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You should always stop production problems before those faulty shipments get out, disappoint customers and begin to ruin your reputation. These actions are taken in order to protect customer orders and is part of your quality system and commitment to customer relations. The halt to further production should occur before anything is shipped to the outside. You should make all attempts to keep your production and quality problems internal and when faced with shipping bad product and making shipment deadlines or missing deadlines because products are flawed and not to customer spec, do not ship.
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