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Supplier Reject PPM and Chargeback Calculator

A supplier reject is rarely just the price of the bad parts. This calculator shows PPM against target, the real cost of the event, and the chargeback you can claim, so a supplier scorecard conversation starts with numbers.

Your numbers

Quantity received

pcs

Quantity rejected

40 pcs

Purchase price per piece

Internal sort and rework hours

hrs

Labor rate

$/hr

Admin cost per NCR

Time to write, route and close the NCR and SCAR.

Expedite and line disruption cost

Share recoverable under contract

Target PPM

ppm

Your results

Reject PPM

800

Chargeback to supplier

$1,278

Reject rate

0.1%

Rejects above target

Material value of rejects

$128

Internal labor

$720

Total cost of nonconformance

$1,598

Unrecovered cost

$320

Chargeback rights depend on your purchase agreement and quality agreement. Confirm terms with purchasing and legal before invoicing.

Save results:

Chargeback and total cost vs rejected quantity

Sweeps Quantity rejected from 0 to 400, holding your other inputs fixed.

Supplier PPM scorecard from ERP receipts

Optional: talk through automating supplier PPM and NCR cost from receiving and inspection data.

Optional. The tool and every export work without this. No spam.

How to use it

Enter the received and rejected quantity for the period or lot. Add the purchase price, the internal hours spent sorting or reworking, an admin cost per NCR, and any expedite or line stoppage cost. Set the share recoverable under your contract: some agreements allow only material, others allow sort labor and disruption. Compare PPM with your target to decide whether to escalate.

The formulas

PPM equals rejected divided by received times one million. Total cost is material value plus labor hours times rate plus admin plus expedite. The chargeback is total cost times the recoverable share. Rejects above target are the rejected quantity minus the number the target PPM would have allowed on that volume, which is a useful way to frame excess.

PPM = rejects / received x 1,000,000
Total = material + labor + admin + expedite
Chargeback = total x recoverable share

How to read the result

A tiny PPM on a large volume can still be an expensive event if it stopped a line. Conversely, a high PPM on a tiny lot may not justify a formal SCAR. Look at both the PPM and the total cost, and trend them over rolling months in the supplier scorecard rather than reacting to a single lot.

Common mistakes

Counting rejected lots instead of pieces, mixing receipts from different part numbers into one PPM, billing costs your agreement does not allow, and forgetting to credit parts the supplier replaces at no charge. Keep NCR numbers on every debit note so the supplier can trace each claim.

Frequently Asked Questions

What is a good supplier PPM?

It varies by industry and part. Automotive and electronics programs often set targets of tens to hundreds of PPM, while commodity items may allow more. Use the target in your quality agreement.

Can I charge back sorting labor?

Only if your purchase terms or quality agreement allow it. Many do. If not, the cost shows as unrecovered here and can support a discussion about renegotiating terms.

How is PPM different from percent?

PPM is parts per million. One percent equals 10,000 PPM. PPM is easier to read when defect rates are low.

Should I use lots or pieces for PPM?

Use pieces for PPM. Lot rejection rate is a separate metric that is also worth tracking on the scorecard.

If receipts and rejections live in your ERP, we can help calculate PPM by supplier and part automatically and attach cost to each NCR for your scorecard.

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