PM 587 Week 4 Planning Risk Responses Example

Freezer Stock, a Rented Autoclave and an Executive Phone Call: Planning Risk Responses for a Composite Panel Launch

[Student Name]

University of Phoenix

PM/587: Project Risk Management and Quality Assurance

Week 4 Assignment

[Instructor Name]

[Date]

Plainsview Aerostructures, its responses, costs and owners are composites written for a model paper.

The Week 3 simulation showed that Plainsview Aerostructures' first delivery of carbon-fiber panels for the new business jet had about a 22 percent chance of meeting month 14 and that customer drawings, autoclave access and prepreg supply drove most of the uncertainty. This paper plans responses for those and the other top risks, sized against what they could cost.

Choosing Strategies

The current standard describes response strategies for threats, avoid, escalate, transfer, mitigate and accept, and parallel strategies for opportunities, exploit, escalate, share, enhance and accept (Project Management Institute [PMI], 2021). Hillson (2002) argued that the risk process should treat opportunities with the same discipline as threats and proposed matching opportunity strategies to the familiar threat strategies, so that upside uncertainty is actively managed rather than left to chance. Zhang and Fan (2014) proposed an optimization approach to selecting risk responses that weighs each response's cost against the reduction in risk it achieves and the budget available, formalizing what project teams usually do by judgment. Plainsview's team applied the same logic informally: each response was compared with the expected cost of the risk it addresses.

Threat 1: Single-Source Prepreg Supply

Strategy: mitigate now, with a longer-term change. Actions: build and hold eight weeks of frozen prepreg safety stock from month 3, stored at the supplier-specified temperature, at a cost of about $210,000 in material carrying cost and freezer space; negotiate an allocation clause guaranteeing Plainsview's launch volumes, with the supplier's sales director; begin qualifying a second source for the smaller panels after first delivery. Owner: purchasing manager. Trigger: any allocation notice. Residual: probability falls from 30 to about 10 percent of a disruption that delays production, and the impact of one shrinks to about two weeks. Secondary risk: stock expiring before use if the schedule slips; the stock will be rotated first in, first out.

Threat 2: Late Customer Drawings

Strategy: escalate and share. The cause sits with the customer, so the response belongs at the level that can influence it. Actions: the general manager calls the customer's program director to propose a trade: Plainsview accepts a design freeze on panel interfaces in exchange for early release of the four largest late drawings, and its engineers join the customer's design reviews for those parts. Owner: program manager, with the general manager. Trigger: drawings not released by month 3. Residual: probability falls from about 4 on the scale to 2 for the four largest parts; the two smaller late parts remain at risk but use short-lead aluminum tools.

Threat 3: Autoclave Conflict

Strategy: mitigate, with a contingency plan. Actions: a written slot agreement with the military program's manager, approved by the operations director, reserving twelve cure cycles for qualification in months 5 to 9. Contingency plan: rent cure time at an outside autoclave 180 miles away if two reserved slots are lost in a month, with a standing quote and logistics plan prepared now. Owner: autoclave supervisor. Trigger: loss of a reserved slot. Cost: about $15,000 to prepare the plan; about $90,000 if used.

A contingency plan written in a calm week is cheaper than one improvised after the trigger has fired.

Threat 4: Invar Tool Delivery

Strategy: transfer part of the impact and mitigate. Actions: a late delivery penalty in the tool contract and a weekly progress call with the tool builder; release the tool order for the two largest tools at 80 percent design maturity to gain four weeks, accepting modest rework risk. Owner: tooling engineer. Trigger: builder misses an interim milestone.

Threat 5: Prepreg Out-Time

Strategy: mitigate. Actions: cut ply kits in the order of layup, track out-time on each kit with a barcode and timer and schedule long layups only when an autoclave slot is confirmed. Owner: production supervisor. Cost: about $25,000 for the tracking system.

Threat 6: Technician Hiring Shortfall

Strategy: mitigate. Actions: a partnership with a local technical college's composites program for twelve trainees, starting in month 4, with a hiring bonus for graduates. Owner: human resources manager. Cost: about $120,000. Trigger: fewer than six hires by month 6.

Opportunities

Automated ply cutting: exploit. The machine is installed; programming it for all 22 parts by month 6 makes the opportunity certain and cuts layup time by about 15 percent. Owner: manufacturing engineer.

Out-of-autoclave material: enhance, then decide. Spend about $20,000 to obtain the customer's preliminary view, as Week 3 recommended, and commit the $380,000 qualification only if the view is favorable, raising the chance of approval before spending.

How Responses Were Tested With the People Who Must Carry Them Out

Before the plan went to the general manager, each owner walked through their response with the people who would do the work. The freezer stock plan went to the receiving supervisor, who pointed out that the existing freezer had room for only five weeks of stock; a rented freezer trailer, about $1,800 a month, was added. The ply-kit tracking plan went to two lead technicians, who asked that timers be visible from the layup table rather than only on a screen in the office. The autoclave contingency went to the shipping coordinator, who confirmed that cured parts could be moved back in an insulated truck within the material's handling limits. Small changes like these are where response plans usually fail if no one asks.

Communicating the Plan

The response plan was summarized on two pages for the general manager and the customer's supplier quality representative, showing the top risks, each response, its owner and the effect on the P80 dates. The customer received a version without cost details, which helped the drawing negotiation: it showed that Plainsview was taking its own risks seriously while asking the customer to act on one.

Accepted Risks

Lower-ranked risks, such as the inspection report format, are accepted with contingency plans and triggers rather than active responses, since their expected costs are below the cost of mitigation.

Response Cost Against Exposure

Responses for the six threats cost about $395,000 to implement, plus about $90,000 if the autoclave contingency is triggered. Re-running the Week 3 model with the responses in place moved the P80 delivery date from mid-month 16 to early month 15 and the P80 cost from about $7.1 million to about $6.7 million. The exposure removed, about $400,000 at P80 cost plus five to six weeks of schedule, justifies the spending.

Reserve Allocation

Contingency reserve is set at about $500,000, sized to the residual exposure at P80 after responses, and allocated to specific risks: about $90,000 for the autoclave contingency, about $150,000 for residual tool delays and expediting, about $160,000 for yield shortfall and scrap and about $100,000 for residual supply and staffing effects. A management reserve of $250,000, held by the general manager, covers unidentified risks.

Conclusion

Plainsview's response plan matches strategies to risks: mitigation for supply, out-time and staffing, escalation for the customer's drawings, mitigation with a prepared contingency for autoclave capacity, partial transfer for tooling and active pursuit of two opportunities. Each response has an owner, a trigger and a cost, residual and secondary risks are recorded, and reserves follow the exposure that remains. The responses move the likely delivery date earlier and justify their cost.

References

Hillson, D. (2002). Extending the risk process to manage opportunities. International Journal of Project Management, 20(3), 235-240. https://doi.org/10.1016/S0263-7863(01)00074-6

Project Management Institute. (2021). A guide to the project management body of knowledge (PMBOK guide) (7th ed.). Project Management Institute.

Zhang, Y., & Fan, Z.-P. (2014). An optimization method for selecting project risk response strategies. International Journal of Project Management, 32(3), 412-422. https://doi.org/10.1016/j.ijproman.2013.06.006