“What Could Shut Us Down?”: A CEO-Level Guide to Hidden Manufacturing Risks
Insights from the field on engineering, quality, supply chain, and systemic risks that threaten production in mission-critical environments.
Introduction: Why Production Risk Demands Executive Attention
If your company designs and manufactures mission-critical systems for commercial and military customers including the U.S. Department of Defense and allied nations you understand that your production performance is directly tied to national security, fleet readiness, and your customers' bottom line. One failed component can ground a fleet. One missed shipment can halt an assembly line. And one poorly vetted supplier can trigger a cascade of quality and compliance issues.
That’s why a CEO’s simple but powerful question: “What are the top ten things that could shut down our product lines?” deserves a comprehensive answer.
At Hoagland Management & Consulting LLC (HMC), we’ve worked inside design and manufacturing organizations long enough to know that production stoppages rarely result from a single catastrophic failure. More often, they stem from a chain of overlooked risks, strategic decisions made in pursuit of cost efficiency, engineering shortcuts, quality lapses, and supply chain vulnerabilities that seemed acceptable at the time.
In this blog, we walk through a real-world risk assessment conducted by HMC for a company that delivers mission-critical systems to both defense and commercial customers. We present our approach, organize the 48 identified risks into actionable categories, and highlight examples that should serve as cautionary tales and planning tools for any manufacturing organization.
The Situation: High Stakes, Tight Margins
The company in question produces critical systems used in high-reliability applications. It is a Lean manufacturer, focused on cost cutting, continuous improvement, and operational efficiency. Yet even the best manufacturing philosophies can introduce unintended vulnerabilities.
The risks were intensified by common tradeoffs:
Just-in-time (JIT) inventory vs. system redundancies
Discounted suppliers vs. high-quality vendors
Single-source dependency vs. diversified sourcing
Lean staffing vs. functional oversight gaps
In this environment, a production stoppage could cause massive ripple effects:
Financial penalties (e.g., liquidated damages)
Erosion of customer trust
Expedited qualification of alternate suppliers
Fleet or mission downtime
Revenue loss for both the company and its customers
The CEO wanted clear answers and a prioritized view of the biggest risks.
HMC’s Approach: Cross-Functional and Risk-Based
To answer the CEO’s question, we developed a comprehensive risk assessment framework grounded in:
Cross-functional input from purchasing, quality assurance, engineering, program management, and operations
“What-if” scenario brainstorming and expert judgment
Categorization by risk type: Engineering, Quality, Supply Chain, and Systemic
Evaluation of mitigation readiness, from leading indicators to lagging consequences
Prescriptive mitigation plans using the four classic risk strategies: Control, Avoidance, Assumption, and Transfer
The result was a detailed catalog of 48 risks, each with the potential to stop production.
The Findings: Categorized Risks That Could Shut You Down
Top Production Risk Categories
48 Identified Risks That Could Shut Down Your Production Lines
Engineering Risks
Design, documentation, and technical decision-making vulnerabilities
Examples:
- Unproven process changes
- Incomplete technical data packages
- Key characteristic definition gaps
- Poor tooling design
- Untested hidden requirements
Quality Risks
Inspection failures, supplier oversight gaps, and inadequate quality systems
Examples:
- Inadequate first article inspection
- Blind acceptance of certificates
- Insufficient supplier audits
- Process change control failures
- Poor corrective action follow-up
Supply Chain Risks
Procurement, inventory, supplier management, and logistics vulnerabilities
Examples:
- Use of discounted suppliers
- Incomplete requirement flow-down
- Poor inventory control
- Incorrect lead times
- Poor shelf-life management
Systemic Risks
Environmental and business ecosystem risks impacting production externally
Examples:
- Economic downturns or mergers
- Political instability & disasters
- Counterfeit parts & ITAR violations
- Demand volatility
- Over-outsourcing risks
Risk Assessment Impact
💡 Key Insight: You don't manage risk in isolation. You manage it across the system.
I. Engineering Risks
Risks related to design, technical documentation, and engineering decision-making.
1. Unproven Changes
Process or design changes without sufficient validation can result in unacceptable parts. Avoidance strategies such as structured design reviews and pilot testing are essential.
2. Incomplete Technical Data Packages
When suppliers don’t receive complete or clear data, they can’t produce compliant parts. The result: costly rework or full rejection. Invest in rigorous documentation standards and internal review.
3. Key Characteristic Definition Gaps
If critical dimensions aren’t flagged clearly, quality assurance may miss them until it's too late. This is a preventable issue with cross-functional drawing reviews and integrated inspection planning.
4. Poor Tooling Design
Inadequate or outdated tooling yields high part rejection rates. Tooling should reflect tolerance stack-ups and material behaviors, especially for complex geometries.
5. Untested Hidden Requirements
Failure often surfaces at system-level tests due to early-stage assumptions. Engineers must identify and test hidden interactions early to avoid last-minute surprises.
Key Takeaway:
Engineering risks are often hidden in documentation, incomplete assumptions, or inadequate early testing. The impact is avoidable but only with discipline and collaboration.
II. Quality Risks
Risks driven by poor inspection, lack of supplier oversight, and inadequate quality systems.
6. Inadequate First Article Inspection (FAI)
If initial production samples aren’t validated thoroughly, bad parts may enter the pipeline undetected.
7. Blind Acceptance of Certificates of Conformance
Certificates should be verified not rubber stamped. Blind trust leads to latent defects and field failures.
8. Insufficient Supplier Audits
If suppliers aren’t audited regularly or rigorously, their processes degrade. This is particularly dangerous for special processes or critical part production.
9. Process Change Control Failures
Suppliers that implement unreported changes - new machines, operators, or settings - can produce nonconforming parts that still "look right."
10. Inadequate Follow-Up on Supplier Corrective Actions
A corrective action isn’t complete until its effectiveness is validated. Skipping this step leads to repeat problems.
Key Takeaway:
Quality issues are often process-driven and preventable. But preventing them requires more than documentation, it requires field presence, responsiveness, and verification.
III. Supply Chain Risks
Risks related to procurement, inventory, supplier management, and logistics.
11. Use of Discounted Suppliers
Low-cost suppliers may seem attractive, but total cost of ownership including risk of poor quality and late delivery often outweighs savings.
12. Incomplete Flow-Down of Requirements
Customer specifications or regulatory requirements that aren’t properly communicated to suppliers can result in noncompliance.
13. Poor Inventory Control or Planning
MRP says parts are in stock, but they’re not. Or quantities are wrong due to bad demand signals or inaccurate BOMs. These errors cascade quickly into production delays.
14. Incorrect Lead Times
Unrealistic or outdated supplier lead times result in missed delivery dates. Suppliers must update lead times in real-time and planners must adjust accordingly.
15. Poor Shelf-Life Management
Expired materials, such as epoxies, are a frequent and preventable reason for delays. Shelf-life management should be integrated into procurement and inventory systems.
Key Takeaway:
Supply chain efficiency without supply chain resilience is a false economy. Visibility, redundancy, and accountability are crucial.
IV. Systemic Risks
Wider environmental or business ecosystem risks that impact production from outside.
16. Economic Downturns or Mergers
Suppliers may go bankrupt or exit the market during economic shifts. Others may deprioritize your programs after a merger. Always qualify alternate sources.
17. Political Instability, Natural Disasters, or Strikes
Globalization introduces geographic risks – tariffs, weather, war, labor disputes - that can disrupt supply. Build buffers and monitor news that impacts your supply base.
18. Counterfeit Parts or ITAR Violations
Regulatory risks don’t just bring quality problems they can lead to fines, embargoes, and shutdowns.
19. Demand Volatility and Commodity Fluctuation
Customer program changes, demand surges, or raw material shortages all increase supply volatility. Flexibility in contracts and production planning is key.
20. Over-Outsourcing or Integration Risks
Reducing internal capacity for cost reasons increases external dependency. Without oversight, this dependency becomes a chokepoint.
Key Takeaway:
Systemic risks require scenario planning and cross-functional response. They’re beyond your control but not beyond your preparation.
Risk Mitigation Strategy Framework
Four Classic Risk Management Strategies for Production Excellence
CONTROL
Implement measures to reduce the probability or impact of the risk
Examples:
- Structured design reviews
- Regular supplier audits
- Quality inspection protocols
- Cross-functional teams
AVOID
Eliminate the risk by changing processes, designs, or business decisions
Examples:
- Design for manufacturability
- Eliminate single points of failure
- Standardize processes
- Proven technology selection
ASSUME
Accept the risk when mitigation costs exceed potential impact
Examples:
- Self-insurance approach
- Contingency planning
- Buffer inventory
- Risk reserves
TRANSFER
Shift risk responsibility to third parties through contracts or insurance
Examples:
- Supplier agreements
- Insurance policies
- Warranty terms
- Risk-sharing contracts
Risk Assessment Process
Key Implementation Recommendations
- Create a cross-functional supply chain risk team
- Use risk matrices to visualize the greatest threats
- Establish clear triggers and leading indicators
- Document learnings and update plans regularly
- Embed risk thinking into procurement and design decisions
- Focus on system-wide risk management, not isolated incidents
Recommendations: Making Risk Strategy Actionable
At HMC, our belief is simple: Risks that can be foreseen can be mitigated.
We recommend companies adopt the following risk management practices:
Create a cross-functional supply chain risk team
Include voices from engineering, quality, operations, procurement, and program management.Categorize and prioritize risks by type and impact
Use tools such as a risk matrix or heat map to visualize the greatest threats.Identify mitigation strategies for each risk
Apply the appropriate strategy: Control, Avoid, Assume, or Transfer.Establish clear triggers and indicators
Track leading indicators, not just lagging ones. A late PO is a symptom; the trigger may be unclear demand signals.Document learnings and update regularly
A risk plan is not static. It should evolve with supplier performance, customer expectations, and global conditions.Embed risk thinking into procurement and design
Engineers should consider supply risk during design. Buyers should weigh risk in sourcing decisions, not just price.
Final Thoughts: What Keeps a CEO Up at Night
The most dangerous production risk isn’t on a spreadsheet, it’s the one your team didn’t see coming because no one was looking upstream or thinking cross-functionally.
The CEO’s original question: “What are the top ten things that could shut down our product lines?”, sparked a process that revealed 48 potential production-stopping risks.
But more importantly, it reminded everyone:
💡 You don’t manage risk in isolation. You manage it across the system.
At HMC, we help companies uncover the hidden risks that could stop production cold.
Our team brings deep, cross-functional expertise from engineering and supply chain to quality, operations, and program management allowing us to conduct comprehensive business and manufacturing risk assessments. Whether you're preparing for growth, navigating change, or strengthening continuity, HMC provides the insight and experience to help you stay ahead of the risks that matter most.
Interested in safeguarding your production against unexpected disruptions?
Let’s talk. Visit www.hoaglandmgt.com to learn more about how HMC supports mission-critical manufacturers.
About the Author
Michael Hoagland is the Founder and Principal Consultant of Hoagland Management & Consulting LLC (HMC), a boutique consulting firm that partners with organizations designing and manufacturing critical systems. With decades of leadership experience in the aerospace, defense, and industrial sectors, Michael brings deep operational insight into program management, engineering, supply chain, and business development. He has led large-scale transformations, post-merger integrations, and risk-based initiatives across Fortune 500 and mid-sized firms. At HMC, he helps clients identify hidden risks, drive operational excellence, and build resilient strategies that deliver results.
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