Allowable Defects Are Killing Your Brand Equity

December 23, 2016



By Jose R. Suarez, Founder and CEO, Impactiva


The apparel and footwear industries are famous for maintaining the same operational modus operandi despite the strength of the headwinds we are all facing. If the massive shift in retail during the last several years has taught us anything, it is that 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 systems starting with the deeper understanding of the implications that final shipment quality control sampling plans and Acceptance Quality Levels (AQL) have on the satisfaction of their eConsumers.

International Organization for Standardization (ISO) has developed standard inspection tables outlining quantities that should be inspected and the maximum number of defective units allowed in order to determine whether a shipment gets approved or rejected.

Based on the ISO tables, if for example you are a premium apparel brand selling to a retailer an order of between 501-1200 pairs, 125 units should be inspected (assumes the use of a Tightened Inspection Level III plan). It also means that if you’ve decided that the Acceptable Quality Levels (AQL) for your production and brand are 1.0% for major defects and 1.5% for minor, statistically the “consumer risk quality” of your sampling plan confirms that up to 10% of your orders could have 4.2% of the product with major defects and 5.3% with minor ones. This means that you have agreed and are satisfied that 10% of your orders can be shipped with up to 9.50% of defects.

If you are a lower priced brand and have set an AQL of 2.5% for major defects and 4.0% for minors, the “consumer risk quality” says that up to 10% of your orders can have the astronomical number of 17.5% of units with defects!

This is how our industry has been working for decades. Yet brands and retailers continue to request chargebacks to their suppliers for the arrival of poor quality, 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 burning platform for the industry is that the perception of quality of today’s eConsumers has dramatically shifted as they search for more value. When a shopper goes into a store and picks up a dress or a shirt and they find a wavy stitch line, they can simply search for another piece or ask the sales-person to check in the back room for another garment. Once verification proves that the second garment is defect free, the consumer completes the transaction and departs satisfied with his or her purchase.

When it comes to e-commerce, however, a defect like that can mean the permanent loss of a customer.  If an eConsumer orders that same dress or shirt and finds a defect upon opening the package at their home, it automatically creates a dissatisfied customer as they are now faced with the hassle of preparing a return. In most cases, that customer will not order a replacement. If they are truly dedicated to the brand and do order it again, finding a similar defect a second time could mean the shopper waves a permanent good-bye to the brand (a few years ago this happened to my teenage daughter as I saw her say in frustration, “that’s it, so much for my loyalty, three times in a row, am I beyond stupid” as she forever switched to the other main competitor – thousands of dollars of lifetime customer value lost into the wind).

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

Future survival requires building a culture of zero-defects in your eProduction-Chain

The 1.0% AQL limit or higher for major defects is no longer a viable strategy in this new shift of the world of eConsumption. The risks are too high and the damage to any brand is guaranteed. To be a leader in this new e-commerce paradigm, companies will have to improve their knowledge of the statistical implications of Acceptance Quality Levels and begin the transformation of their production-chains to a zero-defect policy, at the very least for major defects.

As a first step, a shift to using Tightened Level III sampling levels (instead of the industry standard Normal Level II) will increase the number of units inspected by 50 percent, helping to improve detection of bad quality before the required transformation to a zero-defect Acceptance Quality Level for major defects.

Another solution is to shift the focus and dollar 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 artisans who are fully engaged and cognizant of a brand’s defect requirements, and who are engaged to 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 the norm and pervasive but now the danger is the loss of an entire legion of eConsumers. Buyers can no longer afford to run their production-chains from the hands-off ivory towers at headquarters – you either begin to “own” the continuous improvement of your factories or the market will soon “disown” you! We must all begin to spend the time, energy and resources on our factories to begin implementing 21st century quality management systems, processes and procedures to bring about the goal of zero defects. The future survival of your company is at stake.