This is a Project Management Assigment and Chapter Name is Managing Risk frim Project managemrnt- The managerial process- Clifford Gray, Erik Larson 6th Edition. We have to give the answers of the questions given in the case study.

Supercomp had a real winner with this product. To reap the full benefits from the new product, he sed, it was crucial to ramp-up the production and establish the brand and the position as a pio- cm, "How set you guys are in meeting the first quarter's quota for supplying to Lenovo and hand ve the project facilities to our manufacturing group for regular production? The ramp-up of the Tooduction line was indeed the final and crucial acid test, which the project group had to pass mp-up objectives. The other members of the team were Asutosh Kejarival, an accountant, wing a newly set-up supply chain management group in the materials department. CASE 7.9 Supercomp Systems Manufacturing (Qualitative Risk Analysis Technique for Managing Project Risk) less Abstract Nimish addressed Mahesh, who was the leader of the cross-functional product development Mahesh had called this meeting for a review and analysis of the risks in meeting the project's Subramaniam, a senior engineer from production department and Raman Seth, a bright MBA Managing Risk 411 canliative Risk analysis is an important risk management process used for prioritizing risks. The denique requires developing a cause-effect diagram linking the risk event drivers and risk impact drivers al the corresponding impact on the project cost or schedule, the expected value of the risk is estimated. This expected value is used for prioritizing risks and developing the risk management plan. The case belor describes a scenario of qualitative risk management for a project for a manufacturing organization. CASE TEXT At the conference room table of Supercomp Systems Manufacturing Ltd, sat four executives with intense facial expressions. The group had been closely working together on a project to develop and market a new slim laptop computer, which would be a kilogram lighter than the models sailable in the market. Their project brief included developing the prototype, setting up the production line and overseeing for the first three months the production operation for the smooth transfer of the project to the manufacturing group The project group had burnt mid-night oil and devised ingenious ways to develop the prototype. Lenovo, the Chinese computer giant considered introducing in the US the laptop computer under development by Supercomp as one of its low-cost models in the product line. Lenovo contracted with Supecomp to bankroll the cost of development for the prototype and agreed to purchase at the Lenovo indicated to Supercomp that if the product was well accepted in the U.S., they expected the Sarket to grow up to 15,000 units per week within a year and accordingly, suggested Supercomp to set up the manufacturing line with a capacity for at least 5000 units per week to start with. One look at the prototype model and Nimish Mehta, The Executive Vice-President, realized that before the competitors came up with their "me-too" imitations "You have done very well so 146 "Sixteen months efforts of our group are now coming to a close and we must pass the test successfully ramping up the production and win recognition. What problems or risks do we for and what can we do about them?" Mahesh opened the discussion, "You know that Lenovo has "Well, our assembly line capacity is supposed to be 5,000 units per week on a 3-shifts basis over 20,000 units in a month. So, it would look that we need not expect any problems in meeting the That is a big risk. This would top all the ten risks in our list in terms of exposure. Mas that we can do to minimize the exposure. Here, look at this table and chart. This is where this "Mahesh, you are talking of our assembly line capacity. But have you considered the of Tandon Printed Circuit Boards? He won't be able to supply new PCBs to our design at the "Don't worry about Tandon." Raman Seth interjected, "While I considered the possible sample for the PCBs, I did have preliminary evaluation of Tandon's production capacity. Managing supply chain is my responsibility and I will work with Tandon to make sure that he sugli many PCBs as we need for the first quarter. We are still six months before the launch. I will shop and we will re-assess the capacity and then help him augment his capacity with assur guaranteed off take of the production or something like that. But, you have a point here ** That would go a long way, Raman" Mahesh observed, "Do work with Tandon to me that we get the PCBs we want. . then turning towards Subbu, he asked," Tell me, if our line capacity is 5,000 per week, why can't we get that output at that rate in the first three mai 412 Project Management be supplied for the first three months 5,000, 7,500 and 12,000 units respectively." first 3-month quota before we hand over the facilities. But, before handing over the facilisis manufacturing, we need to establish that the production capacity of the assembly line is 5,000 per week. We may have a problem there. My experience from all these years is that we do is problems in ramping up production. I expect the production rate in the first three months to about 10,000 units, say 40-45% of the required monthly output. Use only 45% of the sales foreca to be met in the first three months; that is the bitter truth. So we will have a problem in demonstrating the production capacity of the assembly line before handing it over to the manufacturing Subramaniam explained. Do you mean every time the manufacturing ramp-up is launched, the output is a meager, the is, less than half, capacity in the first quarter? We would lose a gross margin of several milie dollars - wait a minute, I will calculate the exact number and come back." Kejarival was surprised "Not every time, but most times - say seven times out of ten!" Subbu shot back. The euphoria of the project team, which developed a new winning product in a record time sank. There was a silence for a minute, while Kejarival flipped his papers back and forth, notul down some numbers and punched in his calculator. "Over US Dollars six and a half millions", le announced looking up from the calculator, "Dollars 6,505,191 to be precise. That is the loss in gos revenue if we fail to meet the first quarter's production targets." "How do you get all these funny accuracy in your numbers - right down to a Rupee!" Subtu asked teasingly "It is elementary Dr. Watson!" Kejarival mimicked the famous Sherlock Holmes quote. "O sale price to Lenovo is U.S. S 995/- per piece and the cost of goods sold (COGS) is projected to U.S. S 512.24 cents per unit. Now, using these sales price and COGS numbers, if we fail to suppl 55% of the projected requirement, we stand to lose US S six and a half million five thousand os hundred and ninety one." Kejarival paused for the impact, "Work it out yourself!" and exposure would fall on this graph." He pointed out on the graph sheet. came out with the first possible hitch in up For a long-term strategy, I should start to develop an alternative supplier of PCBs also." of to These are new machines. New control panels. New assembly jigs. No one in our plant has ed or maintained these types of machines. There is something like Learning Curve Principle' w operation, each time the output is doubled, the worker hours per un decrease by a fixed of the previous value. People take some time to get used to new machines and new sethods They need to be trained." Subbu explained "Well, then, since this is the first priority risk in our project, let us manage this risk actively Mahesh suggested, "We have still a few months to go before the launch. Let us have an intensive sting program for the selected work force." Discussion Questions and Assignment Identify event drivers and impact drivers for the risk event and construct a cause effect 2. Estimate expected values of impact for different risk events and prioritize the risks for Managing Risk 413 -We must do that if we want to meet the targets. While we are doing that, let us give special Gention to the third shift crew. They are the ones who are usually the greatest defaulters on the duction targets." Subbu suggested -Well, it is not my field of expertise, but I would like to venture here a thought" Raman spoke out slowly. He was the youngest of the group and was understandably circumspect in putting forth sch ideas before his senior and more experienced colleagues . "The sale price is fixed and the sales department has booked orders at these prices. So probably not much we can do. But, Asutosh, bow did you work out the cost of goods sold per unit with accuracy down to naya paise?" "Raman, the cost of goods sold (COGS) includes all direct costs of raw materials and labour, all indirect materials and indirect labour, other factory overheads, and provision for depreciation for the new assembly line machinery. Most of the data input is from our group members here all I have done is simple arithmetic using the proper accounting procedures "Kejarival replied. "But then, it looks to me like there could be a leeway in saving something from the direct material & labour costs." Raman ventured again. Mahesh saw the merit in Raman's idea and immediately supported it, "Yes, I think let us form a production cost review team looking with a magnifying glass all operating costs. We can definitely form a small section of our project team to do that." After a short pause, he added, "Well, let us do it right away. I would christen the team as the Super Lenovo Team. Let us make the list of people to work in it." "Before we make some big ramp-up plans and commit expenses, Mahesh, please get a confirmation from the sales that indeed they will sell those units to Lenovo I have noticed that Sany times the sales projections promise you the moon before the product is in hand. Once the product is available, all kinds of rationalizations are offered for not being able to sell - the high price, the competitor's product features, sales personnel training... a Long list they come up with Kejarival butted in "I will surely get a firm commitment from them", Mahesh assured, before the meeting dispersed. diagram for the risk event. developing a risk register 1 ng program for the selected work force 2. Estimate expected values of impact for different risk events and prioritize the risks for line capacity is 5,000 per week, why can't we get that output at that rate in the first three month Managing Risk 413 CASE 7.9 Supercomp Systems Manufacturing (Qualitative Risk Analysis Technique for Managing Project Risk) Abstract to lits ace be "Well, it ing 8 that lion sed successfully ramping up the production and win recognition. What problems or risks do we force "Sixteen months efforts of our group are now coming to a close and we must pass the to These are new machines. New control panels. New assembly jigs. No one in our plant has and what can we do about them?" Mahesh opened the discussion, "You know that Lenovo has rated or maintained these types of machines. There is something like 'Learning Curve Principle Era operation, each time the output is doubled, the worker hours per unit decrease by a fixed "Well, our assembly line capacity is supposed to be 5,000 units per week on a 3-shifts basis age of the previous value. People take some time to get used to new machines and new over 20,000 units in a month. So, it would look that we need not expect any problems in meeting the hods. They need to be trained. Subbu explained. "Well, then, since this is the first priority risk in our project, let us manage this risk actively took charge of the situation, "This is the risk we should take up first for our analysis and hesh that we can do to minimize the exposure. Here, look at this table and chart. This is where this all "Mahesh, you are talking of our assembly line capacity. But have you considered the ter before the competitors came up with their 'me-too" imitations. "You have done very well so of Tandon Printed Circuit Boards? He won't be able to supply new PCBs to our design at the sam, "How set you guys are in meeting the first quarter's quota for supplying to Lenovo a "Nimish addressed Mahesh, who was the leader of the cross-functional product development "Don't worry about Tandon." Raman Seth interjected, "While I considered the possible sample Det the project facilities to our manufacturing group for regular production?" The ramp-up of the for the PCBs, I did have preliminary evaluation of Tandon's production capacity. Managing production line was indeed the final and crucial ac supply chain is my responsibility and I will work with Tandon to make sure that he will that Mahesh had called this meeting for a review and analysis of the risks in meeting the project's many PCBs as we need for the first quarter. We are still six months before the launch. I will sit his and then help him augment his capacity with assum top-up obiectives. The other members of the team were Asutosh Kejarival, an accountant, guaranteed off take of the nor something like that. But, you have a point here die ham, a senior engineer from production department and Raman Seth, a bright MBA that we get the PCBs we want.". then turning towards Subbu, he asked," Tell me, if our sur That would go a long way, Raman" Mahesh observed," Do work with Tandon to mule Managing Risk 411 412 Project Management be supplied for the first three months 5,000, 7,500 and 12,000 units respectively." first 3-month quota before we hand over the facilities . But, before handing over the facilit, manufacturing, we need to establish that the production capacity of the assembly line is 5,000 dualitative Risk analysis is an important risk management process used for prioritizing risks. The per week. We may have a problem there. My experience from all these years is that we do le denique requires developing a cause effect diagram linking the risk event drivers and risk impact drivers problems in ramping up production. I expect the production rate in the first three months to the impact on the cost or schedule if the risk event occurred. From the probability of the risk event about 10,000 units, say 40-45% of the required monthly output. Use only 45% of the sales fontes ed the corresponding impact on the project cost or schedule, the expected value of the risk is estimated to be met in the first three months, that is the bitter truth. So we will have a problem in demonstrating This expected value is used for prioritizing risks and developing the risk management plan. The case the production capacity of the assembly line before handing it over to the manufacturing hele describes a scenario of qualitative risk management for a project for a manufacturing organization. Subramaniam explained. "Do you mean every time the manufacturing ramp-up is launched the output is a meager, the is, less than half, capacity in the first quarter? We would lose a gross margin of several milice CASE TEXT dollars - wait a minute, I will calculate the exact number and come back." Kejarival was surprised At the conference room table of Supercomp Systems Manufacturing Ltd, sat four executives with "Not every time, but most times - say seven times out of ten!" Subbu shot back. intense facial expressions. The group had been closely working together on a project to develop The euphoria of the project team, which developed a new winning product in a record time sank. There was a silence for a minute, while Kejarival flipped his papers back and forth, noted and market a new slim laptop computer, which would be a kilogram lighter than the models sailable in the market. Their project brief included developing the prototype, setting up the down some numbers and punched in his calculator. "Over US Dollars six and a half millions", e production line and overseeing for the first three months the production operation for the smooth announced looking up from the calculator, "Dollars 6,505,191 to be precise. That is the loss in gros transfer of the project to the manufacturing group revenue if we fail to meet the first quarter's production targets." The project group had burnt mid-night oil and devised ingenious ways to develop the prototype. "How do you get all these funny accuracy in your numbers - right down to a Rupee!" Subte asked teasingly Lenovo, the Chinese computer giant considered introducing in the US the laptop computer under "It is elementary Dr. Watson!" Kejarival mimicked the famous Sherlock Holmes quote. "Ou development by Supercomp one of its low-cost models in the product line. Lenovo contracted sale price to Lenovo is U.S. $ 995/- per piece and the cost of goods sold (COGS) is projected to with Supecomp to bankroll the cost of development for the prototype and agreed to purchase at the U.S. S 512.24 cents per unit. Now, using these sales price and COGS numbers, if we fail to supp! contracted price about 25,000 units to be supplied in the first three months for seed marketing 55% of the projected requirement, we stand to lose US S six and a half million five thousand of Lenovo indicated to Supercomp that if the product was well accepted in the US, they expected the hundred and ninety one." Kejarival paused for the impact, "Work it out yourself!" market to grow up to 15,000 units per week within a year and accordingly, suggested Supercomp to That is a big risk. This would top all the ten risks in our list in terms of exposure." Make She look at the prototype model and Nimish Mehta, The Executive Vice-President, realized that Supercomp had a real winner with this product. To reap the full benefits from the new product, he would fall on graphHe pointed out on . sed, it was crucial to ramp-up the production and establish the brand and the position as a pio- came out with the first possible hitch in up , shop and we will re-assess the For a long-term strategy, I should start to develop an alternative supplier of PCBs also." ime, oted he ross We must do that if we want to meet the targets. While we are doing that, let us give special ention to the third shift crew. They are the ones who are usually the greatest defaulters on the daction targets." Subbu suggested. it is not my field of expertise, but I would like to venture here a thought" Raman spoke wat slowly. He was the youngest of the group and was understandably circumspect in putting forth och ideas before his senior and more experienced colleagues. "The sale price is fixed and the sales department has booked orders at these prices. So probably not much we can do. But, Asutosh, bow did you work out the cost of goods sold per unit with accuracy down to naya paise?" Raman, the cost of goods sold (COGS) includes all direct costs of raw materials and labour, el indirect materials and indirect labour, other factory overheads, and provision for depreciation for the new assembly line machinery. Most of the data input is from our group members here; all I have done is simple arithmetic using the proper accounting procedures "Kejarival replied. "But then, it looks to me like there could be a leeway in saving something from the direct material & labour costs." Raman ventured again. Mahesh saw the merit in Raman's idea and immediately supported it, "Yes, I think let us forma form a small section of our project team to do that." After a short pause, he added, "Well, do it right away. I would christen the team as the Super Lenovo Team. Let us make the list of people to work in it." confirmation from the sales that indeed they will sell those units to Lenovo. I have noticed that "Before we make some big ramp-up plans and commit expenses, Mahesh, please get a y times the sales projections promise you the moon before the product is in hand. Once the product is available, all kinds of rationalizations are offered for not being able to sell - the high ce the competitor's product features, sales personnel training... a Long list they come up with I butted in "I will surely get a firm commitment from them". Mahesh assured, before the meeting dispersed. ibbu us Our o be pply one bydd risk acity rate pliers Discussion Questions and Assignment Identify event drivers and impact drivers for the risk event and construct a cause-effect es for abbu diagram for the risk event developing a risk register. Sa newly set-up supply chain management group in the materials department. embly - Supercomp had a real winner with this product. To reap the full benefits from the new product, he sed, it was crucial to ramp-up the production and establish the brand and the position as a pio- cm, "How set you guys are in meeting the first quarter's quota for supplying to Lenovo and hand ve the project facilities to our manufacturing group for regular production? The ramp-up of the Tooduction line was indeed the final and crucial acid test, which the project group had to pass mp-up objectives. The other members of the team were Asutosh Kejarival, an accountant, wing a newly set-up supply chain management group in the materials department. CASE 7.9 Supercomp Systems Manufacturing (Qualitative Risk Analysis Technique for Managing Project Risk) less Abstract Nimish addressed Mahesh, who was the leader of the cross-functional product development Mahesh had called this meeting for a review and analysis of the risks in meeting the project's Subramaniam, a senior engineer from production department and Raman Seth, a bright MBA Managing Risk 411 canliative Risk analysis is an important risk management process used for prioritizing risks. The denique requires developing a cause-effect diagram linking the risk event drivers and risk impact drivers al the corresponding impact on the project cost or schedule, the expected value of the risk is estimated. This expected value is used for prioritizing risks and developing the risk management plan. The case belor describes a scenario of qualitative risk management for a project for a manufacturing organization. CASE TEXT At the conference room table of Supercomp Systems Manufacturing Ltd, sat four executives with intense facial expressions. The group had been closely working together on a project to develop and market a new slim laptop computer, which would be a kilogram lighter than the models sailable in the market. Their project brief included developing the prototype, setting up the production line and overseeing for the first three months the production operation for the smooth transfer of the project to the manufacturing group The project group had burnt mid-night oil and devised ingenious ways to develop the prototype. Lenovo, the Chinese computer giant considered introducing in the US the laptop computer under development by Supercomp as one of its low-cost models in the product line. Lenovo contracted with Supecomp to bankroll the cost of development for the prototype and agreed to purchase at the Lenovo indicated to Supercomp that if the product was well accepted in the U.S., they expected the Sarket to grow up to 15,000 units per week within a year and accordingly, suggested Supercomp to set up the manufacturing line with a capacity for at least 5000 units per week to start with. One look at the prototype model and Nimish Mehta, The Executive Vice-President, realized that before the competitors came up with their "me-too" imitations "You have done very well so 146 "Sixteen months efforts of our group are now coming to a close and we must pass the test successfully ramping up the production and win recognition. What problems or risks do we for and what can we do about them?" Mahesh opened the discussion, "You know that Lenovo has "Well, our assembly line capacity is supposed to be 5,000 units per week on a 3-shifts basis over 20,000 units in a month. So, it would look that we need not expect any problems in meeting the That is a big risk. This would top all the ten risks in our list in terms of exposure. Mas that we can do to minimize the exposure. Here, look at this table and chart. This is where this "Mahesh, you are talking of our assembly line capacity. But have you considered the of Tandon Printed Circuit Boards? He won't be able to supply new PCBs to our design at the "Don't worry about Tandon." Raman Seth interjected, "While I considered the possible sample for the PCBs, I did have preliminary evaluation of Tandon's production capacity. Managing supply chain is my responsibility and I will work with Tandon to make sure that he sugli many PCBs as we need for the first quarter. We are still six months before the launch. I will shop and we will re-assess the capacity and then help him augment his capacity with assur guaranteed off take of the production or something like that. But, you have a point here ** That would go a long way, Raman" Mahesh observed, "Do work with Tandon to me that we get the PCBs we want. . then turning towards Subbu, he asked," Tell me, if our line capacity is 5,000 per week, why can't we get that output at that rate in the first three mai 412 Project Management be supplied for the first three months 5,000, 7,500 and 12,000 units respectively." first 3-month quota before we hand over the facilities. But, before handing over the facilisis manufacturing, we need to establish that the production capacity of the assembly line is 5,000 per week. We may have a problem there. My experience from all these years is that we do is problems in ramping up production. I expect the production rate in the first three months to about 10,000 units, say 40-45% of the required monthly output. Use only 45% of the sales foreca to be met in the first three months; that is the bitter truth. So we will have a problem in demonstrating the production capacity of the assembly line before handing it over to the manufacturing Subramaniam explained. Do you mean every time the manufacturing ramp-up is launched, the output is a meager, the is, less than half, capacity in the first quarter? We would lose a gross margin of several milie dollars - wait a minute, I will calculate the exact number and come back." Kejarival was surprised "Not every time, but most times - say seven times out of ten!" Subbu shot back. The euphoria of the project team, which developed a new winning product in a record time sank. There was a silence for a minute, while Kejarival flipped his papers back and forth, notul down some numbers and punched in his calculator. "Over US Dollars six and a half millions", le announced looking up from the calculator, "Dollars 6,505,191 to be precise. That is the loss in gos revenue if we fail to meet the first quarter's production targets." "How do you get all these funny accuracy in your numbers - right down to a Rupee!" Subtu asked teasingly "It is elementary Dr. Watson!" Kejarival mimicked the famous Sherlock Holmes quote. "O sale price to Lenovo is U.S. S 995/- per piece and the cost of goods sold (COGS) is projected to U.S. S 512.24 cents per unit. Now, using these sales price and COGS numbers, if we fail to suppl 55% of the projected requirement, we stand to lose US S six and a half million five thousand os hundred and ninety one." Kejarival paused for the impact, "Work it out yourself!" and exposure would fall on this graph." He pointed out on the graph sheet. came out with the first possible hitch in up For a long-term strategy, I should start to develop an alternative supplier of PCBs also." of to These are new machines. New control panels. New assembly jigs. No one in our plant has ed or maintained these types of machines. There is something like Learning Curve Principle' w operation, each time the output is doubled, the worker hours per un decrease by a fixed of the previous value. People take some time to get used to new machines and new sethods They need to be trained." Subbu explained "Well, then, since this is the first priority risk in our project, let us manage this risk actively Mahesh suggested, "We have still a few months to go before the launch. Let us have an intensive sting program for the selected work force." Discussion Questions and Assignment Identify event drivers and impact drivers for the risk event and construct a cause effect 2. Estimate expected values of impact for different risk events and prioritize the risks for Managing Risk 413 -We must do that if we want to meet the targets. While we are doing that, let us give special Gention to the third shift crew. They are the ones who are usually the greatest defaulters on the duction targets." Subbu suggested -Well, it is not my field of expertise, but I would like to venture here a thought" Raman spoke out slowly. He was the youngest of the group and was understandably circumspect in putting forth sch ideas before his senior and more experienced colleagues . "The sale price is fixed and the sales department has booked orders at these prices. So probably not much we can do. But, Asutosh, bow did you work out the cost of goods sold per unit with accuracy down to naya paise?" "Raman, the cost of goods sold (COGS) includes all direct costs of raw materials and labour, all indirect materials and indirect labour, other factory overheads, and provision for depreciation for the new assembly line machinery. Most of the data input is from our group members here all I have done is simple arithmetic using the proper accounting procedures "Kejarival replied. "But then, it looks to me like there could be a leeway in saving something from the direct material & labour costs." Raman ventured again. Mahesh saw the merit in Raman's idea and immediately supported it, "Yes, I think let us form a production cost review team looking with a magnifying glass all operating costs. We can definitely form a small section of our project team to do that." After a short pause, he added, "Well, let us do it right away. I would christen the team as the Super Lenovo Team. Let us make the list of people to work in it." "Before we make some big ramp-up plans and commit expenses, Mahesh, please get a confirmation from the sales that indeed they will sell those units to Lenovo I have noticed that Sany times the sales projections promise you the moon before the product is in hand. Once the product is available, all kinds of rationalizations are offered for not being able to sell - the high price, the competitor's product features, sales personnel training... a Long list they come up with Kejarival butted in "I will surely get a firm commitment from them", Mahesh assured, before the meeting dispersed. diagram for the risk event. developing a risk register 1 ng program for the selected work force 2. Estimate expected values of impact for different risk events and prioritize the risks for line capacity is 5,000 per week, why can't we get that output at that rate in the first three month Managing Risk 413 CASE 7.9 Supercomp Systems Manufacturing (Qualitative Risk Analysis Technique for Managing Project Risk) Abstract to lits ace be "Well, it ing 8 that lion sed successfully ramping up the production and win recognition. What problems or risks do we force "Sixteen months efforts of our group are now coming to a close and we must pass the to These are new machines. New control panels. New assembly jigs. No one in our plant has and what can we do about them?" Mahesh opened the discussion, "You know that Lenovo has rated or maintained these types of machines. There is something like 'Learning Curve Principle Era operation, each time the output is doubled, the worker hours per unit decrease by a fixed "Well, our assembly line capacity is supposed to be 5,000 units per week on a 3-shifts basis age of the previous value. People take some time to get used to new machines and new over 20,000 units in a month. So, it would look that we need not expect any problems in meeting the hods. They need to be trained. Subbu explained. "Well, then, since this is the first priority risk in our project, let us manage this risk actively took charge of the situation, "This is the risk we should take up first for our analysis and hesh that we can do to minimize the exposure. Here, look at this table and chart. This is where this all "Mahesh, you are talking of our assembly line capacity. But have you considered the ter before the competitors came up with their 'me-too" imitations. "You have done very well so of Tandon Printed Circuit Boards? He won't be able to supply new PCBs to our design at the sam, "How set you guys are in meeting the first quarter's quota for supplying to Lenovo a "Nimish addressed Mahesh, who was the leader of the cross-functional product development "Don't worry about Tandon." Raman Seth interjected, "While I considered the possible sample Det the project facilities to our manufacturing group for regular production?" The ramp-up of the for the PCBs, I did have preliminary evaluation of Tandon's production capacity. Managing production line was indeed the final and crucial ac supply chain is my responsibility and I will work with Tandon to make sure that he will that Mahesh had called this meeting for a review and analysis of the risks in meeting the project's many PCBs as we need for the first quarter. We are still six months before the launch. I will sit his and then help him augment his capacity with assum top-up obiectives. The other members of the team were Asutosh Kejarival, an accountant, guaranteed off take of the nor something like that. But, you have a point here die ham, a senior engineer from production department and Raman Seth, a bright MBA that we get the PCBs we want.". then turning towards Subbu, he asked," Tell me, if our sur That would go a long way, Raman" Mahesh observed," Do work with Tandon to mule Managing Risk 411 412 Project Management be supplied for the first three months 5,000, 7,500 and 12,000 units respectively." first 3-month quota before we hand over the facilities . But, before handing over the facilit, manufacturing, we need to establish that the production capacity of the assembly line is 5,000 dualitative Risk analysis is an important risk management process used for prioritizing risks. The per week. We may have a problem there. My experience from all these years is that we do le denique requires developing a cause effect diagram linking the risk event drivers and risk impact drivers problems in ramping up production. I expect the production rate in the first three months to the impact on the cost or schedule if the risk event occurred. From the probability of the risk event about 10,000 units, say 40-45% of the required monthly output. Use only 45% of the sales fontes ed the corresponding impact on the project cost or schedule, the expected value of the risk is estimated to be met in the first three months, that is the bitter truth. So we will have a problem in demonstrating This expected value is used for prioritizing risks and developing the risk management plan. The case the production capacity of the assembly line before handing it over to the manufacturing hele describes a scenario of qualitative risk management for a project for a manufacturing organization. Subramaniam explained. "Do you mean every time the manufacturing ramp-up is launched the output is a meager, the is, less than half, capacity in the first quarter? We would lose a gross margin of several milice CASE TEXT dollars - wait a minute, I will calculate the exact number and come back." Kejarival was surprised At the conference room table of Supercomp Systems Manufacturing Ltd, sat four executives with "Not every time, but most times - say seven times out of ten!" Subbu shot back. intense facial expressions. The group had been closely working together on a project to develop The euphoria of the project team, which developed a new winning product in a record time sank. There was a silence for a minute, while Kejarival flipped his papers back and forth, noted and market a new slim laptop computer, which would be a kilogram lighter than the models sailable in the market. Their project brief included developing the prototype, setting up the down some numbers and punched in his calculator. "Over US Dollars six and a half millions", e production line and overseeing for the first three months the production operation for the smooth announced looking up from the calculator, "Dollars 6,505,191 to be precise. That is the loss in gros transfer of the project to the manufacturing group revenue if we fail to meet the first quarter's production targets." The project group had burnt mid-night oil and devised ingenious ways to develop the prototype. "How do you get all these funny accuracy in your numbers - right down to a Rupee!" Subte asked teasingly Lenovo, the Chinese computer giant considered introducing in the US the laptop computer under "It is elementary Dr. Watson!" Kejarival mimicked the famous Sherlock Holmes quote. "Ou development by Supercomp one of its low-cost models in the product line. Lenovo contracted sale price to Lenovo is U.S. $ 995/- per piece and the cost of goods sold (COGS) is projected to with Supecomp to bankroll the cost of development for the prototype and agreed to purchase at the U.S. S 512.24 cents per unit. Now, using these sales price and COGS numbers, if we fail to supp! contracted price about 25,000 units to be supplied in the first three months for seed marketing 55% of the projected requirement, we stand to lose US S six and a half million five thousand of Lenovo indicated to Supercomp that if the product was well accepted in the US, they expected the hundred and ninety one." Kejarival paused for the impact, "Work it out yourself!" market to grow up to 15,000 units per week within a year and accordingly, suggested Supercomp to That is a big risk. This would top all the ten risks in our list in terms of exposure." Make She look at the prototype model and Nimish Mehta, The Executive Vice-President, realized that Supercomp had a real winner with this product. To reap the full benefits from the new product, he would fall on graphHe pointed out on . sed, it was crucial to ramp-up the production and establish the brand and the position as a pio- came out with the first possible hitch in up , shop and we will re-assess the For a long-term strategy, I should start to develop an alternative supplier of PCBs also." ime, oted he ross We must do that if we want to meet the targets. While we are doing that, let us give special ention to the third shift crew. They are the ones who are usually the greatest defaulters on the daction targets." Subbu suggested. it is not my field of expertise, but I would like to venture here a thought" Raman spoke wat slowly. He was the youngest of the group and was understandably circumspect in putting forth och ideas before his senior and more experienced colleagues. "The sale price is fixed and the sales department has booked orders at these prices. So probably not much we can do. But, Asutosh, bow did you work out the cost of goods sold per unit with accuracy down to naya paise?" Raman, the cost of goods sold (COGS) includes all direct costs of raw materials and labour, el indirect materials and indirect labour, other factory overheads, and provision for depreciation for the new assembly line machinery. Most of the data input is from our group members here; all I have done is simple arithmetic using the proper accounting procedures "Kejarival replied. "But then, it looks to me like there could be a leeway in saving something from the direct material & labour costs." Raman ventured again. Mahesh saw the merit in Raman's idea and immediately supported it, "Yes, I think let us forma form a small section of our project team to do that." After a short pause, he added, "Well, do it right away. I would christen the team as the Super Lenovo Team. Let us make the list of people to work in it." confirmation from the sales that indeed they will sell those units to Lenovo. I have noticed that "Before we make some big ramp-up plans and commit expenses, Mahesh, please get a y times the sales projections promise you the moon before the product is in hand. Once the product is available, all kinds of rationalizations are offered for not being able to sell - the high ce the competitor's product features, sales personnel training... a Long list they come up with I butted in "I will surely get a firm commitment from them". Mahesh assured, before the meeting dispersed. ibbu us Our o be pply one bydd risk acity rate pliers Discussion Questions and Assignment Identify event drivers and impact drivers for the risk event and construct a cause-effect es for abbu diagram for the risk event developing a risk register. Sa newly set-up supply chain management group in the materials department. embly