Defect classification explained
Defect classification sorts every defect by where it was first found: at the station that made it, later in the plant, at the customer, or in the field. The later a defect is found, the more it costs.
Matt Savas · Reviewed October 2026 · About 7 minutes
What defect classification is
Defect classification gives each defect a class based on the place it was first found. It does not depend on who caused the defect or how serious it looks. The four classes in this guide come from Sadao Nomura's book The Toyota Way of Dantotsu Radical Quality Improvement (Lean Global Network, 2021).
- A, in-process. The operator who made it, or someone at the same station, finds it before the part moves on.
- B, internally found. The source missed it and a later process inside the plant found it.
- C, externally found. Final inspection or the customer found it. A supplier's bad part rejected at your receiving dock is a C defect for that supplier.
- D, market defect. Nobody caught it and it failed in the field.
Why it matters where a defect is found
The same defect costs more each place it travels. A common rule of thumb says a fix that costs 1 at the source costs about 10 at a later process, 100 at final inspection or the customer, and 1,000 in the field. The exact ratios differ by plant, but a later find always costs more.
Most plants count defects by type or by department. That count does not show how many defects got out before anyone saw them. Counting by class does. Nomura also treats the next process as a customer, so any defect passed to the next station counts as an escape. The goal is zero defects passed on anywhere.
The defect
At station 2, a bolt goes in cross-threaded. Nobody has noticed yet. What it costs depends on where someone finds it.
A: found at the station
The operator feels the bolt bind, backs it out and runs a new one. It takes 30 seconds, and nobody after station 2 ever sees it. Call that cost 1.
B: found at a later process
Station 2 misses it. Station 5 finds it when a bracket will not seat. The unit comes off the line for rework and the line falls behind. The cost is about 10.
C: found at final inspection or by the customer
The unit passes every station. Final inspection or the customer finds the bolt. Now someone has to sort the stock, hold the shipment and answer the customer. The cost is about 100.
D: failed in the field
Nobody catches it, and the bolt works loose in use. That means warranty claims and maybe a recall. The cost is about 1,000.
Send it back to the source
Wherever a defect is found, the report goes back to the station that made it, fast, so the cause gets fixed there. Nomura calls this the quality information flow.
The 1, 10, 100 and 1,000 multipliers are a common rule of thumb, not exact figures.
The defect
At station 2, a bolt goes in cross-threaded. Nobody has noticed yet. What it costs depends on where someone finds it.
A: found at the station
The operator feels the bolt bind, backs it out and runs a new one. It takes 30 seconds, and nobody after station 2 ever sees it. Call that cost 1.
B: found at a later process
Station 2 misses it. Station 5 finds it when a bracket will not seat. The unit comes off the line for rework and the line falls behind. The cost is about 10.
C: found at final inspection or by the customer
The unit passes every station. Final inspection or the customer finds the bolt. Now someone has to sort the stock, hold the shipment and answer the customer. The cost is about 100.
D: failed in the field
Nobody catches it, and the bolt works loose in use. That means warranty claims and maybe a recall. The cost is about 1,000.
Send it back to the source
Wherever a defect is found, the report goes back to the station that made it, fast, so the cause gets fixed there. Nomura calls this the quality information flow.
The 1, 10, 100 and 1,000 multipliers are a common rule of thumb, not exact figures.
How to classify defects
- 1Record where it was foundFor every defect, write down the station, process, inspection point or customer that first found it.
- 2Give it a classUse the place it was found and nothing else. A, B, C or D.
- 3Find the station that made itSend the defect and the facts back to that station quickly, so the team there can fix the cause.
- 4Count each class every monthChart the four counts side by side. Set a target for each one and keep it, even after a bad month.
- 5Mark change pointsNote each model change, new operator or die change on the chart. Most jumps in the counts line up with one of them.
- 6Work on C and D firstEvery C and D defect got past the plant. Fix those causes first, then keep moving catches toward A.
A worked example
A plant counted its defects by class for three years. The numbers are made up for this example.
In year 1 it found 60 defects: 8 A, 14 B, 20 C and 18 D. With the 1, 10, 100 and 1,000 rule of thumb, that year cost 8 + 140 + 2,000 + 18,000 = 20,148.
In year 3 it found 33 defects: 20 A, 7 B, 4 C and 2 D. That cost 20 + 70 + 400 + 2,000 = 2,490. The count fell by about half. The cost fell to about an eighth. The number of A defects went up, from 8 to 20, because operators were finding more of their own defects before they moved on.
Made-up numbers. Cost counts a fix at the source as 1.
Classify some defects
Each card describes a defect. Pick the place it was first found.
Final inspection finds a missing fastener on a unit just before it ships.
Common mistakes
- Classifying by severity or by who caused it. The class is the place the defect was found. How serious it is and whose it was are separate questions.
- Counting only what reaches the customer. A defect passed to the next station has already escaped. Count B defects as well as C and D.
- Reading more A defects as bad news. A rising A count usually means operators are finding their own defects. Watch the C and D counts.
- Fixing the part and not the cause. Rework at final inspection fixes one unit. Send the defect back to the station that made it.
How to start
Pick one line. For a month, log every defect with the place it was found and its class. Put the causes of the C and D defects on a chart with the free Pareto chart tool and start with the biggest one. Write up each customer escape with the free 8D report template.
To move catches toward A, give operators a way to stop errors and call for help. The poka-yoke guide, the andon guide and the quality at the source guide cover how.
Frequently asked questions
- What is defect classification?
- It gives each defect a class based on the place it was first found, not on who caused it or how serious it looks. The four classes are in-process (found by the operator who made it), internally found (found at a later process in the plant), externally found (found at final inspection or by the customer) and market (failed in the field).
- Why does it matter where a defect is caught?
- The cost depends on where it is caught. The same defect is a quick fix at the source, rework one process later, a sorting and containment job at final inspection, and a warranty claim or recall in the field. A common rule of thumb puts these at 1, 10, 100 and 1,000. Counting by class shows how many defects got that far.
- What does “your next process is your customer” mean?
- It means a defect passed to the next station counts as an escape, the same as one passed to the end customer. Treating the next process as a customer pushes a plant toward passing on zero defects anywhere.
- What is the difference between an in-process and an internally found defect?
- An in-process defect is found by the operator who made it, or someone at the same station, before the part moves on. It is the cheapest kind. An internally found defect got past the source and was found at a later process. It never left the plant, but it now means rework, lost time and scrap.
- How do you use defect classification to improve quality?
- Count the four classes every month. Work on the causes of the externally found and market defects first, because each one got out of the plant. As the plant improves, those two counts fall and the in-process count rises, because operators find more of their own defects.