Both during a new launch and ongoing production, manufactured products must meet the required quality and quantity standards. If these requirements are not met, customer escalation may occur. The most serious form of escalation is the New Business Hold (NBH).
What Are the Consequences of New Business Hold for an Organization?
When an organization receives a New Business Hold status from a customer, various escalation scenarios arise — both internal and external. The most important ones are outlined below.
Notifying the Certification Body
First and foremost, the organization must inform its certification body of this status. In certain cases, the customer may also be responsible for doing so.
Additionally, the Oversight Office is notified about the NBH.
For the organization, this typically results in a major nonconformity, certificate suspension and the need for a special audit.
Becoming the “Star of the Month” Within the Organization
Once the NBH takes effect, the affected plant usually receives support from other locations within the organization. This synergy should be leveraged to resolve the issue as quickly as possible.
Deterioration of Key Customer Relationships and Loss of Market Trust
A New Business Hold is often a sign of a customer’s dissatisfaction with the collaboration. This can negatively impact not only the relationship with that specific customer but also the company’s reputation among other partners and potential clients.
Increased Operational Costs Due to Corrective Actions
To regain customer trust and address the root causes of the NBH, the organization must conduct a detailed analysis, which may involve:
- implementing additional quality control measures,
- employee training programs,
- modifications to production processes,
- revalidation due to design changes – especially when the organization is co-responsible for product design.
All of these actions generate additional costs.
Ineligibility for New Business Opportunities
As the name suggests, an NBH status prevents the organization from participating in new business opportunities. However, it is important to note that this restriction applies only to the specific plant affected. On the Bid List, the client will typically mark the plant in red.
In such cases, the organization may propose an alternative plant in a different location.
There is one scenario in which a plant under NBH may still receive new business – through direct intervention from the customer’s management. Factors that could work in the organization’s favor include competitive pricing, a long-standing business relationship and a solid track record of successful projects.
The Role of the Customer Representative During New Business Hold
During an NBH, the role of the customer representative is crucial. This individual typically initiates the escalation by preparing the necessary documentation and also defines the conditions for lifting the NBH status. The customer representative operates independently of the special audit conducted by the certification body.
Even if the audit results are positive and the certificate is reinstated, the organization may still remain under NBH status in the eyes of the customer.
During the escalation process, the customer representative often schedules plant visits at set intervals to verify the progress of corrective actions.
New Business Hold Can Also Apply to Ongoing Production
NBH can be imposed not only during a new product launch but also on serial production processes. What should be prioritized after Start of Production (SOP)?
Proper change management is the key. It is essential to monitor aspects such as unauthorized:
- process changes implemented by the organization, including those affecting the product’s Critical Characteristics.
- repair or modification of tooling, which is often owned by the customer.
- changes implemented by a supplier, who is managed by the organization.
Just remember that our clients don’t like to be surprised or informed after the fact when it comes to the above actions.
Our clients are well aware of the consequences that come with initiating an NBH. For this reason, you won’t encounter a scenario where New Business Hold is used as the first step in an escalation. Typically, the organization first receives “warnings” in the form of:
- issuance of a Warning Letter (e.g., Stellantis),
- implementation of 100% inspection carried out by our internal resources,
- kick-off of 100% inspection performed by an external service provider approved by the OEM.
In my eight years of experience as customer Supplier Quality Engineer, I have personally overseen NBH implementation only twice, which confirms that it is truly a last resort when working with organizations.
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Dariusz Kowalczyk
