Practical 3 Updated Case Study:. Risk Register – Tier 1 AUTOMOTIVE SUPPLIER
Prof. Shaila Aranha Sec 3 & 9 MGMT 8370.
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IMPORTANT: Practical assignments are individual independent work.
Kindly safeguard your assignments and work on it without collaboration.
Practical 3: DUE DATE : November 14, Saturday by 11.59 pm (Week 10)
1. Use the information in the updated case study for Practical 3.
2. Continue to work on the risk register template Practical 3 tab for all 5 of your risk statements.
3. Submit in dropbox Risk Register 3. Excel workbook with completed tabs of Practical 1, 2 & 3.
NOTE: Practical 4 will be an updated version and will be available to you closer to the due date
of Practical 4.
CASE STUDY
Risk Register Case Study: TIER 1 AUTOMOTIVE SUPPLIER
Pineapple Wheels Inc. (“Pineapple”) was a Tier 1 automotive supplier located in Algoma, ON
originally started by Melanie Daoust in her garage 30-years ago. Residing in the same town
since 1990, Pineapple had gradually shifted from supplying utility carts and trailers to trucks and
cars. The main customers had headquarters in Detroit, but a sophisticated combination of rail
and long-distance haulers allowed Pineapple to ship wheels throughout Canada, US, and
Mexico as Algoma had a commercial railroad station.
The customer base was steady, but the projected annual domestic wheel sales show a decline
of 4% starting in 2022 (domestics = plants in Canada, US, and Mexico). Upper management at
Pineapple was led by the CEO, Murray Daoust, who was the eldest son. Murray had worked in
the business since he finished school and felt a strong connection to the workforce and the local
region. Understanding the projections, Murray had developed a sales strategy to expand into
Asian vehicle manufacturers. Finally, after 4+ years of hard work, Murray’s first success was a
new $28M project to supply tires to support the 2021 launch of the latest line of SUMO vehicles
from the Tata Motor Company (“Tata”).
A successful launch was the responsibility of the project manager, Tommy Gendron. Having
significant automotive experience, Tommy moved from Detroit to Algoma’s quieter city to find
work/life balance and take part in Murray’s ambitious business plans. Tommy understood a
similar budget had supported the earlier Ford F150 launch, except the F150 only required
domestic transportation and used a wheel design previously tested on another truck program. In
comparison, the Tata wheel was a new design but was on a compressed release schedule with
a timeline of 28-months compared to a standard 48-months. However, the Tata design was very
similar to the F150 design. It used standard material the existing Pineapple machinery and
assembly personnel were comfortable handling. As a unionized shop led by Mario Tremblay,
there were always discussions and tension when new changes were introduced.
As a new design, Pineapple had no test data against domestic or Tata specifications. Terry
Calhoun was the quality manager who had overseen the Ford F150 project and felt the
Practical 3 Updated Case Study:. Risk Register – Tier 1 AUTOMOTIVE SUPPLIER
Prof. Shaila Aranha Sec 3 & 9 MGMT 8370.
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differences in specifications were inconsequential. The project timeline could be compressed by
months if test data from the Ford F150 was deemed as an acceptable substitute by the
customer. However, Tata had no experience with domestic wheel testing standards and relied
on Pineapple’s recommendations on which specification differences could be ignored.
Tata had also introduced Pineapple to new suppliers that Tata had previously done business
with. The purchaser for Pineapple was Wanda Daoust and a new supplier was Amoli Rubber
Inc. (“Amoli”) located in Jaipur, India. Wanda was the youngest child and eager to make an
impression on Melanie. Her enthusiasm sometimes covered over a lack of preparation and this
often was a source of conflict with Murray who preferred planning over trusting a “gut feeling”.
Amoli made a verbal offer to Wanda that would reduce the raw material costs by 40% compared
to the current Pineapple suppliers if “more business” beyond the Tata program was switched to
Amoli. Wanda had not exchanged hard figures yet, but the potential savings were significant.
As the PM, Tommy had independent discussions with the key stakeholders throughout and was
comfortable with their respective areas of expertise. He had a meeting scheduled with Murray
next week to decide whether to release the 1st round of funding to purchase materials and
machinery. Tommy needed to use this meeting to provide an accurate project status and
evaluation of the risks and opportunities so that Murray, as the project sponsor, can make the
appropriate choices.
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Expanded Case Study
Pineapple was responsible for completing domestic wheel testing that included NVH (noisevehicle-harshness), crash, and durability tests (km before failure). A standard testing process
had subcontractor quotations of at least $1.6M and 16-weeks of time. There were accelerated
testing labs that compressed timing to 12-weeks, but this increased testing costs to $2.5M. In
both scenarios, Pineapple supplied a total of 24 tire sets to the subcontractor.
In parallel, Tata was responsible for completing 6 sets of vehicle tests. The fixed test schedule
required Pineapple to provide 6 tire sets for weeks 14, 16, 20, 24, 26, and 28. Along with the
physical tire sets, Pineapple covered all costs to get tire sets to Tata (at least $25K / vehicle test
for logistics, shipping, insurance, etc …).
For the prototype tire sets used in testing, Tommy combined costs for prototype molds, raw
materials, and labour. The estimated cost was at least $20K per prototype tire set. Also, a 12-
week period had to elapse before any prototype tire sets could be produced. This meant tire
sets would only be available starting in week 13 at a rate of 6 tire sets / week.
The 28-month project duration was supported by 11 team members including Tommy, Terry,
Wanda, and Mario. Combining software licenses and overhead, Tommy estimated each team
member costs around $11K / month. Murray had asked Tommy for a larger team because of the
Practical 3 Updated Case Study:. Risk Register – Tier 1 AUTOMOTIVE SUPPLIER
Prof. Shaila Aranha Sec 3 & 9 MGMT 8370.
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schedule, but Tommy felt an 8 member team was more flexible and would still get the work
done. Tata had a $100K / day penalty for every business day beyond the 28-weeks where tire
sets were unavailable. The contract language was ambiguous and Murray wasn’t convinced
Tata wouldn’t apply the penalty even if delays weren’t Pineapple’s fault.
The SUMO vehicle program had a $28M budget for the 28-months to test and release a new tire
design and a further 48-months to produce tire sets to support SUMO vehicle production. Early
production volumes were 16K annually from 2021 to 2024 with Tata paying a selling price of
$330 / tire set that was non-negotiable until 2024. Murray expected to increase the selling price
to $360 / tire set and SUMO volumes to rise to 18K annually in 2024 for the 2nd generation.
Production costs for tire sets were much cheaper at $240. Tommy estimated this figure based
on the shop floor wages (40% of cost), overhead (20% of cost), and material (40% of cost). The
union contract is up in 2024 and preliminary discussions indicated wages could rise by 1.5x.
The last union contract came after a 90-day strike, so Mario is an aggressive negotiator.
Thinking further ahead, Murray had secured a tentative 4-year commitment for the Tata TIAGO
vehicle line. Starting in 2024, Murray used a conservative estimate of flat growth for all 4 years
(60K / year) with a selling price of $325 / tire set and estimated production cost of $300 / tire set.
However, this future business was heavily dependent on a successful SUMO launch.
Additional Project Details
Use this information while completing the risk register.
Duration. 28 weeks
Budget. $28M
Contingency. $2.8M
Constraints. The project is schedule-constrained due to the many fixed dates and lead time
Notes. 1 tire set = 4 tires, all customer volumes are in tire sets
Business week = Monday to Friday
M = Million(s)
K = Thousand(s)
No constraints on the ability to meet production volumes after 28-weeks
Domestic Wheel Testing
Option A. Standard testing – 16 weeks
6 tire sets tested every 4 weeks
Testing execution and final report – cost $1.6M
Option B. Accelerated testing – 12 weeks
8 tire sets tested every 4 weeks
Testing execution and final report – cost $2.5M
Practical 3 Updated Case Study:. Risk Register – Tier 1 AUTOMOTIVE SUPPLIER
Prof. Shaila Aranha Sec 3 & 9 MGMT 8370.
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Fixed Cost. 24 tire sets
$0K / test (shipping, insurance, logistics)
Prototype Vehicle Testing
Number of prototype tests. 6 tests
Number of tire sets / test. 6 tire sets required
Prototype vehicle testing schedule in weeks 14, 16, 20, 24, 26, and 28
Fixed Cost. 36 tire sets
$25K / test (shipping, insurance, logistics)
Prototype Volume, Constraints, and Cost (weeks 1 to 28)
Prototype volume. 6 tire sets / week
Lead time for tire sets. 12 weeks (week 13 is earliest tire sets can be tested)
Fixed Cost. $20K / tire set
Other Project Costs
Option A. 11-team members – $110K/week (including salaries, overhead, etc …)
Duration – 28 weeks starting week 1
Option B. 8-team members – $88K/week (including salaries, overhead, etc …)
Duration – 28 weeks starting week 1
Production Volumes + Revenue + Cost (after week 28)
2021 – 2024 16K sets of tires per year
SUMO Actual selling price $330 / set
Estimated production cost = $240 / set (40% shop floor wages + 20%
overhead + 40% material)
2024 – 2028 18K sets of tires per year
SUMO (2nd Gen) Estimated selling price $360 / set
Estimated production cost = $288 / set (estimated shop floor wages
increase by 1.5x compared to 2021-2024, estimated overhead + material
are same as 2021-2024)
2024 – 2028 60K sets of tires per year
TIAGO Actual selling price $325 / set
Estimated production cost = $300
Production Penalties (after week 28)
Penalty $100K / business day when tire sets unavailable to Tata
manufacturing facilities
Duration SUMO is 2021 to 2024 (only applies after week 28)
Practical 3 Updated Case Study:. Risk Register – Tier 1 AUTOMOTIVE SUPPLIER
Prof. Shaila Aranha Sec 3 & 9 MGMT 8370.
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Supplemental: Heat Map
Supplemental: Impact Table
Impact Rating Cost ($K) Time (days)
5 —
High impact
> 4 business days
4
High impact
> $500K
Medium impact
2 to 4 business days
3
Medium impact
$201K to $500 K
Low impact
< 2 business days
2
Low impact
$50K < $200K —
1
Very low impact
< $50K —
Note. Time is captured in Business Days, not weeks