Case Study

Manufacturing Company Reduces Product Liability and Costs Resulting in Improved Brand Reputation and Profitability

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Client Situation

A medium-sized manufacturing company, a global leader in making a particular kind of heavy equipment that required human/machine interaction, was experiencing product safety issues to the extent that some customer accidents had led to severe injuries and even death. In addition to the ethical issues, this was resulting in a high number of lawsuits, increased product liability insurance costs, increased legal costs, and negative impacts on its corporate image. Even though the company’s competitors were having similar experiences, there was an opportunity to mitigate the company’s exposure to product liability and further differentiate itself from competitors.

Solution

The CEO, realizing that action had to be taken, decided to make his CFO, now a E78 principal, head of this effort. First the CFO established a formal Product Safety Team comprising engineering, field service and marketing representatives and led by himself. With this group acting as the steering committee for product liability, the Product Safety Team established:

  • Formalized requirements for hazard analyses and risk assessments for all existing and new products.
  • Formal annual training of engineering, sales, and service teams to educate and raise awareness of all safety issues, coordinated by the CFO.
  • Establishment of formal policies on reporting observed product safety issues in the field.
  • Contact with customers to notify them of needed changes or upgrades in equipment to keep their plants safe.
  • Annual reporting to the Company’s Board of Directors

Results

The company’s product liability lawsuits were reduced from an average of three to five per year to an average of less than one per year. There was a significant reduction in product liability related costs, with a reduction in premium rates of more than 50 percent, ultimately resulting in meeting an industry rating for “self-insured retention” that is rarely seen for a very highly engineered industrial product line.  The company became more profitable after establishing the safety initiatives and safety became one of the Company’s “Pillars of Success.”

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