Main Approach for the Case study

What are the key elements of Boeing's approach to project management?

1- Outsourcing major component of production process.

2- Risk-sharing partnerships.

3- ultimately parts assembled by Boeing.

4- Selling "Family of planes".

5- Team-work orientated culture with open communication.

6- Realistic, carefully monitored schedules.

Introduction to Boeing Company

In Boeing Timely delivery is the utmost priority The commercial airplane division consists of the 717,
737, 747, 757, 767 and 777 families of jetliners and the Boeing business jet. Building family of planes by
developing on same platform. Availability of more variants and options including standard, long range,
freighter, flexible design with inherent growth potential. Common family of plane produced on a
common assembly line results in earlier reaching of breakeven point Expertise in global marketing,
technological leadership, customer support and production skills. Having centralised coupled with
manufacturing systems and tools for project management.

PARAMETRIC ESTIMATES FOR RETROFITTING

Labour hours required for Completion of retrofitting- 10,00,000 Permissible Delay Period – 1 month No.
of Shifts – 3 Shifts Orders & Purchase of Newly required Electronic Equipments – Assume 3 days Time for
establishing new Workstation for Retrofitting – Assume 5 days

Question – 4

Boeing uses a technique known as "parametric" estimating to develop cost estimates (see p. 140 in course

textbook). Discuss the strengths and weaknesses of this method of cost estimating.

Parametric Estimations

Question 2: Parametric Estimating Techniques

General question: What is your evaluation of the company’s parametric estimating technique?

This question can be broken into several specific questions:

What are the pros and cons of these parametric estimating techniques?

Do you accept Dennis Wilson’s argument that "an airplane is an airplane?"

Under what circumstances would the analysis break down? On what assumptions is it based?

In what other settings or industries (if any) would this approach work? In what settings or

industries would it be desirable?

Selection and adjustment of raw data for the production and developing equations, statistical

findings conclusions must all be documented for validation so that it can help them do scenario

planning. Extrapolation of existing data to forecast the future, which include radical

technological changes, might not be properly forecast. Loses predictive credibility outside its

relevant data range and hence needs to overcome that by using better equipped to face those

challenges.

Advantages
• Easiest to implement • Developed CERs are excellent tools for “what-if” analysis • Non-technical

experts can apply method, no reliance on opinion • “Statistical” uncertainty of the forecast is generated

• Allows scope for quantifying risk •

Diadvantages

Can be difficult to develop • Factors might be associative but not causative (i.e. lack of direct cause-and-

effect relationships • Relationship might not be easily understandable • Selection and adjustment of raw

data and development of equations, statistical findings conclusions must all be documented for

validation • Extrapolation of existing data to forecast the future, which include radical technological

changes, might not be properly forecast • Loses predictive credibility outside its relevant data range
Question - 1

Boeing earlier relied on extensive vertical integration and manufactured the entire plane
itself but also provided engines through its Pratt & Whitney subsidiary and bought and flew
planes through United Air Lines subsidiary. But as the development cost increased the
company became more focused started outsourcing major component of the production
process. It selected its partners on risk sharing basis who then manufactured portions of each
plane and developed and built parts and subassemblies that Boeing later assembled. Boeing
strategy has been to sell families of planes which varied on several dimensions but use the
same base airframe. The company had a teamwork oriented work culture as the program
require close cooperation and often working under intense time pressures. A part of the
culture is absolute dedication to commitments and thus all the schedule was carefully
designed and monitored.

Since 1955, Boeing has competed with their competitors such as McDonnell Douglas and Airbus

by making different variations of each generation of aircraft drawn from the same aircraft

concept. They made sure each variation was uniquely defined with different designs, and

modification was used so that would not have to waste time and resources in the production of

different variations of aircraft. This was a benefit of the team because they did not have to spend

time making a new design, they just modified one design. They are also able to profit from

making the family of planes. Also according to the text, constructing family planes benefits them

because they use the concept gained from past models and apply it on the new aircraft variations.

I used that knowledge to explain how they manage their projects. Boeing manages its corporate

culture by ensuring that team members are able to work as a team. They believe people who are

brilliant but incapable of working in a team would actually harm the company culture. Boeing

had its team work in close quarters for more than 60-70 hours together a week.
==

For several years, Boeing had lobbied the Federal Aviation Administration (FAA) for permission

to build wide-bodied aircraft with two-person cockpits. The 767 had originally been designed

with a three-person cockpit, and 30 of those planes were already in various stage in production.

Boeing had to make decision quickly what was the best way to proceed.

The Airframe Industry

Commercial aircraft manufacturing was an industry of vast scale and complexity. Airframe

manufacturing was a business of enormous risks. Project of this scale put a company’s entire

net worth on the line. A successful new plane could look up its chosen market segment for as

long as 20 years. It likely to bring great prestige, power, and influence on the company and

managers that created it. Success required a long-term view. Competitive pricing was essential.

Pricing practices contributed risks of their own. New plane prices were based on the average

cost of 300 to 400 planes. Manufacturers were therefore anxious orders for new planes as

quickly as possible. Buyers used that knowledge to enhance their bargaining power.

The Boeing Company

Boeing was the sales leader of the airframe industry. In World War I, the company build

military aircraft. It began to prosper in the 1920s and 1930s, when the civil aviation market

expanded because of the demand for mail carrying. Boeing originally relied on extensive

vertical integration. It not only manufactured entire planes itself, but also provided engines

through its Pratt & Whitney subsidiary. Instead, it carefully selected partners, some of whom

participated on a risk-sharing basis, who were the subcontracted portions of each plane and

developed and built parts and subassemblies that Boeing later assembled. The primary
exception were the nose and wings, which Boeing continued to build in-house.

Boeing had completed by selling families of planes. Each new generation of aircraft was

created with several variations in mind. Flexible designs with inherent growth potential were

essential this approach. A more efficient design and development process was only one benefit

of the family of planes concept. One result of this approach was break-even points that were

reached far earlier than they would have been without shared design.

The 767 Program

In 1969, Boeing assembled a New Airplane Program (NAP) study group. Its goal was to review

the company’s experiences with each of its major programs. This process, called project

Homework, took three years and produced a long list of “lessons learned,” as well as a

reasonable idea of the costs of developing the next generation airplane.

The first stage of the process, called program definition, Boeing worked the puzzle of the

market, technology, and cost. The team member projected airline needs into the future to see

if there were holes in the market not met by existing planes; considered alternative plane

configurations; examined new technologies to see what might be available within the few years;

and estimated, in preliminary fashion, likely development and production costs.

The second stage is cost definition. This shift was the major step: it indicated escalating

program commitment and required the authorization of the president of the Boeing Commercial

Airplane Company. First, detailed cost estimates were necessary. Analysts predicted the costs
of a new plane from design characteristics, such as weight, speed, length, and historical

relationships.

The third stage is supplier management. A completed 767 consisted of 3.1 million parts, which

were supplied by 1,300 vendors. The most important was the two program participants and

four major subcontractors, who built such critical parts as body structures, tail sections, and

landing gear. Boeing worked closely with all of its subcontractors, from initial planning to final

delivery.

The fourth stage is production management. This stage was divided into 3 process: part

fabrication, subsection assembly, and major assembly. In the final stages of assembly, half of

the building was devoted to assembly of major subsections; the other half to final assembly.

During the assembly stage, managers faced two critical tasks: maintaining schedule and

ensuring that learning curve goals were met.

In the late 1970s, airframe manufacturers proposed a switch from three- to two-person cockpits.

The Air Line Pilots Association (ALPA) claiming that levels were certain to fall if the number

of crew members was reduced. In July 1981, the task force concluded that two-person cockpits

presented no unusual safety problems, and that manufacturers could offer them on all planes.

In August 1981 a special task force was formed to determine the best way of modifying these

planes. It soon narrowed the choice to two alternatives: (1) building the thirty airplanes as they
had originally been designed, with three-person cockpits, and then converting them to two-

person cockpits after they had left the production floor (before delivery to customer), and (2)

modifying the production plans for the thirty airplanes so that conversion would take place

during production and no parts would installed only to be removed later.

Completion of Production and Subsequent Modification

In this approach, production would continue as planned, without delay. The primary advantage

of this approach was that flaps, ailerons, landing gear, hydraulics, and other airplane system

would be functionally tested during the final assembly process. Problem would be identified

and corrected on the spot. Any problems identifies after installation of the two-person cockpits

could be isolated, with some assurance, to the cockpits area.

The risk of this approach was the potential “loss of configuration”. Parts required for three-

person cockpits would be installed firmly in place. If the modification not done carefully, many

of the plane’s operating system might be disrupted. Space was also the problem. There was not

enough room within the factory to modify all thirty planes.

Modification during Production

In this approach, all modification of the thirty planes would be done during production. The

primary disadvantage of this approach was that the original production plan would be disrupted.

Because all cockpits work would be deferred until engineering drawings and parts were

available for two-crew models, problems might not be detected and corrected immediately and

might well by hidden by systems that were installed later.

Thortnton knew that it was time to make a choice between the two approaches to that

production could continue. The risks, however, were great as his staff kept telling him, the
Question – 3

Boeing is an industry leader in commercial airline manufacturing, and safety is a valued concern

for reliability and performance. Boeing enthusiastically embraced outsourcing, both locally and

internationally, as a way of lowering costs and accelerating development. With more than 3.1

million parts that are required to build a 767 aircraft with 1300 vendors anything would possibly

go out of control. Some of the risks involved are Financial, Market, Technology and Production

risks which are explained as follows.

Financial Risk

Boeing’s main configuration was to reduce its necessary financial risks. In order to

achieve this a parametric estimating technique was used to identify the associated costs such as

design characteristic, historic relationship, and assembly labor hours including learning curve. In

addition, Boeing has scheduling and change control in place to ensure the project meets the

deadline to avoid substantial penalties as to promised delivery dates.

Market Risk

In order to reduce the market risks, Boeing outlined market analysis which involved a direct

approach to get an estimation for the future. They created an econometric model to generate

optimistic, conservative, and expected forecasts with continued regulations, airline preferences.

Complete forecast was run annually and readjusted quarterly to take into account any changes in

airlines industry regulations, rising fuel prices etc.

Technology Risk
Boeings technology encompasses flight systems, aircraft systems both hydraulic and electrical,

and finally aerodynamics. Proven and tested technology was used against any unproven

technology. A proven technology means the “new” technology and on other hand, Chief

engineer would make a judgement call on unproven technology. Learning curve dynamics were

applied to improve efficiency.

Production Risk

Boeing had a change management system where managers tracked changes and ensured that the

specification stood accurate along with that the learn curve goals were met. These involved in

stand-up meetings with first-line managers, and visibility system.

In the late 1970s, airframe manufacturers proposed a switch from three- to two-person cockpits.

In July 1981, the task force concluded that two-person cockpits presented no unusual safety

problems, and that manufacturers could offer them on all planes. In August 1981 a special task

force was formed to determine the best way of modifying these planes. It soon narrowed the

choice to two alternatives: (1) building the thirty airplanes as they had originally been designed,

with three-person cockpits, and then converting them to two-person cockpits after they had left

the production floor (before delivery to customer), and (2) modifying the production plans for

the thirty airplanes so that conversion would take place during production and no parts would

installed only to be removed later. and additional approximately two million labor hours needed.

Critical calculation w.r.t assembly labor hours were made at the beginning itself and was

constantly monitored and adjusted to incorporate any unanticipated changes

Question – 3
 Boeing determined that a detailed cost estimation that based on one configuration is
necessary to reduce its financial risks. A parametric estimating technique would be used to
identify the associated costs such as design characteristic, historic relationship, and assembly
labor hours including learning curve. Managers are able to see the costs and where to adjust it
when necessary. They also chose suppliers who are sharing some of the risks such as a portion
of design, development, and tooling costs. In addition, Boeing has scheduling and change control
in place to ensure the project meets the deadline to avoid substantial penalties as the airlines
planned their schedules around promised delivery dates.
As noted previously, Boeing is an industry leader in commercial airline manufacturing, and also
a leader with global marketing and customer service with a sophisticated supplier chain. The
company mitigates risks based on its industry experience by conducting a thorough marketing
analysis for the need of its several airline models. The company also analyzes development and
production costs prior to commencing manufacturing its products. The company implements a
Master phasing plan that outlines program milestones – design, cost phase, manufacturing, and
selling to existing or new customers. With many tools developed to mitigate risks – specific
work stations, stand up meetings with first line supervisors and management visibility study

Boeing’s Approach to Risk:

Boeing’s approach to managing risk is effective. In the aircraft industry, safety is a

valued concern for reliability and performance. Boeing pushes technology for advancements,

but is conservative about implementation. An example would be on the use of composites for

aircraft material. “Composites are complex materials, formed by combining two or more

complementary substances” (Garvin 7). Engineers conducted laboratory tests on the composite

materials and collected extensive data on the performance. To further test the materials, there

were in-service tests flown on a small number of airlines. Data results concluded that there was

a problem with water absorption in environments of high heat and humidity. Engineers worked

to solve the problem by adding fiberglass to the outside of the material and then only using it for

secondary parts. Boeing handles risk by mitigating the probability and being conservative on

implementation. This ensures the balance of safety in technological advancements and

reliability in performance. Boeing also manages risk by working with vendors to the absolute
detail for project expectations. This risk is mitigated by continuous meetings, cross-functional

teamwork and extensive communication.

1. Financial Risk
 Launching a new plane requires a huge up-front investment and is a highly uncertain
project thus Boeing entered in risk sharing partnership with thousands of sub-
contractors who bore a portion of the costs.
 Pre-production commitments for purchase were made through various price
negotiations agreement with domestic and foreign airlines.
 Regular audits were conducted by a team staffed by experience Boeing’s managers
which were assigned to review every significant element of the project including
finance, manufacturing and management.
2. Market Risk
 Market analysis was done by directly talking to airlines to get their estimates of future
needs.
 Econometric models were used to generate three forecasts-optimistic, conservative
and expected
 Complete forecast were run annually and readjusted quarterly to take into account any
changes in airlines industry regulations, rising fuel prices etc.
3. Technology Risk
 Proven and tested technology was used against any unproven technology
 Learning curve dynamics were applied to improve efficiency
4. Production Risk
 Plans which mapped out the entire development cycle including critical milestone
was carefully drafted at the beginning of any program and strict adherence to it is
monitored
 Strong coordination & cooperation with various partners was ensured to prevent any
delays
 Manager ensure that learning goals are met at the same time that they are
accommodating unanticipated changes.
  Critical calculation w.r.t assembly labor hours were made at the beginning itself and
was constantly monitored and adjusted to incorporate any unanticipated changes

1- Financial Risk

 Shared costs
 Extremely capital employed
 Price negotiable
 Delaying orders,
 Professional Audit team members
 Governmental support

2- Market Risk
  Involve Airlines in making decisions
 Adopt econometric models to generate three forecasts:
 optimistic, conservative, and expected
 Highly adaptable designs
 Fuel Costs

3- Risk Management

 Proven technologies vs Unproven technologies

 Safety tests in laboratory and “real airline environment”
 Lessons learnt

4- Production Risk

 Schedule compression or delays

 Production pressure
 Technology transfer
 Cooperation with partners
 Assembling
 Unanticipated changes

Methods to change cockpits

subsequent

1- Completion

modification

of production and

2- Modifying

the plans during production

Why !?

We believe Boeing should choose for the first option,

Better control one of the only two possible airplane configurations.

1 single plan to modify

It is easier to have

the cockpit (isolated) at the end

quality assurance threats

Having many different plans might result in

production plans

would not be affected

Original

time

It is better with respect to

Functional testing

can be completed sequentially first