PROJECT COST MANAGEMENT PROBLEM IN BOEING 787 DREAMLINER
1. Introduction
1.1. Boeing is one of the largest and most powerful American multinational corporations which mostly designs, manufactures and sells airplanes along with rotorcrafts, rockets and satellites. The corporation lost its market share to Airbus in the late 1990s, so it was in need of a new aircraft that would generate revenues by creating value for customers.
1.2. In 2003, Boeing started a four years project to develop the 787 Dreamliner aimed at improving efficiency of the airplanes by using a composite material (carbon fiber, aluminum and titanium) in airplane manufacturing against the traditional material (aluminum) and an electrical system using lithium-ion batteries and
…show more content…
This approach in the project was taken to reduce the manufacturing and assembly costs and development time but in reality this same decision from the management pushed the project more than three years behind schedule incurring billions of dollars expenses which was more than twice the allocated budget. It was challenging for Boeing to complete the project within allocated budget and time frame. The situation would be different if the corporation had kept the key technologies within the organization rather than outsourcing them as even with good technology, outsourcing possesses major risks in assembling the airplane because the components might not fit together. But these decisions were taken against the advice of a Boeing aerospace engineer Dr. L. J. Hart-Smith who knew these potential problems and presented them in a brilliant paper at a conference back in …show more content…
Boeing designed the 787 Dreamliner for long-haul transportation for 250 passengers for about a 20% lower fuel cost which was possible only if the aircraft's body were made using lightweight composite materials (but not the traditionally used aluminum) and with electrical system using lithium-ion batteries. But such composite materials were never before used to that extent in a large civilian aircraft. So it was challenging for the corporation to design such a big fuselage (a multi-sectional cylindrical barrel) covering the entire seating area of the aircraft and with more sections compared to that of aluminum-based fuselages which tend to fatigue. Thus these composite materials’ fuselages would reduce maintenance and replacement costs of the
April 16th 1907, Joseph-Armand Bombardier, a Canadian inventor and entrepreneur was born. Bombardier grew up in the eastern Quebec village of Valcourt. The ambitious young bombardier wanted to come up with a solution to make it much easier to travel through the snow-covered roads. Through Bombardier’s earlier years, he started his own garage where he worked and honed his mechanical craft. In his spare time, Bombardier worked hard to create an automobile that could travel easily on snow.
Boeing is a very interesting company. Boeing may only be one company but they compete in two different markets: commercial airlines and the defense industry. The main competition in the commercial airline market is Airbus. Airbus and Boeing seem to have the commercial airline industry in a chokehold basically having no other competitors. Since the industry has high barriers to entry they will not see much competition anytime soon. Boeing is the American leader in commercial airplanes and Airbus is the European leader, which means they are constantly battling. Their competing aircrafts are the Airbus A380 and the Boeing 747. Both companies have many variations of their respected aircraft and according to Business Insider, Airbus’ A380 outranks
The important thing in this project was, at the peak of the design effort, there were 238 teams using computing technology to design the 777.Design engineers and manufacturing engineers worked concurrently on the design of parts to decrease later change orders and to increase efficiency in building and installing those parts. Outside suppliers and airline customers also are represented on some teams. According to one of the supervisor of a team, the traditional way of bringing problem is testing and more testing. Boeing 777 is the most tested airplane in the aviation history. Operations of flight controls, the reliability of electronics, all of these things tested and retested by the teams of engineers. Boeing has built new laboratory for 777 in which 10000 workers worked. The engineers did the first ground test of 777 in Nov’93. During the first testing flight only the pilot and co pilot were on board. The problem occurred during the first test flight was the hydraulic leakage on the left side.
Executive Summary A key factor in determining a project's viability is its cost of capital [WACC]. The estimation of Boeing's WACC must be consistent with the overall valuation approach and the definition of cash flows to be discounted. Note that this process is a forward-looking focus and is laden with uncertainty. It is how the assumptions are modeled that many costly mistakes can be made.
The Boeing Company originally started out as the Pacific Aero Products Co., which was founded on July 15, 1916. The name was changed about a year later to The Boeing Airplane Company. The Boeing Company stayed relatively small until World War I when they were selected by Navy officials to produce an order for 50 model C's planes for the war efforts. The company continued to prosper and by the late 1950s, Boeing President William Allen knew that the company had the scientists, the experience and the facilities to lead the company into uncharted territories. He was right, Boeing has emerged as the leading aerospace company in the world today.
The Boeing Corporation is one of the largest manufacturers in the world. Rivaled only by European giant Airbus in the aerospace industry, Boeing is a leader in research, design and manufacture of commercial jet airliners, for commercial, industrial and military customers. Despite enjoying immense success in its market and dominating an industry that solely recognizes engineering excellence, it is crucial for Boeing to ensure continued growth through consistent strategy formulation and execution to avoid falling behind in market share to close and coming rivals.
The Southwest Airlines company and its culture is one that is often cited in today 's business classes. The airline is widely known to be “different” compared to many of its competitors, a result of its founding values and strong corporate culture. This culture developed early in Southwest’s history and was deeply entrenched due to the competitiveness of the airline industry, as well as due to some of the pressures experienced as a result regulatory issues and stiff competition.
Boeing’s market strategies have long-term focus. They believe very strongly in network-centric operation (NCO) is the key to the future of the military. They marketing people are involved in understanding the markets, customers, and where they’re going.
The engineering section of aircraft manufacturing is quite old. It is characterized by a few firms that keep Rolls-Royce on its toes in terms of competition, like General Electric. The small number of firms can be justified by the high cost of starting of...
The Boeing 737 is one of the most popular aircraft ever produced. Over 7,700 in all variants have been produced, with an additional 11,275 aircraft on order. This makes the 737 the most popular jetliner to date. The 737 has a wide variety of uses, and still remains extremely popular and in high demand. Because it is such a widely mass produced aircraft, it is also a target for constant aerodynamic improvements.
Technology Innovation: - Boeing should carefully analyze the market to evaluate the trends in the airline industry and aggressively invest in a new product line (top dog strategy) that could counter Airbus’s A380.
Developing the World's Largest Commercial Jet. In this case, we will be analyzing strategic interaction between the two. Airbus and Boeing, the two leading producers in the global commercial. aircraft industry.
Boeing 787 Dreamliner was first announced to the public in January 2003 with approximated costs of five billion dollars , since the sales of the aircraft were high it was supposed to enter commercial service during 2008 but the building up of aircraft seemed more anticipated than expected , since the management decided to use composite materials as an alternative for traditional metals as composite materials are lighter , stronger , cheaper and also resistance to wild variety of chemical agents including acid rain and salt spray as these are the conditions under which metals suffer , Boeing also shared their views in development of air craft with suppliers which effected in a project significantly more anticipated than expected . More than three years later after the project exceeded the estimated budget at last 787 entered commercial service in September 2011.
Summary William Boeing founded the Boeing airplane company in the early 20th century. After strings of acquisitions and mergers, this company grew and became the largest global aerospace industry. Followed by previous reorganizations in the 1990s, this company decided to start its branding campaign in May 2001. This campaign consisted of lots of effort and structural changes for the first time in corporate history. The media was showing the initial success of this campaign just after its beginning.
In 1990 Boeing was set to introduce the 777, the world’s largest and longest haul twin-bodied jet at the time. The 777 would serve the medium and long haul markets like the expanding Asian market. Boeing’s main competitors, Airbus Industries and McDonnell Douglas, had already announced plans to produce airliners that would compete directly with the 777. Analysts believed that the intense competition between the manufacturers would serve to depress prices for the airliners. Lower prices for aircraft would mean lower earnings.