Discounts for sewing defects?

I imagine these questions will spark some rousing debate. Anonymous writes:

  1. 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).
  2. 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.

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  1. bethany says:

    Ok, I will bite. I was waiting for someone else to post, but I guess I will dive right in.

    Personally I think there should be no damages. But of course, being humans, nothing is perfect. I know I have had many problems before I found my good contractor. My favorite was the (bad) contractor that switched the size 3T and 5 sleeves, which I never noticed because they were package up when I got them. I actually found out much later when I was ironing one for something. I was like, ‘these sleeves seem kind of long!’ LOL! By then it was too late. The contractor had been paid.

    I just had a problem with my samples for one design of t-shirts. The samples for one screened design came back and the different colors didnt line up- they were off by as much as 1/4″! I quick scrambled to get new blanks and told the screeners I wasn’t going to pay for the botched ones and took off the price of the new blanks. We have worked together for a while, so neither of us wanted to piss off the other. I thought it was a fair trade.

    My question is this: what about when you give a contractor a deadline and they miss it? Do you take off a percentage? Do you just suck it up? Personally I have yet to ship late, but I have heard of others who had contractors give them their production up to 2 weeks late. How do you pay the contractor? Do you charge them for the bounced boxes? What about for the little perk you offer your stores so they will accept your shipment like free shipping? Do you charge the contractor for the free shipping? These are what I ponder while lying awake in bed at night! LOL!

  2. Kathleen says:

    I was waiting for someone else to post, but I guess I will dive right in.

    I’m glad you did! I was totally bummed and thought it’d be something for discussion.

    My question is this: what about when you give a contractor a deadline and they miss it? Do you take off a percentage? Do you just suck it up?
    I don’t know but these are good questions. I’m thinking this should be a point of discussion when placing the work. You know, coming to terms before something goes awry? I’m going to ask my friend Tom, he’s a contractor.

    Do you charge them for the bounced boxes?
    I don’t know, probably not if you can place it elsewhere or use it for re-orders. The issue is tho, if you chargeback the contractor (and collect or successfully with hold it), you probably can’t get more than the cost of service. Iow, you couldn’t get the full value of the shipment.

    What about for the little perk you offer your stores so they will accept your shipment like free shipping? Do you charge the contractor for the free shipping?

    [You know what really annoys me? When somebody is way past deadline, then they express ship it and charge ME for express shipping! I refuse to pay that. When I ship late, I pay the entire cost of shipping. I figure it’s the least I can do.] If you can get the store to accept the late order with the free shipping perk, I think that should be a point of discussion also when placing the contract. Then again, you just might be so friggin grateful to have dodged a bullet and take the loss. Still, it could be a point of negotiation with that contractor in the future. Save your receipts to show later.

  3. I love this post! Kathleen, thanks for stopping by the RuffleBlog to comment on our similar issues. This has been such a huge topic for our company, as I was not experience in apparel production when I launched RuffleButts.

    It is an ongoing battle when you are a small company to get the pricing that you need to have a profitable business, while still being an important client to a factory, worth the effort to them to maintain the quality level needed. While our factory is willing to work with our smaller production numbers (although these are increasing quickly and giving us a bit more leverage), we have dealt with one issue after another when it comes to quality. I don’t think this is because they don’t care about us, but more because the factory is run with horrible management and a huge lack in quality control.

    We worked through the issues the first time around and found vast improvements giving me hope that there was an end in sight to my production delimas. Well, after a year in production, we are now having more issues, which led me to write that lst post about cutting our losses. I do believe that a factory should be held accoutable for their damages, but the big question, is how do you do this? With such low costs per garment, our cost of correction is quite often more than the original construction itself. You also have to factor in the loss of materials and trims that were wasted with complete loss pieces. We are learning a lot of lessons as we go, but that is one we are working on currently…a set agreement with our manufacture to address damaged goods.

    And the question about late shipments…yet again, we are super experienced with this issue, as we are constantly struggling with our factory to deliver on-time, even when we build in literally months to cover shipment delays. Where I am not an expert, is how to correct this problem. I, as the previous comment, refuse to pay extra shipping fees to express late products, but I can’t figure out how to change the process from the root, so I don’t have to deal with express shipments in the first place.

    Well, I will keep you updated as we continue to learn and grow. And I always love hearing your opinions and advice as the expert!

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