Voluntary Product Withdrawal Cost

In cases of a voluntary product withdrawal, it’s essential to consider the extensive distribution costs. An average scenario assumes a product is available in 10,000 stores through 30 distributors. Each case contains 12 units, and store shelves average 18 units per shelf. Additionally, 10% of shelf stock is held in warehouse inventory. The brand sells each case to distributors at $30.00.

If a full recall were necessary, the estimated deduction from sales revenue would be calculated at $495,000.

In addition to the impact on sales revenue, this calculation does not account for the effort required from brand employees to manage the recall process, the administrative burden of handling accounting adjustments for deductions from retailers and distributors, the inconvenience caused to retailers, or the disruption it creates for store employees.