Defective products are sent for two reasons:

1.     Employees don't know it is a bad product
2.     They felt some sort of pressure to move on without correcting the mistake. 

It sounds simple, but it’s not. Let’s look into these further. If the employee is truly unaware that a product is unacceptable, typically there are a few reasons why:

1.) They don’t know the standard. One common misconception (especially in todays unique employee pool) is the generational misconception of “common sense quality.” Owners commonly quip “He should know that’s unacceptable.” Instead, use printed standards, posted on machines and walls above machine centers. SHOW them what quality looks like, and what failure looks like. Hang examples above machines as a constant standard for whomever comes to work at that station. Send your employees emails with constant reminders of best quality practices and detailed photographs.

2.) There isn’t an inspection process. If inspection isn't a part of each process, you will just plain and simple miss defects. Add inspection into every process, your're trading seconds for hours and time is money. 

Now, why would an employee intentionally ship an unacceptable piece of work? Internal pressures. The simple fact is this: for whatever reason, it’s sometimes easier to ignore the problem than deal with it. Humans are experts at finding these opportunities to save energy. Reverse that in your shop, make it harder to ignore than to deal with. Think of this example: I’m a guy running a rail end machine when a rail end blows out, and I know it. I’ve seen a few different types of phycology at play in these situations. There are competing pressures in the shop environment that will persuade the employee that he needs to not take the time to correct the mistake, and to pass it on for someone else to find:

1. “Nobody will know its me.” If several operators do the same job, and there’s no accountability, it’s easy to justify passing a mistake as the consequence is diluted amidst doubt to the guilty party. Instead, employees should be accountable for the processes they complete. Your company (you) doesn’t get off the hook for its mistakes, why should they?
       This isn’t about being big brother or taking huge amounts of time to monitor everything. When I was running my dad’s shop, all we had to do was give the employees a simple system to track time. It did log who did what, to which job, and since it did that, we didn’t ever have to monitor anything, the men self-regulated and this problem went away.
    
2. "I don't want to be the whistle blower." It takes time to correct a mistake, and everyone's time is valuable. The further down the line the mistake is, the harder it is to fix (the more time it takes) and the easier it is to point the finger. It’s a type of mob mentality, if I made a mistake matching up a panel, and every single person in the shop continued to add to the door, they’re all validating it with a passive collectively. There’s something about knowing that everyone else has seen and ignored a mistake that makes it easier to accept and harder to reject. If the guy above you didn’t send it back, won’t you be an over ambitious zealot if you raise the red flag? This type of mentality drives mistakes through the roof. Instead, turn "whistleblowing" into craftsmanship by demphasizing the theatrics and rewarding craftsmanship. Instead of violently breaking doors apart while glaring at an employee when something is wrong, try openly rewarding "catches" and fixes. 
    
3. “It won’t matter”. If employees know that producing sub-par quality will have little consequence, why should they care? If they see fellows constantly “getting away with” it, they’ll just intrinsically know that it’s culturally acceptable, minus a few awkward minutes during the “chew out”. If a light slap on the wrist is the punishment for the stolen cookie, they’ll take the cookie every time (I know I did as a kid). For them, it might be the difference between getting a (mild) scolding by the boss, or keeping respect (for keeping up and going fast) from the whole crew.
       It might just be an “acceptance tax” they’re willing to pay. Instead, make employees accountable for bad quality by taking the time to pay the “quality tax”. This might come in the form of a few public examples, uncomfortable critique sessions, and slowing down. Make sure they know it matters. 
    
4. “We don’t have time.” Most shop owners impossibly expect quality AND speed simultaneously. Usually the worth of an employee is measured by dividing these two variables, producing a sort of “x” factor ratio. To have both, you need either a superb gene pool (let us know if you find it) or the right automation and investments.
       It’s more common that your people need to take the time to do their job well, and if that standard is 100%, then you’ll have to allocate time into each order to fix mistakes properly. If you don’t, you’re sending the subliminal go-ahead for them to “see what they can get away with.” As the owner of the company or the production manager, you might be guilty of installing this type of culture yourself. Gulp.
    
5. “The customer is too picky.” Well, he’s paying you. You have either accepted a bad customer, or you’re out of touch to what your customers expect of you. If you’ve accepted a bad customer, take note of possible red flags you should have caught  in your early conversations, and ask verification questions in your next customer interview to dump these problems on your competitors next time. If you’re out of touch (and who will admit that except the really brave?), you need to reevaluate what customers want.
       Just because they wanted it at one point, doesn’t mean they are willing to pay for it now. In the 80’s, my grandpa preferred the conversation from a particular gas station attendant, and that determined where he took his business. Today, I fill up at the place who has the best fountain drink. You can spend your time complaining about drinks, or make yours the best.

The reality is that most shops face all of these issues to varying degrees, all at once. There isn’t a program you can run, a piece of paper to send out, or a manager who will fix it this week. Quality is a function of culture, and culture takes time to build. You’ll have to do all of these things all of the time, all together, and for a period of time before they pay out. If you don’t do it, you’ll be complaining about it for as long as you own your company (minus the times when you get lucky and nobody notices), but If you do, the company culture will actually become a profit center to you. Good luck!