The true cost of quality defects: How poor supplier management eats into your margins

From a lack of visibility to a lack of control

When a batch fails final inspection or issues are flagged at intake, it’s already a problem. But the real risk begins when it happens again. That’s when you know the issue wasn’t identified—or worse, that your teams weren’t equipped to trace it back to the source.

At its core, managing recurring quality issues comes down to two possible scenarios:

You have a well-structured facility:

• You know where the product was made and who among your suppliers and subcontractors handled it before it arrived at your warehouse.
• You have a clear understanding of what materials or processes were involved, and you have the certificates to back up any claims about your products.
• You can track and score your suppliers so that you can take action if this type of issue has occurred before.

You operate with little to no visibility into your suppliers:

• Your supplier data is not connected to your product data, and you have no visibility into your subcontractors (tier 2 and 3 suppliers).
• Your teams struggle to find batch-level information because it is not tracked that way or is siloed from the information you use every day.

If, like most companies, you fall into the second category, your teams can't pinpoint the source of quality defects when they occur. Instead, they typically launch time-consuming internal investigations, try to contact multiple suppliers, and hope for answers that take a long time to come. Most importantly, your teams are forced to absorb the costs because they can't assign responsibility to the right supplier.

According to McKinsey, 45% of quality problems in the fashion and apparel industry are caused by Tier 2 or Tier 3 suppliers. Yet less than 20% of brands have active visibility beyond Tier 1.

In short? If you can't track it, you can't fix it - and you certainly can't prevent it from happening again.

From poor oversight to recurring failures

Most quality defects don't come from bad intentions. They come from lack of oversight, unclear expectations, and inconsistent execution across suppliers.

When onboarding is rushed, training is superficial, and there's no structured follow-up, your suppliers may fall back on their own practices. And these are rarely aligned with your standards: Technical specifications are misinterpreted, materials are substituted without approval and agreed-upon processes are skipped under time pressure.

At first, it may look like isolated human error. But when the same mistakes happen again and again, it's no longer an exception - it's a systemic problem.

And without feedback loops, supplier scorecards, or shared performance benchmarks, you have no way to compare suppliers or spot early warning signs. You're flying blind, hoping the next batch will be better.

Still not convinced? A 2022 QIMA benchmark found that brands with little to no supplier engagement had 32% more critical quality defects. Worse, nearly 60% of these defects weren't discovered until final inspection or after delivery - at a point where fixing the problem is already expensive and disruptive. Yet only 4 out of 10 brands audit their Tier 2 suppliers, even once a year.

The result? Your teams have no choice but to go into perpetual firefighting mode. Instead of improving processes, they're manually investigating every issue, managing urgent rework, approving emergency shipments, and fielding supplier excuses.

It's a slow drain on your resources, time and margin - and the longer it goes on, the harder it is to regain control.

From lack of agility to constant underperformance

When a supplier consistently underperforms, the logical decision is to move on. But in reality, most production teams can't act on that decision-not because they lack a strategy, but because their systems don't support it.

Without real-time visibility into your supplier network, without documented workflows for qualification and onboarding, the process of switching becomes painfully slow, uncertain, and resource-intensive.The question shifts from "Should we replace them?" to "Can we afford the cost of replacing them?"

And that's the real trap: you know the supplier isn't delivering, but the lack of infrastructure makes it safer to continue tolerating the problem than to risk further disruption.

Why? Because too often, you don't have a bench of pre-vetted alternatives ready to take over. You don't have reliable performance data to justify the change internally, or the workflows to quickly test and ramp up a replacement without compromising timelines. Instead, you find yourself having to wait, renegotiate, or lower expectations. And the business absorbs the costs-quietly, but steadily.

According to a study by APQC, only 31% of companies have developed alternative sourcing options for more than 70% of their tier-1 suppliers. This means the majority of companies still rely heavily on single-source suppliers—making fast, low-risk transitions nearly impossible when problems arise.

But this lack of agility doesn't just affect quality. It slows down your sourcing strategy, weakens your resilience, and puts pressure on every launch cycle. Your teams are caught between urgency and inertia, forced to solve short-term problems with long-term inefficiencies.

What best-in-class operations teams are doing differently

Leading brands aren’t simply adding more quality checks. They’re rethinking how supplier performance is monitored, managed, and corrected—shifting from reactive inspection to system-wide traceability and agility.

Here’s what this shift looks like in practice:

Each issue can be traced to a specific supplier and process

Every product, batch, or component is tied to detailed supplier data: the facility, the subcontractor, even the exact production stage if needed. Traceability is not limited to documentation—it’s operational. When a defect occurs, teams don’t waste time identifying the source. They isolate the origin, assess the risk, and act with precision.

Supplier relationships are managed through performance data

The evaluation of suppliers no longer relies on anecdotal feedback or one-off audits. Brands use structured performance indicators—defect rates, resolution times, compliance breaches—to assess and compare suppliers over time. This data is shared across departments to ensure sourcing, quality, and production are aligned in their decisions.

Switching suppliers is a process, not a disruption

When a supplier fails to meet expectations, the ability to switch quickly is critical—but rarely achievable without preparation. High-performing teams maintain a pool of pre-qualified alternatives and rely on standardized onboarding workflows. Legal, technical, and operational requirements are digitized and accessible, reducing transition time from months to days. Supplier change becomes a managed process, not an operational risk.

Conclusion: Quality is not just a production issue—it’s a strategic lever

Too often, brands treat quality issues as inevitable. A cost of doing business. Something to be “managed.”

But the truth is, most quality defects are preventable—if supplier relationships are structured, traceable, and performance-driven.

Production and Quality Directors today are no longer just responsible for outputs. They’re responsible for orchestrating complex ecosystems of suppliers, facilities, and processes across multiple geographies and tiers. That demands a new kind of control—built on data, visibility, and speed.

By investing in better supplier management and not just quality control, you unlock:

• Faster resolution of issues,
• Fewer critical defects,
• Stronger supplier accountability,
• And ultimately, healthier margins.

Quality is not a line on your dashboard. It’s a lever for operational and financial performance. And in a world where disruption is constant, brands that take control of their supplier network will outperform those who don’t.

It’s not just about avoiding mistakes. It’s about building a supply chain that can move fast, react smart, and deliver on promise—every time.