Design of Traceability Systems for Product Recall

A product recall is very expensive and a poorly executed recall can be devastating to a company’s reputation. Implementing a recall, which requires locating the defective products, can be a very difficult task in a long and complex supply chain. It is therefore important to design traceability systems in supply chains to support potential recalls. This paper focuses on traceability system design to support recall management in two aspects: (1) choose certain degree of accuracy and level of coding to help trace back the defect source and control the total recall liability in a cost-effective way; (2) avoid free-rider problems by correcting the liability misallocation, therefore motivating the supply chain to improve traceability. The goal is to provide a cost-effective framework to design the traceability system with consideration of technologies, recall liabilities, and incentives.