers look to give themselves added protection against similar events in the future. Once the current storm is weathered, we can expect to see major changes to the electronics industry as we know it. Q1 2020 RECALL INDEX: PRODUCT RECALL DATA, TRENDS AND PREDICTIONS FOR EMEA INDUSTRIES 43
CLOTHING Data from the first 12 weeks of 2020 revealed a total of 33 notifications placed from eight countries. The most commonly recalled item was children’s clothing, with the most prominent reasons including chemicals, choking and strangulation risks. Bulgaria placed the most notices (12), followed by Norway (4) – which along with Finland was one of two Scandinavian countries submitting five recalls for footwear contaminated with dangerous chemicals. Major trends stemming from the pandemic which may impact on the recall market include a shift in consumption patterns, drastic changes to supply chains and manufacturing processes and manufacturers refocusing efforts to create PPE equipment.
It’s estimated that global demand for PPE has grown by 1,000% in the past few weeks, and with it a rise in not- fit-for-purpose, unregulated surgical masks made from leftover textiles” Q1 2020 RECALL INDEX: PRODUCT RECALL DATA, TRENDS AND PREDICTIONS FOR EMEA INDUSTRIES 45
While historically one of the categories analysed with the least amount of recalls, the clothing industry is perhaps among those gathering the most amount of attention from consumers.” FIRST QUARTER OVERVIEW While historically one of the categories analysed with and Cyprus just two. It seems Hungary, after a spike the least amount of recalls, the clothing industry is in recalls for children’s clothing due to choking risks perhaps among those gathering the most amount of in Q1 2019, has taken heed of safety warnings, with attention from consumers due to the nature of the recalls petering down across the year and into 2020. risks, many of which directly relate to the safety of children. Women and girls’ apparel are responsible Interestingly Germany, which placed the second for the largest share of revenue in this market, with highest amount of notifications in 2019, did not place the European clothing industry as a whole worth any in Q1 2020. Whether this is the beginning of a €168.5 billion in 2018, growing at an average rate of new downward trend remains to be seen. 5.8% according to CBI. The biggest markets within 1 the EU include Germany, France, the UK, Spain, the The main reason for recalls was chemicals (11), Netherlands and Italy, comprising nearly 72% of all EU followed closely by strangulation (10). Recalls purely apparel imports. due to injuries, which topped the charts during Q2, Q3 and Q4 of 2019, are down to just three. However, this Analysing recall data for the first quarter of 2020, mirrors the data collected during the first quarter of a total of 33 notifications from eight countries was 2019, so it remains to be seen if recalls due to injuries observed in Q1, down from 35 from ten countries in will follow the same trajectory as 2019. the same period of 2019. Any trends observed in Q1 are likely to change The country leading the way in recall notifications is over the course of the year given that we’re living in Bulgaria, with 12 submitted, followed by Norway with unchartered times. Two trends we may see emerging four. This is a stark change from 2019, where countries with potential to impact recall alerts include a rise including Hungary and Cyprus topped the charts in in local manufacturing, increased automation and clothing recalls. However, Hungary has yet to submit reallocation of resources as spending habits shift. any notifications in the clothing market so far this year 1 https://www.cbi.eu/market-information/apparel/what-demand/
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According to the European Apparel and Textile Confederation the COVID-19 pandemic is likely to cause a 50% drop in sales and production.” CLOTHING DEEP DIVE The first quarter of 2020 sparks the beginning of what will be a year of significant change for the global economy. While the world is in flux and markets continue to be characterised by COVID-19, it can be difficult to predict what may happen over the course of the year as spending patterns change to reflect new needs and changes in income. If we look back at 2020 so far, there hasn’t been much fit-for-purpose, unregulated surgical masks made from of a shift in terms of the reasons we might expect leftover textiles. The global market for masks is, as a recalls to occur. Children’s clothing, leather goods and whole, relatively unregulated – which could present footwear all appear on recalled item lists, with the risks some problems as the clothing and textile industry we’ve seen crop up regularly in our quarterly Recall grapples to produce large batches with incorrect Index reports. However, with the pandemic only being materials which have the danger of being used by declared in March, it’s likely the effects will begin to unwitting consumers and frontline workers. Indeed, take shape over the next few months. counterfeits are rife in places including Hong Kong, which saw a government crackdown in January with According to the European Apparel and Textile spot-checks on retailers and pharmacies selling masks. Confederation1 the COVID-19 pandemic is likely This might be something we see more of in Europe as to cause a 50% drop in sales and production in the virus continues to take hold, with The European the European textile and clothing sector. The UK Anti-Fraud Office establishing an enquiry into this in Government has reported that an increasing number mid-March. of manufacturers are turning their production efforts towards helping the national interest, including Another trend we foresee coming to the fore in the creating protective face masks for key workers. coming months is dramatic changes in supply chains. Stark warnings of shortages have already come from It’s estimated global demand for PPE has grown by Asia, including from the chairman of Ambattur Fashion 1,000%2 in the past few weeks, and with it a rise in not- India3. Clothing manufacturing powerhouses including
China and increasingly India, Bangladesh and Jordan towards a slower fashion model with fewer seasonal have shut down factories and cited unreasonable collections – which has the potential to perhaps demands from UK and US-based retailers including positively impact on recalls as consumerism may extended payment terms and discounts. This is not decrease and the need for products to be produced sustainable and has the potential to devastate the quickly and cheaply does too. industry with companies unable to pay factory workers as a result. Further to this, we can expect to see significant changes to the manufacturing process as more workers We can expect to see self-isolate, become unwell or are made redundant significant changes to the – which may result in an increased reliance on manufacturing process as automation. As well as this, the world is likely headed more workers self-isolate, for a recession, and, as we understand from history, all become unwell or are economic downturns increase automation as less jobs made redundant.” become available. This may result in a rise in recalls due to risks arising from manufacturing errors in the longer term as new technologies are adopted. A major trend we’ve identified in the past is sustainability, however, as raised in Vogue Business4, when pressure is on the bottom line, sustainability is at risk of falling as a priority. We may expect to see increased scrutiny on supply chains from environmental 1 https://euratex.eu/press-release/covid-19-may-cause-important-drop- organisations as companies put green initiatives on in-sales-and-production/ 2 https://pciaw.org/industry-news/government-personal-protective- the backburner. equipment-ppe-hub/ 3 https://www.bbc.co.uk/news/business-52146507 4 https://www.voguebusiness.com/sustainability/will-covid-19- Finally, one industry analyst noted in fashion industry coronavirus-disrupt-fashions-sustainability-commitments 5 https://wwd.com/fashion-news/designer-luxury/will-coronavirus-reduce- trade journal WWD5 that the industry may move fashion-seasons-collections-1203549445/ Q1 2020 RECALL INDEX: PRODUCT RECALL DATA, TRENDS AND PREDICTIONS FOR EMEA INDUSTRIES 49
SAFETY GATE INSIGHT AND ANALYSIS The European clothing market has evolved rapidly As to be expected, children’s clothing, including over the past decade. Consumers are demanding baby bodysuits, continued to pull in the most recalls, more from retailers, and the big players need to be accounting for 60% of those placed. This follows suit nimble, have a robust digital strategy and get trend- from Q1 2019, in which we saw children’s clothing led products to market – fast. As well as efficient supply sets also topping the list. The most common risks for chains and production lines, clothing retailers are now children’s clothing include strangulation and choking, expected to act as ‘civic brands’ – taking an “active as many items are made to expand with growth in stance on social issues, satisfy consumer demands height and weight in young people and so include for ultra-transparency and sustainability, and, most drawstrings and cords. importantly, have the courage to “self-disrupt” (The State of Fashion 2019, McKinsey). All of the above can As we approach the warmer months, we would usually result in huge pressure for retailers and manufacturers. expect recalls in clothing to rise as the purchase of summer clothing rises and seasonal sales are While the number of recalls in the clothing industry is launched. However, with overseas holidays sharply slightly up on Q4 2019 from 27 to 33, they are lower declining and the nature of shopping habits restricted, than the same period of 2019 (35) and markedly lower this year may be an anomaly. than the same period of 2018, which saw 48 recall notices placed in this category, with the majority A sharp rise in recalls due to a chemical risk was of these (14) placed by Hungary. As we’ve already surprising in this category, with 12 notices submitted. referenced, Hungary has seen recall instances decline This is over a third of the total recalls submitted due to over the past two years. chemicals over 2019 in its entirety (33). A proportion RECALLS BY PRODUCT 5 4 3 2 1 0 Children’s Clothing Set Children’s Sweatshirt Slippers Baby’s Bodysuit Leather Shoes Children’s Sports Trousers Children’s Shirts Babies’ Clothng Sets Men’s Sandals Gilrs’ Clothing Sets Q1 2020 Q1 2019
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