Case Study 2
Case Study 2
Case Study 2
Title: The Boeing 767: From Concept to Production (A) and (B)
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After reading the case study, you need to perform the executive summary and answer three questions.
You need to have more than one page (1.5 space & 11 font size) to summarize the case study and
answer four questions.
Team name:
Team members:
Executive Summary
Question 1. How would you describe Boeing's approach project management? What are its basic
elements? Its strengths and weaknesses?
Question 3. How does Boeing manage risk? (please consider all of the following: financial risk, market
risk, technological risk, and production risk.)
Citations:
● Garvin, David A., Field, Lee C., Simpson, Janet. “Boeing 767: From Concept to Production
(A)”. Harvard Business School. April 01, 1988. pp 1-19.
● Garvin, David A., Field, Lee C., Simpson, Janet. “Boeing 767: From Concept to Production
(B)”. Harvard Business School. April 01, 1988. pp 1.
● Erik W. Larson and Gray, Clifford F., Project Management: the Managerial Process. 8th ed.,
McGraw-Hill, 2020.
Executive Summary:
The history of the Boeing Company began in 1916 when it was founded by William E. Boeing
(Garvin, Field, & Simpson, “A”, p. 2). The beginning productions were focused on military aircrafts for
use in World War I; however, after the war Boeing transitioned to the civil aviation market which was
driven mainly by the transportation of mail. The Boeing market continued to expand over the years and
they became “the sales leader of the airframe industry, as well as one of America’s leading exporters”
(Garvin, Field, & Simpson, “A”, p. 2). In 1981, sales for the Boeing Company exceeded $9 billion mainly
resulting from the sale of commercial aircraft (Garvin, Field, & Simpson, “A”, p. 2). Since inception,
Boeing’s culture centered around meeting commitments while production focused on being the first to
implement proven technologies.
“Airframe manufacturing was a business of enormous risks, for in no other industry was so
much capital deployed with so much uncertainty” (Garvin, Field, & Simpson, “A”, p. 2). The article
claims that executives in airframe manufacturing were often characterized as “gamblers” because of the
large risks that they took. In the early years, Boeing not only manufactured the planes and engines, but
also operated United Airlines. This structure presented substantial risks to the company. To combat this,
Boeing had to reduce risk in several aspects, such as financial risk, market risk, technological risk, and
production risk. Boeing reduced their overall financial risk by subcontracting out engine manufacturing,
making a “family of planes” with flexible and similar designs, and used sophisticated manufacturing
systems combined with project management tools. Boeing reduced their risk of rivalry, or their market
risk, by keeping a healthy competition among subcontractors, as well as working directly with the
consumer on their preferred design. Boeing reduced their technology risk by continually evaluating their
systems, and implementing new up-to-date technology with a proven track record. Finally, Boeing
reduced their production risk by continually auditing their program.
In the late 1960’s Boeing commissioned a study group to evaluate their previous lines of aircraft,
the 707, 727, 737, and 747 and develop lessons learned and historical data which would improve the
production of their newest aircraft, the 767. This 3-year study was followed by roughly four years of
market research which included plane configurations, travel distance and demand, new technologies, fuel
cost projections, and government regulation. In 1977, Boeing launched the 767 aircraft preliminary
project investigation with top-down initial cost and schedule estimates. Parametric estimating techniques
were used based upon historical cost and schedule data from their previous aircraft, using metrics like size
and number of parts. The 727 aircraft was also used as a benchmark for estimating cost and assembly
hours. Boeing’s development of a Master Phasing Plan defined the assembly schedule along with
milestones for each critical component. Manufacturing learning curves were factored into these cost and
schedule estimates. By 1978, Boeing was provided the go ahead to produce the 767 aircraft consisting
“of 3.1 million parts, which were supplied by 1,300 vendors” (Garvin, Field, & Simpson, “A”, p. 9).
With Boeing no longer manufacturing large components of the aircraft, in an effort to distribute
design, cost and development risk, Boeing engineers worked extremely closely with their major
subcontractors from initial plan set through production. Boeing integrated the subcontractor engineers
into their program and then embedded Boeing engineers into their facilities. Through close collaboration
with their subcontractor, all elements of the 767 were evaluated from design and production, including
delivery. This close integration of engineering staff facilitated training, quality assurance and technology
transfer. Part production of the 767 began in mid-1979 with major portions of the plane being assembled
one year later. Throughout the 767 production, over 10,000 change orders were requested by both
internal sources and external clients. These change orders were tracked closely with alterations occurring
either by adding staff, making changes in line or making changes after the fact, off line. With eleven
months to aircraft delivery, Boeing was faced with a complex change from a 3-person cockpit to a 2-
person cockpit as a result of Federal Aviation Administration relaxation of regulations. The question
before them was “should the changes be made in-line, or off-line, building the 30 planes with three-
person cockpists as originally planned and then retrofitting them with two-person cockpits in a separate
rework area” (Garvin, Field, & Simpson, “A”, p.1)? Each alternative had its pros and cons; however,
Boeing elected to retrofit the airplanes off-line in a separate storage area to avoid disruptions to the
remaining 767 production line and manufacturing learning curves associated with a new aircraft.
The focus on culture and project management goals allows Boeing to be successful in the
completion of their planes needed to compete in the industry on a technology aspect. The key cultural
expectations for Boeing include teamwork and accountability.. Each member needs to work together to
make sure that the project takes precedence over the individual skill so that the group as a whole is
successful in production (Garvin, Field, & Simpson, “A”, p. 4). Completing projects on time is how they
are able to compete with a lower price point sale to buyers. (Garvin, Field, & Simpson, “A”, p. 2). The
Boeing case supports the textbook guidelines of how project management flow should occur in a real life
scenario.
Question 1. How would you describe Boeing's approach project management? What are its basic
elements? Its strengths and weaknesses?
In the studies titled “Boeing 767: From Concept to Production (A)” and “Boeing 767: From
Concept to Production (B)” written by David A. Garvin, Lee C. Field, and Janet Simpson, it describes the
elaborate approach that the company Boeing has towards its project management. From the very
beginning, the Boeing Company stressed the importance of creating the best product possible; no
shortcuts. As said by the founder, William Boeing, the company credo became “Our job is to keep
everlastingly at research and experimentation, to adapt our laboratories to production as soon as possible,
and to let no new improvement in flying and flying equipment pass us by” (Garvin, Field, & Simpson,
“A”, p. 3). In addition to focusing on creating the best product with no shortcuts, Boeing’s project
management approach was also extremely detailed and thorough. Once the managers were identified for
each project, they were expected to have knowledge from every aspect and in order to accomplish this,
they “were assigned to review every significant element of the 7X7 program, including technology,
finance, manufacturing, and management” (Garvin, Field, & Simpson, “A”, p. 7).
As mentioned in the previous paragraph, Boeing’s approach to project management was
extremely thorough and detailed. Because of this, the approach has a long list of basic elements that are
segmented into three different phases: program definition phase, cost definition phase, and production
phase (Garvin, Field, & Simpson, “A”, p. 15). The program definition phase includes authorizing the
program definition phase, market requirements review, program review, preparation for initial airline
contracts, approving market analysis, configuration(s) selection, and authorizing the cost definition phase
(Garvin, Field, & Simpson, “A”, p. 15). This phase includes most of the preliminary steps to set-up
production. Next, the cost definition phase includes preliminary design review, program plan review of
technology, costs, and schedules, final preliminary design review, selection and approval of
configuration, secure commitment funct, engine, suppliers, approval price/market cost relationships,
authorization to offer, sales review, and engineering the design go-ahead (Garvin, Field, & Simpson, “A”,
p. 15). And the last phase, the production phase, includes the production go-ahead which is the final step
before product production begins (Garvin, Field, & Simpson, “A”, p. 15).
As described in the study, Boeing’s project management approach was very successful and has a
multitude of strengths. One of the strengths that helped Boeing’s project management approach succeed
was its “expertise in global marketing, technological leadership, customer support, and production skills”
(Garvin, Field, & Simpson, “A”, p. 3). Other strengths to this approach include flexibility and efficiency.
“Flexible designs with inherent growth potential were essential to this approach. A more efficient design
and development process was only one benefit of the family of planes concept” (Garvin, Field, &
Simpson, “A”, p. 3). This ultimately helped lead to the result of “break-even points that were reached far
earlier than they would have been without” the flexibility (Garvin, Field, & Simpson, “A”, p. 3). The
Boeing Company received continuous high praise for its project management success, as one aerospace
analyst said, “If someone hired me to rebuild the Great Pyramid, I’d ask . . . Boeing to assemble it”
(Garvin, Field, & Simpson, “A”, p. 4).
Despite the multitude of strengths in Boeing’s project management approach, there were also a
few weaknesses. One of the weaknesses in this approach was the inconsistency of the salespeople. As the
product launch approached, T.A. (“T”) Wilson, Boeing’s chairman, recalled the salespeople saying, “We
need a new product. They didn’t really care what it was, as long as it was new” (Garvin, Field, &
Simpson, “A”, p. 5). Although the work of the salespeople are extremely important to the project
management systems success, Boeing’s approach wasn’t able to tune out the opinions of the salespeople.
Another weakness from this approach was the lack of training from the program managers to the rest of
the employees. With Boeing’s extremely high standards already in place, “there was also concern among
the board of directors that Boeing’s next generation of leaders was not being trained in the best way
possible” through this approach (Garvin, Field, & Simpson, “A”, p. 5). Although lack of attention to
training wasn’t a main focus in this approach, it did not hinder the success of the final outcome.
Although there are numerous methods for developing both time and cost estimates, all which
should encompass critical considerations, like historical data, learning curves, new technologies, and
organization structure, Boeing elected to utilize the parametric estimating technique for the production
their 767 aircraft, consisting of several million parts and development costs of approximately 2 billion
dollars. As detailed in the case studies, “Boeing 767: From Concept to Production (A)” and “Boeing 767:
From Concept to Production (B)” by David A. Garvin, Lee C. Field, and Janet Simpson, Boeing
deployed parametric estimating techniques during the Program Definition to develop a top-down,
preliminary estimate and “predicted costs of a new plane from design characteristics, such as weight,
speed, and length, and historical relationships, such as number of parts per airplane” (Garvin, Field, &
Simpson, “A”, p. 8). These parametric estimates were further refined using bottom-up techniques which
were vetted and carried through final costing and scheduling.
The textbook, Project Management, The Managerial Process, 8th edition, by Erik W. Larson and
Clifford F. Gray, suggests that parametric estimating methods are most effective when ”projects closely
follow past projects”, have “good historical data” available, and projects are “relatively standard but have
some small variation or customization” (143). For these reasons, I believe that Boeing’s use of parametric
estimating techniques is well suited for establishing accurate time and cost estimates for their 767 aircraft
project.
The aircraft manufacturing industry is dominated today by only two companies, Boeing and
Airbus. “Boeing ha[s] built more commercial airplanes than any company in the world” (Garvin, Field, &
Simpson, “A”, p. 2). Boeing’s 707, 727, 737, and 747 aircraft production lines have been dominant
within the commercial airline industry since 1955 through the introduction of the 767 in August 1981,
resulting in the manufacture of a lot of aircraft. Boeing’s efficiency in aircraft manufacturing resulted
from retaining the knowledge and experiences from the previous aircrafts assembled. Boeing’s
manufacturing facility in Seattle, Washington, accommodated both assembly of major aircraft
components, such as the wing section, and the full aircraft assembly line common to commercial plane
production. This consistency in production and technical resources reduced the learning curves associated
with the deployment of new aircraft series. Learning curves were a factor that Boeing calculated into their
parametric estimating process. Although the 767 would be more fuel efficient and contain enhanced
technologies, the basic structure, production, and assembly were similar to other aircraft previously
developed by Boeing; thereby, the 727 aircraft was the benchmark by which the 767 closely followed and
was estimated.
With a long history of commercial aircraft production, Boeing commissioned a study group to
evaluate past aircraft production and develop lessons learned and costs associated with developing a new
aircraft. Parametric cost and schedule estimating generated from historical data on earlier aircraft lines,
like the 727, were derived from this 3-year study group. Managers evaluated each major section of the
727-benchmark aircraft (labor hours/pound) and then translated this to the same section in the 767
aircraft. Adjustment factors were assigned for weight efficiencies and learning curves for production
efficiency gain. These major sections were then totaled to provide a comprehensive estimate of the total
labor hours needed to construct the 767 aircraft. The “Engineers believed that the historical relationships
underlying these calculations remained valid for long periods. According to Dennis Wilson, manager of
scheduling for the 767” (Garvin, Field, & Simpson, “A”, p. 8). Boeing was diligent in recording all
changes to their aircraft during the project through formal price and schedule documentation practices,
thus providing greater support to the historical cost and schedule estimates.
Boeing had always offered flexible and customization options on their family of planes; “by 1987
the 747, for example, was being offered in eleven varieties” (Garvin, Field, & Simpson, “A”, p. 3). Carpet
and passenger configuration changes were common for Boeing to meet customer expectations. Each
aircraft produced could have slight adaptations in the configuration of the body, seating, technology and
aesthetics. Boeing provided greater flexibility to their customers by offering a standard configuration to
which customers could modify to meet their specific flight distance and payload needs. Providing
adaptations to the standard model, while tracking such changes, afforded Boeing the opportunity to
continue to use parametric estimates as schedule and cost estimates did not drastically diverge from the
standard.
Within the referenced case studies, it is evident that Boeing was thorough in their estimating
practices and took non-production items into consideration during their estimating process. Factors, such
as Boeing’s matrix organizational structure for implementing technology, company culture built around
commitment to intense planning and meeting schedules, production learning curves, technology
implementation, and Master Phasing Plans, were also instrumental in influencing the quality of the
parametric estimate process. As detailed, the 767 followed a long line of prior aircraft, Boeing provided a
standard design with flexibility for slight customizations, and Boeing retained abundant historical cost
data. For these reasons and their evaluation of non-production company factors, like organizational
culture, I would deduce that historical-based parametric estimating served Boeing very well. The
successful delivery outcome of the 767 aircraft production substantiates this conclusion.
Question 3. How does Boeing manage risk? (please consider all of the following: financial risk,
market risk, technological risk, and production risk.)
“Airframe manufacturing was a business of enormous risks, for in no other industry was so
much capital deployed with so much uncertainty. Launching a new plane meant up-front
development costs of $1.5-2 billion, lead times of up to four years from go-ahead to first delivery, and
the qualification and management of thousands of subcontractors. (Garvin, Field, & Simpson, “A”, p. 2).
The article claims that executives in airframe manufacturing were often characterized as “gamblers”
because of the large risks that they took. To combat this, Boeing had to reduce risk in several aspects,
such as financial risk, market risk, technological risk, and production risk.
As stated above, manufacturing airframes was considered a huge financial risk. “Launching a
new plane meant up-front development costs of $1.5-2 billion, lead times of up to four years from go-
ahead to first delivery…” (Garvin, Field, & Simpson, “A”, p. 2). Boeing decided instead of producing the
entire plane themselves, they would subcontract out portions of the work, to reduce their upfront cost.
Another move that Boring made to reduce financial risk was to make a “family of planes”, “flexible
designs with inherent growth potential were essential to this approach” (Garvin, Field, & Simpson, “A”,
p. 3). The “family of planes” idea also resulted in a smaller learning curve for manufacturers, in turn
leading to faster manufacturing times and less capital spent. Finally, Boeing had one more trick up its
sleeve that resulted in them being the lowest-cost manufacturer across the industry. Boeing’s managers
implemented sophisticated manufacturing systems, and project management tools, that led to close
collaboration between workers. Boeing implemented many safeguards against financial risk, which led
aerospace analysts to say “If someone hired me to rebuild the Great Pyramid, I’d ask . . . Boeing to
assemble it” (Garvin, Field, & Simpson, “A”, p. 3). Boeing reduced their overall financial risk by
subcontracting out engine manufacturing, making a “family of planes” with flexible and similar designs,
and used sophisticated manufacturing systems combined with project management tools.
Boeing’s risks did not end with financial risk, however. Boeing implemented many procedures to
reduce their overall market risk. Boeing raised barriers in the market that made them unique and the best
at airframe manufacturing. One of the steps that Boeing took was outsourcing their engine manufacturing.
Boeing bought their engines from either General Electric or Pratt & Whitney. Boeing chose to outsource
engine manufacturing, in order to keep a healthy competition in the market, and keep moderate costs.
Boeing managers also would take their complex airframe designs and show them to airlines. By involving
the consumer, or purchaser, Boeing could get direct feedback on their designs and work with the airlines
to continue to improve their design. They would then relay these messages back to the designers and
revise. Boeing reduced their risk of rivalry, by keeping a healthy competition among subcontractors, as
well as working directly with the consumer on their preferred design.
To further reduce risk, Boeing needed to reduce risk in technology. Boeing decided a way to
reduce risk was to evaluate their manufacturing technology, on a consistent basis. The review helped
Boeing decide to implement state-of-the-art technology during the production of the 7x7 planes. Boeing
chose a manufacturing technology that had a proven track record with manufacturing space vehicles.
“Because it offered improved reliability...lower maintenance costs...it was incorporated into the 7X7 with
little debate” (Garvin, Field, & Simpson, “A”, p. 7). Boeing reduced their technology risk by continually
evaluating their systems, and implementing new up-to-date technology with a proven track record.
Finally, Boeing reduced their production risk by continually auditing their program. Boeing chose
internal employees to audit their system, due to better success than outside auditors. Boeing would isolate
their auditor internally, and have them report directly to the manager. The company (Boeing) would audit
their system in every aspect: technology, finance, manufacturing, and management. A typical audit alsted
around 3 months, and teams would act as “devil’s advocates”. By continually auditing their system, it
gave Boeing a chance to catch any kinks in their system, before they became a problem.