Quality Claim Process: How to Document and Recover Defective Goods Costs

The cost of unrecovered defects#

You receive 1,000 units from a supplier. 40 units are defective (4% reject rate). You rework 30 (SGD 15 labour each = SGD 450). You scrap 10 (SGD 8.50 cost per unit = SGD 85). You don't document the defect or cost. The supplier has no feedback that quality was inadequate, so nothing improves. Next month, another 4% rejection. By year end you've absorbed SGD 10,000 in rework and scrap costs from this one supplier. With proper documentation you would have claimed SGD 5,000 in costs, recovered it from the supplier, and negotiated quality improvement. Cost of not claiming: SGD 10,000 absorbed; cost of claiming: SGD 0. Yet 70% of SMBs don't file quality claims because the documentation seems burdensome.

What a quality claim should include#

Purchase order reference: PO number, order date, product, and quantity ordered. Shipment reference: invoice number, shipment date, delivery date, actual quantity received. Defect documentation: photos/video of the defect, specific description (dimension out of tolerance, material impurity, assembly defect, finish issue), sample retention (keep a defective unit for supplier review), date defect discovered, percentage of shipment affected. Impact quantification: rework cost (labour hours × hourly rate), scrap cost (units destroyed × product cost), customer refund (if customer was refunded due to defect), return freight cost. Supplier communication: did you notify the supplier and what was their response.

Filing and negotiating the quality claim#

Send the quality claim to the supplier in writing (email or formal letter) within 5 business days of discovering the defect. Include all documentation. Propose resolution: full credit for defective units at the unit price charged, reimbursement for rework/scrap cost with documentation, or return shipment and replacement at supplier expense. Give the supplier 5 business days to respond. If supplier denies the claim, escalate to their quality manager or management. If unresolved after 2 weeks, you have the right to: refuse to pay the invoice for this shipment, return the goods at supplier expense, or reduce payment by the claimed amount.

Contractual language for quality claims#

Your supplier contract should include: 'Supplier warrants all goods are free from defects in materials and workmanship. Defects discovered within 30 days of delivery are the Supplier's responsibility. Supplier will reimburse Buyer for all documented costs of rework, scrap, return freight, and customer compensation related to defects exceeding 1% reject rate.'

AskBiz Quality Claim Tracker#

AskBiz tracks received goods quality by supplier, flags shipments with reject rates >1%, and generates a quality claim template with photos/documentation. When you file a claim it stores the documentation, tracks supplier response, and escalates if unresolved after 10 days. Ask it: which suppliers have quality issues this quarter, what is the total value of unresolved quality claims, which suppliers should we escalate or de-list based on quality trend.

• A quality claim requires documentation: proof the goods were defective, evidence of impact (rework cost, customer refunds, lost sales), and supplier acknowledgement.
• Most SMBs skip documentation and absorb the cost.
• Proper claims recover SGD 5K-20K per major incident.