Case Study
Johnson & Johnson
On January 26, 2011, health care conglomerate Johnson & Johnson announced that earnings had declined in the fourth quarter of the previous year, and lowered its estimates for its earnings for 2010. The firm claimed that the weaker results could be attributed to the depressed economy and to a string of product recalls. Sales figures do indicate that Johnson and Johnson has clearly been hurt by 17 recalls since September 2009, covering several over-the-counter medicines, a batch of contact lenses and some hip replacements.
The most serious problems have surfaced at McNeil Consumer Healthcare, which has had to recall many of its products, including one for an estimated 136 million bottles of children’s Tylenol, Motrin, Benadryl and Zyrtec – the biggest children’s drug recall of all time – that were potentially contaminated with dark particles. Johnson & Johnson has been excoriated by the Food and Drug Administration for failing to catch McNeil’s quality problems. The agency slapped one of McNeil’s plants with a scalding inspection report, causing the company to close down the factory until 2011.
In response to these problems, Johnson & Johnson recently announced that it intended to revamp its quality controls, creating a single framework for its consumer, pharmaceutical and medical device divisions. Ajit Shetty, the corporate vice president responsible for supply chain operations, will oversee the new system, reporting directly to William C. Weldon, the firm’s chief executive. The company said it also planned to appoint chief quality officers for each of its three major divisions.
The decision to create a more centralized form of quality control was a difficult one for Weldon. The firm has relied heavily on acquisitions to grow over the years, resulting in a collection of as many as 250 different operating companies that are spread over 60 countries. Johnson & Johnson has been committed to providing each of these units as much
On January 26, 2011, health care conglomerate Johnson & Johnson announced that earnings had declined in the fourth quarter of the previous year, and lowered its estimates for its earnings for 2010. The firm claimed that the weaker results could be attributed to the depressed economy and to a string of product recalls. Sales figures do indicate that Johnson and Johnson has clearly been hurt by 17 recalls since September 2009, covering several over-the-counter medicines, a batch of contact lenses and some hip replacements.
The most serious problems have surfaced at McNeil Consumer Healthcare, which has had to recall many of its products, including one for an estimated 136 million bottles of children’s Tylenol, Motrin, Benadryl and Zyrtec – the biggest children’s drug recall of all time – that were potentially contaminated with dark particles. Johnson & Johnson has been excoriated by the Food and Drug Administration for failing to catch McNeil’s quality problems. The agency slapped one of McNeil’s plants with a scalding inspection report, causing the company to close down the factory until 2011.
In response to these problems, Johnson & Johnson recently announced that it intended to revamp its quality controls, creating a single framework for its consumer, pharmaceutical and medical device divisions. Ajit Shetty, the corporate vice president responsible for supply chain operations, will oversee the new system, reporting directly to William C. Weldon, the firm’s chief executive. The company said it also planned to appoint chief quality officers for each of its three major divisions.
The decision to create a more centralized form of quality control was a difficult one for Weldon. The firm has relied heavily on acquisitions to grow over the years, resulting in a collection of as many as 250 different operating companies that are spread over 60 countries. Johnson & Johnson has been committed to providing each of these units as much