Operations Management – Management – The Boeing 767: From Concept To Production
OM – I Assignment
CASE ANALYSIS
The Boeing 767: From Concept to Production
Group 2 Akashjyoti Suni
PGP2011523
Ankita Srivastava
PGP2011555
Bhavesh Karandikar
PGP2011591
Keerthan G
PGP2011688
Preeti Gupta
PGP2011793
Rudranil Chakrabortty PGP2011836 Subrata Mondal
PGP2011898
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Operations Management – The Boeing 767: From Concept To Production
1. The Boeing Company The sales leader in airframe industry and one of America’s 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. History Founded 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 near –disastrous 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 potential o modifications capability ( without need for wholesale revisions) Manufacturing Benefits – Producing a common family of planes on a common assembly line accumulated experience and ensured that learning does not get lost. It led to far-earlier breakeven points. Facilities – Large centralized facilities were provided with sophisticated manufacturing systems and project management tools. Expertise in global marketing Technological leadership Customer support Production skills
As a consequence of such strategies, Boeing emerged as the industry’s low-cost producer.
1.3. Culture The 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 followsa) Teamwork – Teamwork and cooperation were especially valued in the organization.
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Operations Management – The Boeing 767: From Concept To Production
b) Inter-functional cooperation- Coupled with teamwork, inter-functional cooperation was ensured 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 and detailed planning were strictly expected. d) Realistic schedules – High priority was placed on meeting schedules. Realistic schedules were developed and monitored over time. This was done with help of certain toolsMaster Phasing Plan: mapped out entire development cycle for each new plane program Parametric 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 to cause delays e) Regular Communication- encouraged ensuring prompt adaption and agility.
2. The 767 Program In 1973, Boeing initiated a new airplane study, naming it the 7X7(‘X’ stood for development model)- to define and, if approved, to develop, Boeing’s 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)
Boeing’s expected forecast for 1990 was a total market of $100 million Configuration:
Market research indicated that the new plane should carry approximately 200 passengers; have a 1-stop, U.S. transcontinental range; and offer minimal fuel burn Technology:
Technology development was an ongoing process at Boeing, and included such areas as structures, flight systems and aerodynamics Audit teams:
Proper auditing was done by dividing the organization and giving each of the audit teams a proper separate reporting line
2.2. Cost Definition The $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 upfront costs of several billion dollars.
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Operations Management – The Boeing 767: From Concept To Production
First detailed cost estimates were necessary to be obtained to make such a decision.
2.3. Parametric Estimates Establishing 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 Decision The 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 toge ther with Boeing engineers
In 1978, Boeing established residence teams in Italy and Japan, consisting of some of Boeing’s best operations people. The operations team evaluated and helped establish participant’s facilities, training, and manufacturing processes, and also certified their quality assurance processes
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Operations Management – The Boeing 767: From Concept To Production
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 that learning 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 were prominently 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 would reflect 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 2person cockpits without modification. But, since all the 30 planes were being built according to the plane’s 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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Operations Management – The Boeing 767: From Concept To Production
4. Boeing 767 Process Network Diagram Authorize programme definition
-
Programme review
Market requirements review
3
2
1
4
Preparation For initial airlines contacts
Programme Definition Phase (May 1973 – December 1977)
Duration - 4 ears 8
Configuratio n selection
Authorize cost definition phase
Preliminary design review
1
5
6
7
Programme plan review, tech, cost, schedule
Select & approve configuration
Final preliminary design review
5
4
3
2
Approved market analysis
Secure commitmen t functional, engine, suppliers
Cost Definition Phase (January 1978 – September 1978)
Duration - 9 Months 9
10
Engineering design go-
8
Sales review
Authorizatio n to offer
6
6
7 Approve price/market/co st relationship
Operations Management – The Boeing 767: From Concept To Production
5. Production Phase
6. Problem Statement When 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 twocrew 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 their researches 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 program’s 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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Operations Management – The Boeing 767: From Concept To Production
Modification during production.
COMPARISON BETWEEN THE ALTERNATIVE PLANS COMPLETION OF PRODUCTION AND SUBSEQUENT
MODIFICATION DURING PRODUCTION
MODIFICATION
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 sect ions 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 plane’s 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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Operations Management – The Boeing 767: From Concept To Production
7. Suggestions After 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 not be meaningful to disrupt the entire production line for t he purpose. The labour hours involved in separate modification line is half of the labour hours required in the 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 3crew 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 there may be chances of issues going undetected. The learning chart and the schedule would remain unchanged reducing the re-planning costs.
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