Ethics in Production Management - 5. Process Issues: Flawed Products

Some products like pillows or mailboxes, even when flawed, are very unlikely to cause any harm. Whereas products like motor vehicles, chemicals, medical devices, and children’s toys – if not designed or manufactured well, pose a high risk of severe injury.

Companies can reduce the quality of the goods and still sell them at the same price to maximize profit. By doing so, however, they can cross the line into an unethical business practice. For example, many companies turn to "downsizing" to maximizing profits. After many years of selling a 16-ounce can of food, the company might use the same packaging to sell only 14 ounces of the same food, but charge the same price, hoping consumers don't notice the difference.

The danger of reducing quality to maximize profit is damage to the company's brand and a loss of both consumer trust. If your business has one or more competitors, they can use any changes in your product or services that decrease quality as a sales tactic against you.

The Consumer Protection Act, 2019  introduces the concept of product liability, seeks to revamp the process and settlement of consumer disputes, establishes a Central Consumer Protection Authority as a central authority and Consumer Protection Councils at the district, state and national level, introduces penalties, covers unfair trade practices, unfair contracts, broadens the definition of a "consumer", among other changes.

The New Act defines product liability as "the responsibility of a product manufacturer or product seller, of any product or service, to compensate for any harm caused to a consumer by such defective product manufactured or sold or by deficiency in services relating thereto." The impact is that it is not only the manufacturer who will be liable to compensate a consumer but also the seller if it fulfils the conditions mentioned in the New Act. The New Act allows a person to raise a product liability action by means of filing a complaint before a District Commission or State Commission or National Commission.

Manufacturer Liabilities

The New Act sets out the following scenarios in which a product manufacturer shall be liable:

  • the product contains a manufacturing defect, or
  • the product has a defective design, or
  • there is a deviation from the manufacturing specifications, or
  • the product does not conform to an express warranty given by the manufacturer (even when the manufacturer proves that it was not negligent or fraudulent in making the express warranty for the product), or
  • the product does not contain adequate instructions or any warning regarding improper or incorrect usage of correct usage to prevent harm.

The CPA 2019 provides for detailed ambit on product liability with specific responsibilities and liabilities of a 'product manufacturer', 'product service provider' or 'product seller', of any product or service, to compensate for any harm caused to a consumer by such defective product manufactured or sold or by deficiency in services relating thereto.

Product Recalls

 In India almost all automobile recalls were initiated by companies whereas in the food and drugs case they were imposed by regulatory authorities. A case in point is the Maggi recall initiated by the Food Safety and Standards Authority of India (FSSAI).

Research suggests that firm-initiated preventive recalls are indicative of mature internal quality control systems which may be the case in automobiles.

Though consumer protection laws have existed in India, an integrated regulatory framework for product recalls has been largely absent, unlike in other countries. However, increasing consumer awareness, high profile recalls and the attention of policy-makers are helping the product safetymovement gain momentum through regulators such as the FSSAI, Central Drugs Standard Control Organisation (CDSCO) and the Society of Indian Automobile Manufacturers (SIAM).

The FSSAI and SIAM introduced the recall process draft and code in 2011 and 2012, respectively, but there is need for stronger enforcement of safety standards and recall data.


Circular Economy


A circular economy is a systemic approach to economic development designed to benefit businesses, society, and the environment. In contrast to the ‘take-make-waste’ linear model, a circular economy is regenerative by design and aims to gradually decouple growth from the consumption of finite resources. After defining what an economy actually is, this learning path explores the nuances of the concept of a circular economy, including the difference between biological and technical materials, the different opportunities that exist to keep materials and products in use, and the history of the idea. Finally, the benefits of shifting from a linear to a circular economy are highlighted.

Itis based on three principles:

·         Design out waste and pollution

·         Keep products and materials in use

·         Regenerate natural systems

 



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