Defect rate is the percentage of units sold that turn out to be faulty. The difference from shipping damage is that the fault is in the product itself, meaning it originated in manufacturing or sourcing. It is the most objective measure of supplier performance, and tracked per batch it makes visible which shipment was the problem.
The rate has to be measured per batch; a catalog-wide average hides one bad batch. Once acceptance criteria and a maximum defect rate are written into the supply contract, batches over the threshold become grounds for a return or a price reduction. Running incoming quality control on a sample of each batch catches the defect in the warehouse and stops it before it reaches the customer. Once a defect does reach the customer, the cost is not only the product; it is return shipping, a negative review and a lower store rating.
Defect rate = Faulty units ÷ Units sold × 100
If 35 of 500 units in a batch come out with stitching faults, the rate is 7 percent; if the contract threshold is 2 percent, the difference can be charged back to the supplier.
The rate has to be measured per batch; a catalog-wide average hides one bad batch. Once acceptance criteria and a maximum defect rate are written into the supply contract, batches over the threshold become grounds for a return or a price reduction. Running incoming quality control on a sample of each batch catches the …
Knowing the term is not enough; you need to know which lever to pull. In a free 30-minute call we look at your store's actual numbers.
Get a free analysis