BrightField Paper
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University of Houston, Downtown *
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6324
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Industrial Engineering
Date
Dec 6, 2023
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docx
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Uploaded by laura83777
A lucrative contract from a prospective customer in Spain presents a significant
opportunity for Brightfield Industries, Inc. This case study will offer a list of risks
associated with the contract proposal, conduct a qualitative risk analysis, and provide
mitigation recommendations.
Delay Risk: A good project management system, timely material supply cooperation with
Tienmu, and having alternate transportation alternatives like as air freight for
emergencies are all addressed.
Risks of Damage and Theft: Reduced by careful packing and bracing, reliable carriers,
and shipping insurance.
Cargo loss risk is reduced by using an organized inventory system and real-time
tracking using GPS or RFID technologies.
Supplier Reliability Risk: Minimized by researching Tienmu's capacity and financial
stability, as well as having backup suppliers to assure a steady supply of
subassemblies.
The principal form of transportation for subassemblies from Tienmu to Chicago is sea
freight, which balances cost and transit time. Sea freight allows for improved production
planning and reduces delays. Full Incoterm: FOB Shenzhen Port, putting Brightfield in
responsibility of products after loading and reducing risk.
Logistics of Finished Goods to the Port of Valencia Sea freight is the principal route of
transportation for completed goods to Valencia, with air freight as a backup alternative.
Sea freight improves logistics cost control and risk management.
Full Incoterm: CIF Port of Valencia, with Brightfield in charge until delivery, assuring
transportation risk insurance coverage.Raw Materials Supply Logistics from Tienmu:
Total cost $900,000 (Sea freight)Finished Goods Logistics to the Port of Valencia: Total
cost $1,200,000 (Sea freight).Overall Estimated Transportation Cost: $2,100,000 (Best
Case)"
List of Risks Related to the Contract Proposal:
A. Logistics and Transportation Risks:
1. Delay in Subassemblies Delivery: There may be delays in receiving subassemblies
from Tienmu, Inc., which could result in delays in production and shipment of finished
goods.
2. Transportation Delays: The transportation process, especially during shipping and
rail transport, may face unforeseen delays due to weather, port congestion, or other
logistical challenges.
3. Air Freight Availability: In case of emergencies or unforeseen circumstances, there
might be limited availability of cargo 747 aircraft for air freight, impacting timely delivery.
4. Cargo Damage during Transit: The bulky and heavy subassemblies could be
susceptible to damage during the long shipping and rail transport process.
5. Cargo Theft: The risk of theft during transit or at any stage of the transportation
process could lead to a breach of contract terms.
6. Cargo Loss: Any loss of cargo could have severe consequences, equivalent to an
11-day delay in delivery.
B. Production Risks:
1. Production Delays: Unforeseen issues during the 60-business-day production
process in Chicago may lead to delays in completing the production run.
2. Quality Control Issues: If there are quality control problems during production, it
might lead to the rejection of finished goods, causing delays and financial losses.
3. Capacity Constraints: The substantial increase in production volume might strain
Brightfield's production facility and impact their ability to meet the tight delivery
schedule.
C. Customer and Contractual Risks:
1. Customer Default: The customer might fail to fulfill their contractual obligations,
affecting payment or other aspects of the contract.
2. Contractual Penalties: The stringent penalty clauses for delivery delays could lead
to significant financial losses for Brightfield if they fail to meet the 140-day delivery
window.
Quantitative Risk Analysis:
To conduct a quantitative risk analysis, we would assign probabilities and impacts to
each identified risk. For simplicity, let's use a scale of 1 to 5, with 1 being the lowest and
5 being the highest, to rate the probability and impact of each risk.
1. Delay in Subassemblies Delivery: Probability (4), Impact (4)
2. Transportation Delays: Probability (3), Impact (3)
3. Air Freight Availability: Probability (2), Impact (3)
4. Cargo Damage during Transit: Probability (3), Impact (4)
5. Cargo Theft: Probability (2), Impact (4)
6. Cargo Loss: Probability (2), Impact (5)
7. Production Delays: Probability (3), Impact (3)
8. Quality Control Issues: Probability (3), Impact (3)
9. Capacity Constraints: Probability (2), Impact (3)
10. Customer Default: Probability (2), Impact (3)
11. Contractual Penalties: Probability (3), Impact (5)
Mitigation Suggestions:
Based on the risk analysis, the following are the suggested mitigation measures for the
most critical risks:
A. Logistics and Transportation Risks:
1. Maintain Regular Communication: Establish a robust communication channel with
Tienmu, Inc., and transportation partners to track progress and address any potential
delays proactively.
2. Diversify Transportation Options: Have alternative transportation methods and
carriers in place to mitigate any delays or capacity issues.
3. Enhance Packaging: Work with Tienmu, Inc., to ensure robust packaging and
secure blocking and bracing to minimize the risk of cargo damage during transit.
4. Employ Security Measures: Implement security measures to reduce the risk of theft
during transit.
B. Production Risks:
1. Streamline Production Processes: Optimize production processes and capacity to
meet the demands of the large contract and reduce the likelihood of production delays.
2. Conduct Rigorous Quality Control: Implement strict quality control measures to
identify and address any issues early in the production process.
C. Customer and Contractual Risks:
1. Perform Due Diligence: Conduct background checks and assess the financial
stability of the customer before finalizing the contract.
2. Negotiate Reasonable Penalty Terms: Try to negotiate more flexible penalty
clauses with the customer to avoid severe financial losses in case of minor delays.
Overall, proactive risk management, close monitoring of critical processes, and
contingency planning will be essential to ensure the successful execution of this
significant contract and to mitigate potential risks that could impact Brightfield Industries,
Inc.
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