While I have not been involved in this directly, I imagine there should be contracts set up by the company's legal team to mitigate this. There should be clauses that protect the company if the vendor falls through and especially if their products and services are not performing up to expectations. This should protect the company from any losses if there are breaches in the contract. 

However, if the vendor evades responsibility, the company has to take necessary action to protect themselves and their customers. They should begin by immediately pulling off the affect products off the shelves and release a statement. Further testing should be done to evaluate the root cause of the issue and establish if this has always been the case with the vendor and this is a pattern repeating itself. Legal action such as suing should be considered if the consequences were dire. Otherwise, the most realistic option is to deal with a financial loss and pull all the affected products from production and evaluate new options for vendors.  

This discussion reinforces the importance of doing your research and requesting smaller batches to confirm the service/product you are requesting meets expectations. This requires maintaining close contact and communication with vendors. As already mentioned, it is important that if a product a company is trying to sell requires a service or part provided by a vendor that a contract is set up to ensure that in the end, all aspects/components of the final product meet design requirements and specifications. If the product is failing verification and validation because the vendor is not meeting expectations on their end than the contract can be terminated and depending on the degree of negative cost variance may transpire into legal action or finding other vendors. I had an issue like this at work, where the manufacturer of a specific model of x-ray detector plates had made changes to the battery sizes that ended up loosely fitting in older model detector plates and had to be refunded and recalled.

I wanted to expand on @srp98 response and how they mentioned that a legal team could get involved during a situation where the vendor delivers a subpar product to the company and are unsure how to proceed. The company can legally reach out to the vendor and inform them where the product was unsatisfactory as per their agreement. This can include official meetings to engage in communication where the company may request for the vendor to change their design and fulfill the original contract or the company may request for compensation from the vendor to alleviate any losses incurred by the company. If this does not seem to resolve the problem then the company may choose to take legal action through arbitration in court, however, this is a lengthy process that has an unknown outcome. The safest route for the company would be to terminate the contract with the vendor regardless of the extra costs the company may face. At the end of the day the company needs to deliver quality products to its customers and they must always strive to achieve the best results in their work.

Auditing suppliers/vendors and their products is a key step to figuring out if a company will be a good fit to your need. Additionally, it is extremely important to create a binding contract to hold the vendors responsible for any quality issues linked to their goods. However, if a company realizes there might be product issues that are tied to vendor quality, there are a few things a company can do if the vendor does not take responsibility. One is evaluating the root cause of the issue (hopefully linked to vendor quality), which can be an integral step to hold the vendor legally liable. Additionally, it is important for the company to take necessary steps to ensure customer satisfaction and safety (i.e. making a statement and recall if necessary). Lastly, if vendor culpability can be proven, it is a good idea to receive compensation via a law suit.

The first step is to investigate the vendor's product and determine the root cause of the issue. If the issue is indeed the vendor, then the buyer must assess if it's worth it to challenge the vendor. Some issues may be mild and others might be severe. If the issue is severe, then vendor must be notified of the problem. The company should always attempt to negotiate a resolution with vendor. However, if the vendor does not take responsibility or fails to provide satisfactory resolution, the company must again do a cost-benefit analysis whether or not to take legal action. This could involve filing a lawsuit against that vendor to seek damages and or terminating its current contract. In certain occasions, companies may blacklist against vendors that don't provide the minimum quality and failed to reach a solution. This can be extremely damaging as having a good reputation can affect future contracts. Other companies may take reference and not buy from the same company as well. However, most companies do include specific quality clauses and requirements. It's often the case that companies will want to constantly receive samples from their vendors and do quality control to see if the product they receive is up to par. 

A real life example is Boeing's 737 Max. It was found that Boeing outsourced the design and production of key production to vendors. Boeing failed to provide adequate oversight and quality control. One of which designed and made the Maneuvering Characteristics Augmentation System (MCAS), which was later found to be responsible for two deadly crashes that killed 346 people. Boeing got substantially fined and later changed its quality control pipeline to catch these issues.