Product failure can be described in two categories; product risk & business risk. Product failure is not a fun thing to deal with and a lot of companies deal with it in different ways. Some companies have a non-conformance tracking system where quality notifications are initiated when a non-conformance occurs. Sometimes it can be parts that were received from a vendor with incorrect dimensions. In this case a risk assessment is done to figure if the part is accepted or not. If yes, a deviation must be recorded. If not, all parts of the same batch/lot number must be returned to vendor or scrapped based on the agreement that was made.

From my experience, there are a lot of ways things can go wrong. It all depends on the quality management and how they categorize the different levels of risk.