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Operations Management The Boeing 767: From Concept To Production
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OM I Assignment
CASE ANALYSIS
The Boeing 767: From Concept to
Production
Group 2Akashjyoti Suni PGP2011523
Ankita Srivastava PGP2011555
Bhavesh Karandikar PGP2011591
Keerthan G PGP2011688
Preeti Gupta PGP2011793
Rudranil Chakrabortty PGP2011836
Subrata Mondal PGP2011898
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1.The Boeing CompanyThe sales leader in airframe industry and one of Americas leading exporters, Boeing earned $5.1 billion
from Boeing Commercial Airplane and $4.1 billion from other divisions-missiles, rockets, helicopters,
space equipment, computers and electronics.
1.1.HistoryFounded in 1916 by William E. Boeing, the Boeing Company built military aircraft, in its earliest days,
for use in World War I. It began to prosper in 1920s and 1930s when civil aviation market expanded
with increasing demand for mail carrying.
Its focus was on research, experimentation, adaption to production and prompt improvements. For
this, it originally relied on extensive vertical integration-manufactured planes itself, provided engines
as well as bought and flew then through various subsidiaries. Later, it became highly focused following
neardisastrous experiences with its first wide-bodied jet, the 747. When introducing the 737 as well
as the 747; management problems, declining productivity, steep development costs and unanticipated
problems plus cutbacks in commercial and government orders compelled the company to become
leaner and resolve problems with 737 and 747 programs. Eventually, Boeing emerged from the crisis,
where it no longer assumed all the development costs itself, nor did it fabricate entire airplanes.
Instead, it selected partners who were subcontracted portions of each plane and developed and built
parts and subassemblies that Boeing later assembled. The nose section and wings, however, were
exceptions that Boeing continued to build in-house.
1.2.Strategy Variations Boeing manufactured families of planes, creating several variations on the same
base airframe concept. It required
o flexible designs,o inherent growth potentialo modifications capability ( without need for wholesale revisions)
Manufacturing Benefits Producing a common family of planes on a common assembly lineaccumulated experience and ensured that learning does not get lost. It led to far-earlier break-
even points.
FacilitiesLarge centralized facilities were provided with sophisticated manufacturing systemsand project management tools.
Expertise in global marketing Technological leadership Customer support Production skills
As a consequence ofsuch strategies, Boeing emerged as the industrys low-cost producer.
1.3.CultureThe culture of Boeing has a distinct identity of its own and many practices of the company were seen
as characteristic of Boeing. Broadly, they can be understood as follows-
a) Teamwork Teamwork and cooperation were especially valued in the organization.
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b) Inter-functional cooperation- Coupled with teamwork, inter-functional cooperation wasensured that was influential in addressing the very acute concerns of new plane programs,
which were a prime vehicle for management development.
c) Autonomy Considerable autonomy was given to teams but disciplined decision-making anddetailed planning were strictly expected.
d)Realistic schedulesHigh priority was placed on meeting schedules. Realistic schedules weredeveloped and monitored over time. This was done with help of certain tools-
Master Phasing Plan: mapped out entire development cycle for each new plane programParametric Estimating Techniques: estimated costs and established relationships between
critical sections of the schedule by using historical data drawn from earlier plane programs
Management Visibility System: surfaced problems before they became serious enough tocause delays
e) Regular Communication- encouraged ensuring prompt adaption and agility.
2.The 767 ProgramIn 1973, Boeing initiated a new airplane study, naming it the 7X7(X stood for development model)- todefine and, if approved, to develop, Boeings next generation airplane
2.1.Program Definition (From May, 1973 to December, 1977)During this period, Boeing worked the puzzle of market, technology, and cost.
Market assessment:
Market segments were defined by range of travel- short(less than 1500 nautical miles),medium(1500-3000 nautical miles), and long(greater than 3000 nautical miles)
Boeings expected forecast for 1990 was a total market of $100 millionConfiguration:
Market research indicated that the new plane should carry approximately 200 passengers; have a1-stop, U.S. transcontinental range; and offer minimal fuel burn
Technology:
Technology development was an ongoing process at Boeing, and included such areas asstructures, flight systems and aerodynamics
Audit teams:
Proper auditing was done by dividing the organization and giving each of the audit teams a properseparate reporting line
2.2.Cost DefinitionThe $100 million spent so far on 7x7 programme was regarded as part of ongoing research and
development. Now the critical decision at hand was to see decide whether Boeing should incur up-
front costs of several billion dollars.
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First detailed cost estimates were necessary to be obtained to make such a decision.
2.3.Parametric EstimatesEstablishing the basic design, the costs of the plane could be predicted from design characteristics that
were known well in advance of production. The critical calculation involved assembly labour hours. For
every major section of the plane, the number of labour hours per first-unit was estimated, multiplied
by expected weight and then by historical experience-based adjustment factor. Totaling the results of
all the sections gave the number of labour hours required to build subsequent planes.
It was believed that these estimates remained valid for long periods. They were, however, carefully
fine-tuned to account for differences in plane programs, which in turn could go in either direction.
Several factors contributed to increase or decrease in the number of assembly hours and after such
adjustments, a final estimate for total assembly hours was obtained.
Similar process was used to develop the Master Phasing plan, which established schedule and
identified major milestones. The critical task was linking the schedules of interdependent groups to
avoid schedule compression and delays.
2.4.Go/No-Go DecisionThe board agreed to authorize the new plane, but only if two conditions were met: commitments to
purchase were received from foreign and two domestic airlines and pre-production orders totaled at
least 100 planes.
Full commitment was authorized after orders were received from United Airlines, American and Delat
Airlines.
2.5.Supplier Management A complete 767 consisted of 3.1 million parts, which were supplied by 1300 vendors But, Aeritalia, the Italian aircraft manufacturer, and the Japan Aircraft Development
Company(JADC), a consortium made-up of Mitsubishi, Kawasiki, and Fuji Industries, were the two
main program participants, who were contracted with in September, 1978
2.6.Technology transfer Italian and Japanese participants were asked to work together with Boeing engineers In 1978, Boeing established residence teams in Italy and Japan, consisting of some of Boeings best
operations people. The operations team evaluated and helped establish participants facilities,training, and manufacturing processes, and also certified their quality assurance processes
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3.Production Management All 767s were assembled in Everett, Washington, in the same facility used for 747s. Half of the
building was devoted to assembly of major subsections; the other half to final assembly. In the
final stages of assembly, a line flow process was used, with seven major work stations
During the assembly, managers faced two critical tasks: Maintaining schedule, and ensuring thatlearning curve goals were met
3.1.Scheduling and change control Three general approaches were used: incorporating changes into the normal flow of production;
installing old parts as originally planned and then retrofitting new parts off-line, outside the
normal flow of production; and expediting changes by assigning additional workers, a process
known as blue streak
In order to maintain schedule, Boeing employed a management visibility system. Schedules wereprominently posted, and marathon status meetings, which were attended by representatives of all
affected departments, were held weekly to review slippages and highlight potential problems
3.2.Learning curves Boeing had made learning curves for every major work center To begin with, an optimum crew size was defined for the operation, based on available work space
and tooling to be employed
For e.g., optimal size for forward body section assembly = 8 people,
No. of days to complete the very first assembly = 6000 hours/(128 hours- 8 people working 8
hours per shift, 2 shifts per day) = 47 days
The next assembly would be scheduled not for 47 days, but for a lesser number, which wouldreflect the rate of learning on that operation
3.3.3-Crew to 2-Crew Conversion 30- First 767 were still far enough from completion, and subsequent planes, could be built with 2-
person cockpits without modification. But, since all the 30 planes were being built according to
the planes original, 3-cockpit design, all would require some modification
In August 1981, a special task force narrowed down the choice to two alternatives:(1). Building the 30 airplanes as they had originally been designed, with 3-person cockpits, and
then converting them to 2-person cockpits after they had left the production floor
(2). Modifying the production plans for the 30 airplanes, so that conversion would take place
during production and no parts would be installed only to be removed later
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4.Boeing 767 Process Network Diagram
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Programme Definition Phase
(May 1973 December 1977)
Duration - 4 ears
Preparation
For initial
airlines
contacts
Approved market
analysis
1 2 3 4
8 5
Authorize programme
definition
Market requirements
review
Programme
review
7 6
Configuratio
n selectionAuthorize cost
definition phase
Secure
commitmen
t functional,
engine,
suppliers
Approve
price/market/co
st relationship
Sales reviewEngineering
design go-
Authorizatio
n to offer
1 2 3 4
6
5
109 8
7
Cost Definition Phase
(January 1978 September 1978)
Duration - 9 Months
Select & approve
configurationFinal preliminary
design review
Programme plan review,
tech, cost, schedule
Preliminary
design review
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5.Production Phase
6.Problem StatementWhen the manufacturing of Boeing 767 was started, they inserted three-crew cockpit for as many as 30
planes. Then a new technology emerged and the advanced technology team suggested inserting two-
crew cockpits instead of three crew cockpits. The airline pilot association argued about the dip in safety
standards if such a design was introduced. Hence, a taskforce was convened and based on theirresearches it was concluded that 2-crew cockpits were a better option. Based on the findings the
company decided to change all the 30 three crew cockpits to two crew cockpits.
Dean Thorton, the programs vice president general manager got into a dilemma amongst the two
options available for implementation of two crew cockpits.
Completion of production and subsequent modification
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Modification during production.
COMPARISON BETWEEN THE ALTERNATIVE PLANS
COMPLETION OF PRODUCTION AND SUBSEQUENT
MODIFICATION MODIFICATION DURING PRODUCTION
Production would continue as planned without
delay and modification would be taken
separately.
Modification would be done in-line with the
production.
One million additional labour hours were
required for the modification plan.
Two million additional labour hours were
required for the modification plan.
ADVANTAGES
Learning curve and schedule would not be
disrupted.
Production would continue on the other sections
of the plane.
Modification programme was separate and
would not intervene with the normal flow of
production.
Once plan and part were available for two crew
cockpits they would be incorporated within the
flow of production.
The functional testing process would not be
affected due to the planned modifications.All parts were installed only once.
Problems could be identified and corrected on
spot.
The configuration would be more secure
because of one time configuration.
DISADVANTAGES
Loss of Configuration- The integrity of the overall
design would be compromised.
Installation of instruments associated with three
crew cockpits would be halted.
If the modification was not executed properly,
the planes operating system might be disrupted.The original production plan would be disrupted.
Space constraint for the process of modification. Learning curves would be disrupted.
The planes would have to be parked very close
to each other which would violate their fire
regulations.
Functional testing would have to be done after
the two crew cockpit was fully installed, hence,
problems could have gone undetected.
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7.SuggestionsAfter case study and analysis, the observation is that the manufacturing process and the subsequent
modification should be carried out separately.
Below are the reasons for considering the option:
There are only 30 planes for which the modification to 2-crew cockpit is required. It would notbe meaningful to disrupt the entire production line for the purpose.
The labour hours involved in separate modification line is half of the labour hours required inthe in-line modification. Since Boeing has to stick to the deadlines, they need to choose the best
option.
One of the airlines company still needs a 3 crew cockpit. Hence, it would be easier to build the 3-crew planes and then supply the company and modify the leftover planes rather than
modification during production.
Functional testing would be a major problem if the modification during production, as theremay be chances of issues going undetected.
The learning chart and the schedule would remain unchanged reducing the re-planning costs.