Trade-off between cost of traceability within a small and large commercial meat plant and economic benefits of reducing the number of recalls and size of recalls

Bryan Lindley

ISU General Staff Papers from Iowa State University, Department of Economics

Abstract: Is the benefit of reducing the size or probability of a recall worth the cost of the system? Recalls have the potential to incur large cost associated with loss of product, negative publicity, and legal judgments. A model including the cost of traceability, probability that a recall occurs, costs associated with a recall, and severity of recall events is simulated using a random draw of probability and average size from a given distribution for both a 400 head per day and a 5,000 head per day beef plant. For a small plant, it was estimated that the reduction in size of recall by 77 percent is required to breakeven while a greater than 99 percent reduction in probability is required. For a large plant, the breakeven point plant is found at a 7 percent reduction in size of a recall and 15 percent reduction in the probability of a recall.

Date: 2007-01-01
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