I imagine these questions will spark some rousing debate. Anonymous writes:
- Is it reasonable to expect a lower price from our contractor on second quality goods? If so, how much of a reduction is fair to everyone? We won’t sell them, so we can’t recoup any costs for these (although I know many manufacturers will sell them at a discount).
- Seconds are inevitable in any manufacturing process; what is the typical acceptable defect rate for sewn goods? I’ve seen numbers around 2-5%.
I’ll answer the second question first (feel free to chime in) since it seems the easiest, kind of, sort of. I’m not sure I agree that “seconds are inevitable in any manufacturing process”. The major tenet of lean manufacturing is that they are not. I wrote an entry before on how to prevent sewing defects which I’d encourage everyone to review (one of my faves). Perhaps this is a matter of semantics, defects enter the work stream but if your process is in order, products should not leave the system wholly constructed. In other words, if a defect is introduced somewhere during the process of construction, that item should not be completed but set aside at the point the error is discovered. Go read that article, it explains it better.
For the purposes of this discussion in the context of the first question (lower price for defective goods), an item upon which work has ceased, can still be repaired before it is completed meaning one will receive a good product for the agreed upon price and no discount is needed. Sure, there’s an internal cost the contractor must absorb but it only affects you indirectly and then, only if this happens a lot. I wouldn’t expect that to be the case though because if they had a lot of errors, they wouldn’t be the sort of operation to stop work if defects were found mid-stream so we’d be dealing with the first question of discounts.
As far as an acceptable defect rate, I’d say none is appropriate. Seriously, what would you all expect me to say? A far more interesting question to me is where and how defects happen. There is little I find more interesting than that. My favorite consulting work is to troubleshoot defects. In answer to the question, I don’t know what is considered acceptable by other enterprises. Professionally, my goal has always been to have a defect rate so low that it is immeasurable. As I told this person by phone, I worked at one plant that had a four person team working full time repairing defects. Two years later, they only had one person working one day a week making repairs and that was often due to a consumer who’d sent their jacket in because they’d torn a portion of the garment and needed a piece replaced.
The first question, what’s an acceptable discount is much harder to answer, everyone struggles with this. Usually I’ve recommended that the discount be tied to the cost of repairs. I don’t know what the answer is if the item can’t be repaired because in part, that is a relationship question. Is this contractor a party with whom you would like to continue to do business? Is there a chance that any of the fault lies with you (a bad pattern).
Some cases of defective units are tied to components. The contractor has done nothing wrong but the client supplied component fails meaning you have to go back to the component supplier for redress. This has happened to several clients. In these cases, the discount covering the cost of repair was sought from the component supplier. One case was particularly egregious because the item was designed to be subject to a lot of stress (it failed miserably) and its maker trotted out all number of data to promote the product. It was critical in that failure could have easily meant serious injury to an infant.
Speaking of, costs escalate dramatically if the component or product failure isn’t realized until after lots have been shipped to customers because that involves a product recall. One of our DEs had to go through that a couple of years ago and she said she’d write about it but then got too busy. Pity, she knew it all and had some advice on how to handle the practical aspects as well as damage to one’s reputation. Considering the latter, I don’t know how one could possibly recover those (costs being difficult to quantify) outside of an expensive lawsuit.
So, feel free to weigh in with your experiences and advice on how to determine appropriate discounts for defective goods. It would be best to couch this under two scenarios. One in which you have a good and productive relationship with the contractor and intend for the relationship to continue and one scenario in which you’d consider severing ties and prefer to recover the full value of your losses assuming it were possible.