Customer Complaint PPM: How to Handle and Calculate It

What a customer complaint and PPM are

A customer complaint is the formal record that a delivered product did not meet the agreed requirement. PPM (parts per million) counts how many rejected parts the customer found for every 1,000,000 parts received, and OEMs and tier suppliers use it to compare suppliers.

PPM summarizes performance but fixes nothing by itself. Every complaint still needs containment, a root cause and closure, and PPM shows whether that work is paying off.

Visual map: from receipt to closure

The map shows the handling steps and the PPM calculation using the example in this article.

How to calculate PPM

PPM = rejected parts ÷ delivered parts × 1,000,000

• Count parts, not complaints: one complaint can cover 1 part or 200.
• Use the same period, customer and scope in the numerator and denominator.
• For several months, add the parts first and then divide. Averaging monthly PPM values distorts the result when volumes differ.

Example: 38 rejected parts out of 125,000 delivered

Fictional example from a machined-parts supplier. In September it delivered 125,000 parts and the customer rejected 38:

PPM = 38 ÷ 125,000 × 1,000,000 = 304

With a target of 200 PPM, the most this volume could allow is 200 × 125,000 ÷ 1,000,000 = 25 parts. That is 13 parts too many, or 34.2% of the rejects. At this volume, each extra rejected part is worth 8 PPM.

Quarterly PPM is 113 ÷ 374,000 × 1,000,000 ≈ 302. The simple average of the three months gives 301, a small gap here that widens when monthly volumes swing.

Pareto of the month's causes

Before acting, sort the 38 parts by defect type. A Pareto chart shows where to focus:

Dimensional and cosmetic defects add up to 25 of the 38 parts (65.8%). Fixing dimensional alone would bring the month to 23 parts, or 184 PPM, below target, if nothing else changed.

Handling a complaint, step by step

1. Log it: complaint number, customer, part, lot, rejected quantity, defect description and evidence (photo, measurement).
2. Contain: segregate and inspect suspect stock (plant, in transit, at the customer) and release only verified parts.
3. Respond: tell the customer about the containment and the plan deadline, as set by their specific requirements.
4. Find the root cause: analyze the returned part and use the 5 Whys or the 8D report method. Also investigate why the defect escaped inspection.
5. Correct and prevent: fix the process and update the control plan. The general flow is in nonconformance and corrective action (CAPA).
6. Verify effectiveness: track the following lots before closing.
7. Close and record: file the evidence and lessons learned, and extend the fix to similar parts.

Containment and response deadlines differ by customer and come from the contract or the customer-specific requirements. Confirm them before setting internal targets.

How to read and use PPM

• Small volumes distort: 1 rejected part in 5,000 delivered is already 200 PPM. Track the absolute count too and use longer windows.
• Keep the PPM types apart: customer PPM (parts the customer rejected) is not the same as the internal scrap rate. For internal results see FPY and RTY.
• Break it down by part, line and defect to find the source instead of looking only at the company total.
• Add other metrics: number of complaints, response time, recurrence and cost. More in performance indicators.
• Every complaint has a cost: freight, sorting, rework and penalties count as external failure in the cost of quality.

Common mistakes

• Closing a complaint on containment alone, with no root cause and no effectiveness check, which invites recurrence.
• Calculating PPM on the wrong base (for example, parts produced instead of parts delivered to the customer).
• Averaging monthly PPM without weighting by volume.
• Blaming the operator without asking why the outgoing check missed the defect. Strengthen detection with proper acceptance sampling and attribute control charts.
• Treating every complaint with the same rigor instead of ranking severity (safety and legal requirements first).

Frequently asked questions

What is PPM in quality?

It is the number of defective parts per million parts delivered or produced. Lower is better.

What is the PPM formula?

PPM = rejected parts ÷ delivered parts × 1,000,000.

What is 38 rejects in 125,000 parts?

38 ÷ 125,000 × 1,000,000 = 304 PPM.

What is a good PPM target?

It depends on the industry and the contract. Use your customer's target rather than a generic number.

Does PPM count complaints or parts?

Parts. A single complaint can involve many parts, and the part count is what goes into the calculation.

Does every complaint need an 8D?

Not necessarily. The customer decides when an 8D is required; for the rest, a record with root cause and corrective action is usually enough.

About the author

Vagner Soares

Lean Manufacturing & Behavioral Management Specialist

Over 20 years in the automotive and metalworking industries (GM and Dana), Lean Manufacturing practitioner since 2006. SENAI instructor and mentor in Brazil’s Brasil Mais Produtivo program, delivering consulting, training and audits for 50+ companies, combining quality, productivity and people development.

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