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RESEARCH PRODUCT

The magnitude of a product recall: offshore outsourcing vs. captive offshoring effects

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The escalation in product recalls in recent years is attributed to the rise of globalisation and associated challenges of offshoring. Extant SCM research suggests that product recalls have a significant negative impact on financial performance, but gaps exist relative to the managerial actions to minimise their impact. Recall response strategies have become more important in the press, given that a single recall may result in the mandatory withdrawal of millions of products from the market, with firms incurring enormous logistics costs and brand damage. In this study, we address this gap in the research, and using a measure of product recall defined as the volume of products withdrawn from the market due to product quality failure. We explore the scale of the recall in the context of pharmaceutical sector global sourcing strategies, exploring whether the variation in global sourcing decisions not only increases the likelihood of a recall, but also influences the capability to minimise the total cost of recall. Our results suggest that offshore outsourcing and captive offshoring have opposite effects in terms of their influence on the magnitude of product recall. We summarise the implications through a compelling set of insights for future global sourcing strategy research themes.