Untrimmed thread apparel quality control

Defect Calibration: A Key Tool for Reducing Errors and Chargebacks

By Jose Suarez

In the fast-paced, competitive apparel and footwear industries, quality has always been important. However, with rising material and labor costs, combined with the growing pressure for faster deliveries and the proliferation of styles, minimizing defects is no longer just important; it’s essential.

Therefore, as part of their efforts to ensure short- and long-term growth, forward-thinking brands are investing in defect calibration, the practice of minimizing quality discrepancies that exist when a product is manufactured.

Untrimmed thread apparel quality control

The Importance of Outlining Quality Standards and Expectations

To achieve effective defect calibration, brands must methodically outline quality standards and expectations regarding defect classification with their factories.

While this action may seem obvious, consider the state of communication and understanding at your factories. If you were to ask the key 15-20 people at each factory (those who have an important impact on the quality of your product) to clearly state what you as the buyer define as a critical, major, and minor defect, would their answers be consistent? Probably not.

From the merchandiser to quality control managers and operators, few are likely to have a firm understanding of your expectations regarding defects.

It gets worse. Now consider the state of communication between you and your retailers. Like your factories, the likelihood is that you do not fully understand each of your retailer’s standards for critical, major, and minor defects.

If you are not clear on each retailer’s expectations, how can you relay the correct standards to your factories? You can’t.

 

The Loose Thread Example: Major or Minor Defect?

A clear example of the confusion and costs created by poor defect calibration can be seen in the inconsistent ways a loose thread is classified.

Traditionally, a loose garment thread is classified as a minor defect, However, if the thread is overly long, some parties may classify it as a major defect. But how long? The problem is that most companies do not specify the exact length at which a thread should become a major defect.

This lack of clear expectations may result in costly, avoidable quality errors.

 

Employing a Retailer-Specific Approach to Defect Calibration

It is important to note that while you and your factories may have different opinions on what constitutes critical, major, and minor defects, the opinions that should truly guide your standards are those of your retailers and consumers.

If consumers of a particular retailer tend not to care about a small, loose thread and pay for the product without requesting a discount, the defect should likely be classified as a minor defect. However, if the defect is significant enough that consumers of another retailer tend to purchase the product only at a 30-50 percent discount, it should likely be classified as a major defect.

Thus, since retailers have different expectations of product quality, based on their consumer base, brands should define and adjust their defect classifications accordingly. Then, they should educate their factories on the specific quality standards applicable to each product.

 

Adopting Factory Defect Books

Communicating quality specifications can take many forms, but chief among them should be the adoption of factory defect books. Distributed to your operations team and key personnel at each of your factories, defect books are manuals that clearly classify each possible defect as a critical, major, or minor, thereby turning your quality expectations into an objective standard.

For instance, the books should include pictures and figures specifying the length at which a loose thread is classified as a major defect. Further, if the brand or retailer has multiple sets of quality specifications (e.g., one for a mass-market line and one for a top-tier line), books should be created for each.

As issues arise and new determinations are made regarding a defect classification, defect books should be revised with new, descriptive pictures. In addition, books should be reexamined, updated, and reissued to factory personnel after each update.

Ultimately, by establishing precise quality specifications that align with retailer expectations, then effectively communicating them to your factories with tools such as defect books, brands stand to gain significant savings through reduced errors, chargebacks, and lost sales.

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Understanding Your True Cost of Poor Quality and How to Reduce It

By Jose R. Suarez, Founder & CEO

In today’s competitive apparel and footwear industries, brands regularly focus their efforts on acquiring new customers, increasing distribution networks, and preparing next season’s products. But what about reducing their cost of poor quality?

Despite their success in other areas, companies that do not understand and address their true cost of poor quality face substantial barriers to long-term growth.

Poor quality can weaken consumer relationships, damage your brand, and add major operational and financial costs.

 

The Underestimated and Compounding Effect of Poor Quality

The cost of poor quality comprises not only the costs resulting from product defects, but also company processes, practices, or functions that generate defects and errors.

For instance, consider the effect of a continued weakness within invoicing and logistics. The error may result in shipments of the wrong product, yielding increased freight costs, chargebacks, and even lost sales.

Similarly, errors in the product development stage may result in a host of additional costs. Suppose first samples are not adequate; additional money must be spent on couriers and redevelopment, with compounding errors leading to production delays, chargebacks, and cancelled orders.

In fact, companies lacking effective quality management often have a cost of poor quality equal to 20 percent of sales or more, according to a recent American Society for Quality guide.

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Identifying the Five Major Categories of Your Product Cost of Poor Quality

To establish and benefit from effective quality management, quality guru Philip Crosby recommends that brands first understand and measure their cost of poor quality.

This step, what Crosby refers to as the “awakening,” entails identifying the costs of not conforming to requirements within the supply chain. Namely, companies must recognize the five major categories of the cost of poor quality:

  1. Rework costs
  2. Freight costs
  3. Chargebacks
  4. Product returns (replacement or cancelled orders)
  5. Lost sales (probation or permanent loss of customer)

 

1. Rework Costs

If you ship a defective product, the customer may ask for it to be reworked in your warehouse. For instance, if a garment is incorrectly labeled, you may need to spend $1, $2, or more per piece to open the packages, cut out old labels, print and attach new labels, and ship it back to the customer. Further, if the product itself needs rework, a frequent occurrence with footwear, the repair cost at a local rework facility can easily exceed $3 per piece.

 

2. Freight Costs

How many of us have supply chains that generate up to 20 percent late shipments, forcing us to incur millions of dollars annually in airfreight to deliver products on time? Even worse, how many of us have suffered from the delivery of a defective product that is the showcase item for our top customer’s key campaign, requiring us to rush a replacement production order that includes hundreds of thousands of dollars in airfreight?

In addition, how frequently do we negatively impact our bottom line by having to invest in additional in-land freight to pick up defective products from disgruntled customers?

 

3. Chargebacks

In today’s difficult retail environment, where consumers are demanding more value for their purchases, including product quality, retail customers are rightly requesting substantial chargebacks for un-conforming products. It has become commonplace for a seller to receive a claim for $25,000, $50,000, or $100,000 for even the slightest of product variances.

 

4. Product Returns (Replacement or Cancelled Orders)

If a customer chooses not to keep a defective shipment of garments or shoes, at best you may be able to negotiate a quick replacement. At worst, you receive a cancelled order. Should we not keep track of the loss gross margins that defective product returns have on our profitability?

 

5. Lost Sales (Probation or Permanent Loss of Customer)

Finally, a pattern of defective shipments may lead a major retailer to put your brand on probation, lowering your subsequent order volumes. If the retailer represents a significant portion of your sales, the cost of this action can be devastating. Even worse, the retailer may decide to sever the relationship altogether.

How many of us consistently lose customers because of deliveries of bad products? What impact does this continuous erosion of your topline sales have on the future growth, or even the survivability of your company?

 

The Fallacy of Passing Charges on to Factories

While the true cost of poor quality can be staggering, corporate finance departments often do not capture these costs. Further, even those that do often assume that the costs are of little consequence to their bottom line, as the general philosophy in our industry is that we “simply pass them on to the factories.”

In the world of operational excellence, this is called “fools gold,” as factories will need to “pad” their future costs with those chargebacks to maintain their financial viability. As a result, you will end up paying a higher price per piece, as the factory is assuming there will be future quality claims.

Also, in the current business climate, where consumers reward those brands that are eco-friendly, is it commercially sound to accept that billions of dollars are being wasted on our planet’s limited resources for un-sellable returns sitting in our warehouses or being sold at a discount?

 

The Path Forward: Working with Factories to Eliminate Quality Errors

To successfully reduce the product cost of poor quality, companies must:

  • Accurately keep track of the five major costs due to poor quality
  • Identify key errors throughout their supply chains
  • Implement corrective action plans to significantly reduce such waste from having a corrosive impact on their bottom lines

In addition, they must invest time and money in the hiring of process-minded professionals who can work with their factories to implement effective quality systems.

Ultimately, for brands that achieve the final step of quality management, what Philip Crosby terms “certainty,” remaining errors may drop to 2.5 percent of total sales—the equivalent of millions of dollars in savings for a company and its shareholders.

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Allowable Defects Are Killing Your Brand Equity

by Jose R. Suarez, Founder & CEO

The apparel industry is famous for maintaining the same modus operandi despite the strength of the headwinds it faces, but if the massive shift in retail this year taught us anything, dramatic experimentation and change is a must—and survival is at stake.

One blind spot for brands is the need to update their quality control sampling plans. Sampling plans refer to the percentage of units to be controlled during a final shipment inspection and the number of defective units that are acceptable.

The International Organization for Standardization (ISO) has developed standard tables outlining quantities that should be inspected and the tolerance for defective pieces, in order to determine whether a shipment gets approved or rejected.

Based on those ISO tables, if you are a premium footwear brand selling an order of between 501-1200 pairs of shoes to a retailer, for example, 125 pairs of shoes should be inspected. It also means that if you’ve decided the Acceptable Quality Levels (AQL) for your production and brand are 1 percent of major defects and 1.5% of minor, statistically, the “consumer risk quality” of your sampling plan confirms that up to 10 percent of the orders could have 4.2% of the goods with major defects and 5.27% with minor ones. This means that your brand has agreed, and is satisfied, that up to 9.47% (4.2% + 5.27%) of defects can occur in 10 percent of your orders.

If you are a lower-end brand with an AQL of 2.5% major defects and 4 percent minor, the consumer risk quality says up to 10 percent of your orders can have an astronomical 17.49% (7.29% + 10.20%) of shoes with defects!

This is how the industry has been working for decades, yet brands and retailers often still return to their suppliers voicing concerns that there are too many unsellable items in their shipments—even though the brands and retailers are ultimately the culprits, as they are the ones that have set, and thus accepted, the statistics behind the agreed upon AQLs.

The main issue is that the consumer’s perception of quality has dramatically shifted.

When a shopper goes into a store and picks up a dress or a shirt and the stitching line is off or wavy, they may choose a different one of the same size or inquire with the sales person to see whether there are more in stock. Chances are, the next one won’t have the same defect, so the consumer will complete the transaction.

When it comes to e-commerce, however, a defect like that can mean the permanent loss of a customer.

If an e-commerce shopper orders that same dress or shirt and finds the wavy stitch once the package arrives at their home, it automatically becomes a return. In most cases, that customer will not order another one. But if they are truly dedicated to the brand and product and do order it again, finding a similar defect a second time could mean the shopper waves a permanent good-bye to the brand.

Research performed by some brands confirms that for every one complaint received, another 25 consumers will not bother to complain at all, so the negative, long-term impact on the brand is considerable.

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Using a Tightened Inspection Level III plan

The 1 percent tolerance limit for major defects is no longer viable in this new product-being-received-at-home environment. The risks are too high and the damage to any brand is guaranteed. To ensure survival in this e-commerce era, buyers must transform their supply chains to ensure a zero defect policy.

To be a leader in this new e-commerce paradigm, companies will have to improve their knowledge and correctly set their quality control sampling plans relative to current consumer expectations.

A shift to using Tightened Level III sampling levels (instead of the industry standard Normal Level II) will increase the number of units to be inspected by 50 percent, helping to improve detection of bad quality in the required transformation to a percent AQL on major defects.

Another solution is to shift the focus and spend to quality assurance versus quality control.

Buyers will have to work to get their factories to take full ownership of quality so that the very low value-added final shipment quality control is altogether eliminated. Instead, it should be replaced by factory operators who are fully engaged and cognizant of a brand’s defect requirements, and who will take pride in not passing defective units from one step of the process to another.

Our industry is at a tipping point and factories need the direction and leadership from brands and retailers to force this paradigm shift in quality.

Chargebacks and markdowns for bad quality are pervasive but now, and even more damaging, is the possibility of losing a consumer completely.

Buyers can no longer afford to run their supply chains from ivory towers—they must spend the time, energy and resources on their factories to start implementing the quality management systems, processes and procedures to bring about the goal of zero defects going forward. The future survival of your company is at stake.

Businessman taking oath.

Here’s How to Curb Bribery in Quality Control

by Jose R. Suarez, founder & CEO, Impactiva

 

For a brand to invest all the money it does in quality control and compliance, corruption in the supply chain shouldn’t render it all for naught.

Unfortunately, in the QC business, corruption is endemic and bribery is common. But with the right procedures in place, curbing both is possible.

Businessman taking oath.

For one, brands, just like quality assurance companies, should have anti-corruption policies in place that do things like forbid quality control technicians from accepting gifts from vendors or invitations to lunch or even free transportation from the airport to the hotel—there should be nothing that functions as a favor to a quality control technician.

Sometimes factories are far out from where a technician lives, and the only possibilities for eating or getting transportation is with the help of a factory. In cases like this, quality control companies should pay the factories market price for the meal and the transport they help provide to the technicians.

The lack of reasonable pay for quality control techs is a major part of what poses the above problem, but bribery can be so rampant that major testing companies have admitted to not raising their inspectors’ salaries because they know the benefits from the factory’s kickbacks can be substantial.

In one case the GM of a major Chinese factory had an agreement with a brand’s QC to give the inspector 2 percent of the shoes produced to sell online, and they would divvy up the profit. Another retailer got fed up and rid itself of all of its quality control inspectors because some were taking 2,000 to 3,000 yuan ($300 to $450) per container from the factories to perform the inspection and create a favorable “pass” report. Instead of maintaining their in-house inspection team, the retailer shifted the ethics controversy upstream to their QC inspection company to be rid of the problem.

In managing the improvement of their factories, it’s easier, some brands have said—however unfortunately—for factories to pay off a brand representative to approve the “right” metrics, because then the factory won’t have to invest in transforming themselves. They’ll just benefit from false metrics.

That’s a testament to how messed up our society is.

Cutting down on ethical issues in quality control begins with the inspector hiring process. Quality control companies need to be firmer on issues of ethical compliance, as should brands. Building a culture in your company that strengthens the sanctity of the quality control process begins with the interview process, with as many questions as possible to suss out who seems honest and who may not be. Once you get dishonest people in the company, the cancer is inside and it spreads from there. Even then, when QC inspectors go out into the world, there is no guarantee that they will be honest and ethical.

That’s where penalties come in. And they have to be harsh to have meaning.

When a factory tries to bribe an inspector from a third-party QC provider, photographic evidence should be taken of the actual bribe, whether a red envelope with cash in it or gifts in other forms. Then the QC can confront the factory with the evidence, have them admit to attempting the bribe, and brands can be notified about their suppliers’ unethical activities.

That sort of public punishment and the risk of potentially losing business after multiple dishonest activities can help keep factory owners in line and rampant corruption out of the supply chain.

The nonsense has to be stopped, especially because bribery and corruption, in general, affects the disadvantaged classes the most as money is siphoned off at higher levels without making it down to those who most need it. In the case of unethical quality control, bribery increases the price consumers pay, and even worse, dramatically diminishes the quality of the products they buy.

Now the question is: are apparel companies willing to support an ethical quality control process and implement a zero tolerance policy, penalizing those factories and QC inspectors who are unethical?

It should be feasible for apparel companies to scale back on factories who repeatedly bribe QC inspectors because of the many alternative sourcing options that exist. A typical brand or retailer may have hundreds of factories, thousands even, so it shouldn’t have a major impact on them to stop using two, three or four of them over compliance concerns.

Rarely do we see companies implement a zero tolerance policy. If we look at society in general, corruption happens everywhere, like in politics. The problem is, people believe they have a right to a company’s or supplier’s money above and beyond what they’re already earning. And in some societies, bribery and corruption is more widely accepted than in others, making it even more difficult to root out this cancer that plagues our society.

 

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Lining tearing – Case #491

“A picture is worth a thousand words”. Practical solutions to problems encountered in the manufacturing process that demonstrate how we assist our customers’ factories to produce Right from the Start TM.

Problem: the lining was tearing under the eyelets (handbags).

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Impactiva solution: we got the factory add a layer of non-woven and two layers of leather to give strength to the reverse side of the lining.

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Stay tuned for more Impactiva technical solutions to every day production problems.

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Fold marks – Case #429

“A picture is worth a thousand words”. Practical solutions to problems encountered in the manufacturing process that demonstrate how we assist our customers’ factories to produce Right from the Start TM.

Problem: the folding of the side gusset is causing an impression (fold marks) on credit card pockets of the wallets.

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Impactiva solution: we got factory to stuff the pocket with a piece of 260 GSM paper board, in order to avoid these undesirable marks.

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Stay tuned for more Impactiva technical solutions to every day production problems.

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Handling in production – Case #419

“A picture is worth a thousand words”. Practical solutions to problems encountered in the manufacturing process that demonstrate how we assist our customers’ factories to produce Right from the Start TM.

Problem: dents and fold marks on panels due to improper handling in production.

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Impactiva solution: we got the factory to reduce the batch size and stack them properly one on top of the other.

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Stay tuned for more Impactiva technical solutions to every day production problems.

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Tab coming off – Case #405

“A picture is worth a thousand words”. Practical solutions to problems encountered in the manufacturing process that demonstrate how we assist our customers’ factories to produce Right from the Start TM.

Problem: insecure handle tab.

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Impactiva solution: we got the factory to add extra secure stitching with thicker thread in order to improve the tab strength.

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Stay tuned for more Impactiva technical solutions to every day production problems.

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Wrong direction – Case #397

“A picture is worth a thousand words”. Practical solutions to problems encountered in the manufacturing process that demonstrate how we assist our customers’ factories to produce Right from the Start TM.

Problem: the direction of the cut to fix the fittings was the other way around, i.e. against the direction of stress, resulting in the elongation of the hole and the tearing of the strap.

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Impactiva solution: we got the factory to change the direction of the cut.

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Stay tuned for more Impactiva technical solutions to every day production problems.