Supplier escalation: controlled shipping CS1 / CS2 and new business hold
The escalation ladder for poorly performing suppliers: improvement plan, controlled shipping level 1 and 2, new business hold and phase-out, with entry and exit criteria.
Why a defined escalation ladder
Without clear rules escalation depends on who shouts loudest. A ladder with entry and exit criteria, agreed in the supplier quality agreement, makes the reaction predictable and fair.
Typical escalation levels
| Level | Trigger (examples) | What the supplier must do | Exit |
|---|---|---|---|
| 0 Normal | Class A / B | Monthly scorecard review | – |
| 1 Improvement plan | Class C or repeated complaint | Written plan with actions, owners and dates; monthly reporting | Two months in class B or better |
| 2 Controlled shipping CS1 | Defects reach the customer, plan not effective | Extra inspection by the supplier’s own staff after the normal process, data reported daily | Usually 20–30 days without defects and root cause verified |
| 3 Controlled shipping CS2 | Defects despite CS1 | Inspection by a third party chosen by the customer, at the supplier’s cost | Defined clean period and a successful audit |
| 4 New business hold | No improvement at CS2, systemic problems | No new parts awarded; management review with the customer | Audit passed and KPIs stable |
| 5 Phase-out | Hold without improvement | Resourcing of all parts | – |
Make the costs visible
Every escalation step costs the supplier money: controlled shipping, sorting, freight, administration. Charge these costs back consistently with a cost statement; it is often the strongest motivation for real root-cause work.
Exit needs evidence
Leave an escalation level only on data: a defined period without defects, a verified root cause and an effective action, ideally confirmed by an on-site process audit. Otherwise the problem returns as soon as the extra inspection is removed.
Written by Ľubomír Blažek, automotive quality manager. Standards are summarised in our own words; use the official publications for formal work.