Case Summary

The Boeing 767: From Concept to Production

(A)
By: Runit Marda (115)

The case deals about the issue faced by Dean Thorton, Vice president General
Manager of the Boeing 767 program. The company had lobbied for Federal Aviation
Administration (FAA) for permission to build wide body aircraft with two-person
cockpits (rather than 3). Now, being granted the permission, the issue was that
already 30 of the aircrafts were into various stages of production. Now, how should
Thorton handle this situation? What are the options that he has? The decision had to
be taken fast as the delivery dates were fast approaching.
Commercial aircraft manufacturings posed various complexities as there were over
3.1 million parts to be connected by wiring over 85 miles. In 1981, three companies
dominated the market: Boeing, McDonnell Douglas and Airbus. Launching a new
plane was a daunting task as the manufacturing required $1.5-2 billion (which was
considered to put the whole companies net worth on the line!!). But, any successful
product was expected to lead to heavy profits and tie up the market segment for at
least 15-20 years. Buyers, comprising mainly of the top 50 airliners, negotiated on
price, after sales parts and service, design modifications etc. to make the task even
tougher.
In 1981, Boeing was the industry leader in terms of sales, having net sales of $9.2
Billion ($5.1 Billion of the aircraft manufacturing division). Boeing partnered with
subcontractors on a risk-sharing basis for manufacturing parts and subassemblies,
while the final assemble was done by Boeing. It later also started to offer varieties
in the design, drawing on the same basic structure but just some carefully selected
variations. These were built on the same assemble line, resolving the complexities.
With its expertise in global marketing, technological leadership, production skills
and use of project management tools helped it become the low cost producer of the
industry. The managers relied on great building great teams to get the work done on
time.

The 767 Program and Program Definition:

The New Airplane Program (NAP) was assembled to study the issues faced with
previous major programs 707, 727, 737 and 747 so that the problems do not get
repeated in the future. The project, called Project Homework, came out with a

long list of lessons learned and ideas for development of the next generation plane.
The first stage of the development program, called Program Definition looked out
for market opportunities, configurations, forecasting future needs of the buyers etc.
IT also dealt with issues regarding tradeoff between fuel efficiency and range,
engine type and from whom to buy etc. It also dealt with the technology to be used
and other features which would lead to the overall improvement for the company.
Constant reviews of all the significant elements were done by the Audit Teams,
which comprised of experienced managers.

Cost Definition:
After the program definition, the flight was named 767 and the cost definition phase
began. This shift indicated an increase in the commitment level. Cost estimation
was done using the parametric estimate technique. This technique estimated the
cost of the plane from its design characteristics such as weight, speed, length etc.
These were, however, were carefully fine-tuned to account for the differences in the
programs. Use of computer Aided Design (CAD) and computer Aided Manufacturing
(CAM) helped the team to get better predictions. Similar process was used to design
the master phasing plan, which established the schedule and important milestones
of the program.

Supplier Management:
1300 vendors supplied the 3.1 million parts that were used to manufacture the 767.
Two program partners and four major subcontractors were the most important as
they built the body, tail sections and landing gear, the most important parts of the
airplane. The program partners were Aeritalia and Japan Aircraft Development
Company (JADC) which was a consortium of Mitsubishi, Kawasaki and Fuji Industries.
Aeritalia would produce the wing control surface and tail while JADC would produce
the body section. The participants of both the companies were asked to work
together with Boeing engineers, ensuring the work to be done properly.

Production Management:
All the 767s were assembled in Everett, Washington, in the same facility used for
assembling the 747s. Half of the building was devoted for assembling major
subsections and the other half for final assembly. Line flow process was used in the
final assembly stages with seven work stations. The critical tasks faced by the
management were: maintaining schedule and ensuring that the learning curve
goals are met.

Scheduling and Change Control:

Requests for changes came from internal as well as external sources. Interior
settings were negotiated by the customers while technical changes were proposed

by the engineers. All major changes had to be filed before freezing the basic design.
Any changes had to be approved by the Production change board, chaired by the
operation department. Implementation plan was developed only after the approval
of the changes. Three general approaches were used:
1. Incorporating changes into normal flow of production.
2. Installing old parts as per the original plan and then refitting the new parts
offline.
3. Expediting changes by assigning additional workers process called as blue
streak.
Maintaining the schedule was the most critical task. To ensure this, Boeing
employed Management Visibility System and marathon status meetings took place
to discuss the status of the program and the potential problems faced by the
various representatives.

Learning Curves:
Learning curves were developed for each work center based on historical
experience. Optimum crew size was defined for the operation at the beginning
based on available work space, tooling to be employed etc. The learning curve
indicated the decrease in the number of days required to produce another unit of
the 767 after the first, since the learning had taken place and hence, time taken
should be reduced. This was followed and parametric estimates indicated the same.
Learning curves were also applied to change management. The three tools used to
make sure the targets were met are:
1. Specific work-station goals
2. Stand-up meetings with first line supervisors
3. Management Visibility System

Three-Crew to Two-Crew Conversion:

Led by Boeing, airframe manufacturers proposed the switch from a three member
cockpit to a two member cockpit as the recent advancements in technology made
the presence of third member unnecessary.
Boeing had already received order of 80 planes. After the FAA passed the decision
for two member cockpits, Boeing received change requests for two member
cockpits instead of the originally planned three member cockpits. Engineers
concluded after an elaborated study that thirty of the planes could be modified
along with the subsequent planed to be produced henceforth.
A Special task force, which reported directly to Thorton, suggested two alternatives
to deal with the issue:

1. Building the thirty airplanes as per the original design and modifying them
after they left the production facility.
2. Modifying the production plans to incorporate changes in the current system
to avoid installation of parts later on.
Both the above options had positives and negatives.

Completion of production and subsequent Modification:

In this approach, production would complete as planned without any delay. The
modification activity would be planned as a tightly controlled separate activity
apart from normal production flow.
Advantages:
1. Airplane systems such as flaps, landing gear etc could be tested during the
final assembly process.
2. Problems occurring during the final assemble can be sorted, which will isolate
the problems while modification during the later stage.
Disadvantages:
1. Potential loss of configuration.
2. Rework had to be done replacement of firmly installed systems of three
cockpit system and again setting up of the two cockpit systems.
3. Threat of disruption of planes operating system if modification was not done
carefully.
4. Additional functional testing required for minimizing risks.
5. Not enough pace to modify all thirty planes at the same time.

Modification during production:

In this approach, modification would be done during production. No parts will be
installed or removed after the final assembly of the plane. All equipments for three
panel cockpit will be identified and their installation would be halted.

Advantages:
1.
2.
3.
4.
5.

Traditional method of making changes.

Used routinely for thousands of configuration changes.
All parts had to be installed only once.
Secure configuration.
Activities would be controlled by the normal procedures rather than a
separate program or team.

Disadvantages:
1. Disruption of the original production plan.
2. Separate plans will have to be made for the thirty airplanes.

3. Disruption of learning curve.

4. Additional 2 million labor hours would be required for the modification.
5. Change in test procedures.

The Dilemma:
Which of the above choices to go forward with: After the fact conversion or
modification during production?