Supply chain blunders cost Johnson & Johnson $900 million

Battered by product recalls in 2010, Johnson & Johnson is facing the repercussions of its supply chain blunders as it announced its fourth quarter profit fell from the year prior. The consumer products giant also forecast 2011 earnings well below analyst' estimates.

The New Jersey-based conglomerate was bogged down in controversy last year after many of its medicine offerings, including Tylenol, Motrin and Rolaids, were recalled following consumer complaints that the products smelled of mold and in some cases, contained metal pieces.

J&J's McNeil Consumer Healthcare division was responsible for a majority of the recalls, placing warnings on 40 of its over-the-counter brands since late 2009. In total, J&J affirmed that the recalls cost it $900 million in lost sales - $300 million more than the company originally predicted in July.

J&J chief executive William Weldon said on a conference call that last year was both "difficult and disappointing," asserting that the company is engaged in an "uncompromising effort" to ensure its supply chain does not suffer the same setbacks in the future.

However, Wells Fargo analyst Larry Biegelsen wrote in a report that J&J's supplier problems could have long-term consequences: "Consumers are reluctant to switch back and are continuing to switch to other brands. If this trend continues, we believe that growing consumer loyalty to new brands or comfort with private labels could slow McNeil recovery relative to expectation."