Tuv: Cost Barriers to Improving Product Safety Unfounded

Munich / DE. (ts) Perceived cost barriers to improving product safety are unfounded, indicates new independent global research released by Tuv Sud AG, one of the world´s leading providers of testing, inspection and certification services. The study, named the «Tuv Sud Safety Gauge», to the contrary suggests that escalating consumer demand coupled with substantial annual recall costs, mean investing in enhanced product safety should not only improve consumer well-being but drive commercial success. The research is the first to investigate product safety practices alongside consumer attitudes and experiences in the consumer electronics, children´s products and food sectors.

Consumer Demand

Business Expense

More than 70 percent of consumers are willing to pay an average premium of 16 percent over standard prices for products that achieve exemplary safety standards Consumers now place product safety above brand in purchasing criteria and demand increased transparency in safety labelling Over half of consumers have experienced unsafe products in the last five years

Companies conducted an average of ten product recalls in the last five years alone, at a cost of nearly ten percent of revenue Despite improvements to product safety practices over the last five years, over half of manufacturers, distributors and retailers are still unable to trace components throughout their supply chain and half cannot guarantee that their entire supply chain meets product safety requirements

Economic Benefits of Improving Safety

On average, companies surveyed as part of the research estimated they would need to increase production costs by 19 percent to achieve the highest safety standards available. At the same time, however, they admitted with current standards in place they have had to conduct an average of ten product recalls in the last five years alone at a cost of nearly ten percent of revenue. Responses from consumers also supported the notion that improving safety standards makes commercial sense by stating safety is one of the most important criteria when purchasing a product, above brand. Nearly all (77 percent) also said they are willing to pay an average premium over standard prices of 16 percent for products that achieve exemplary safety standards.

Ishan Palit, Chief Executive Officer, Tuv Sud Product Service Division, said: «The results indicate companies are overestimating the cost required to achieve exemplary safety standards. From our experience, attaining the highest safety requires significantly less than an increase of 19 percent in production costs. Furthermore, in some instances, increases in production costs are not required at all. For example, many companies we work with have improved the safety of their products by tightening the quality and safety requirements imposed on suppliers, and thereby improving the safety standards throughout the entire value chain. It is beneficial for all companies to investigate the potential for implementing such initiatives, bearing in mind the cost of product recalls extends beyond the physical act into reputational damage and reduced future sales».

Consumers Are Driving Legislation

The «Tuv Sud Safety Gauge» also indicates concern from consumers around product safety is mounting, with two thirds (63 percent) of those surveyed stating that product safety is very important to them now, up from half (47 percent) in 2007. This appears to be having a spill-over effect with Government´s looking to tighten their legislation in response, as 58 percent of the consumers surveyed do not think that penalties imposed on companies failing product standards are strict enough. Consumer concerns are shown to be particularly high when purchasing products online (57 percent more concerned about product safety when buying online than in-store).

In addition, consumers called for increased transparency in product safety labelling. Nearly one third (29 percent), for example, said they do not understand product safety labels at all at present, suggesting companies that adhere to high standards could achieve a competitive advantage by more clearly communicating their products enhanced safety on packaging. Furthermore, 51 percent of consumers stated they have experienced unsafe products in the last five years. Cuts from sharp edges (24 percent), allergic reactions (21 percent) and injuries from product design (18 percent) were the most common causes.

The Current State of Safety

Encouragingly, the study suggests significant improvements to product safety practices have been made over the last five years in major manufacturing markets across the world. However, it also reveals more than half (56 percent) of organisations are still unable to trace all components in their products throughout their supply chain and almost half (47 percent) cannot guarantee that the entire supply chain meet product safety requirements.

Ishan Palit: «The complexity of modern supply chains in terms of both depth and geographic reach has made it increasingly difficult for organisations to trace all of the components in their products. However, complete traceability is not impossible and must be pursued because the first step to solving an issue is identifying the source of the problem».

The research findings indicate that companies still have a long way to go when it comes to improving product safety measures, with one third (30 percent) agreeing that their own company´s awareness of safety practices is low and nearly half (47 percent) believe product safety is a serious issue in their industry. In addition, half of manufacturers, distributors and retailers do not undertake any form of independent testing on their products (50 percent), despite the fact that more than 80 percent of consumers consider third party testing important.

Palit concluded: «Companies are working hard to improve product safety. However, the results of this research indicate that the issues highlighted such as limited component traceability, independent testing and awareness of basic safety practices are common across major manufacturing hubs. Hopefully this study will go some way to helping organisations understand that high product safety levels not only enhance consumer well-being but add genuine value to products and mitigate risk. These attributes are essential for remaining competitive and profitable in today´s fragile economic times».

The research was undertaken in the United States, the United Kingdom, China, India and Japan – markets that represent almost half (47 percent) of worldwide Gross Domestic Product. It included surveys of more than 5’000 consumers and 500 management-level employees in manufacturers, distributors and retailers that operate in the food and beverage, children´s products and consumer electronics industries.