This paper would analyze certain vital elements of these paper-including elements such as project uncertainty, risk management quality management, forecasting, budgeting, appraisal of the model, value analysis amongst some. Besides reviewing the project itself, this paper would also seek present a cross comparisons of the above elements between the Boeing case and a similar case study.
The project revolved around the production and the delivery of Boeing’s first ever 747 plane craft. The initial production itself required much speculation and hesitation on the behalf of the management as in order to meet the current demand certain significant changes has to be implanted-regarding the conversion of the model into a two person cockpit. Whether this was viable decision had to be considered amongst a number of factors and hence, there was a lot that had to be taken into account.
In order to launch this plane, it required upfront payment of $1.5 to $2 billion which in itself was a huge investment. A huge capital deployment and hence, making this one of the most risky industries to exist. Projects of this size could make use of large number of the company’s finances making things pretty difficult for Boeing if it did not go as planned.
In the last 2 years according to a market survey, only two planes had actually gone on to make money portraying the sense of uncertainty and risk that were attached to such a project. At the same time the return so n the success of such a project were huge making it a difficult choice for the management indeed.
The prices had to be competitively priced which added certain risks of their own. The learning curve which was used to derive these prices was not something that had not been used before the purposes of airplane manufacturing. In order to break even, mass production was required. Explaining the managers need to start the process as soon as possible.
In order to meet the above risks, Boeing took on a number of partners who participated in the risk sharing scheme effectively making risk management more effective. This sense of risk management evolved after a near disastrous experiment that resulted in immense losses.
The strategy of having shared designs resulted in Boeing reaching break even pints much earlier than previously and becoming much more efficient. The expertise of Boeing in technological leadership, customer support, and sophisticated manufacturing systems all allowed Boeing to effectively manage their projects.The commitment of the workforce and the importance of time were allowed Boeing to achieve this success.
A project called Project Homework allowed Boeing a reasonable understanding of the various costs involved in the manufacturing of a plane. Boeing carried this project further by carrying out a project assessment in order to figure out the requirements of the new plane; 747.
The initial forecasting scheme meant assessing the market which in itself was a formidable task. It meant the generation of econometric models, in predict optimistic, conservative and expected scenarios in order to cover all aspects of the future. All the forecast were based on the assumption that there would be continued regulation of the industry, continued preference for airlines that linked major cities directly, rising fuel prices, and no new competition in the medium range market.
The forecast was done in order to meet the demand of the current and expected airline users. The medium range segment was expected to be targeted totally and hence the sales were taken as 100 percent.
Besides forecasting the demand, the company had to consider important aspects such as the quality, technology involved in the production of the plane itself. At Boeing, technology was an ongoing process and each area had its own chief engineer. Before the development of any technology it was imperative to see, if it could be incorporated into the cost schedule, was it an acceptable technological risk and the ultimate vale to the customer.
Some of the newer technologies had already proven to have lesser risks and hence, Being had taken care of risk management along with the manufacturing element in order to make sure that in order to configure the panes the required technology was available. For the unproven technology however, it was harder to decide as certain risks were involved with their development.
The configuration scheme involved creating newer designs in order to meet the quality needs of the ultimate consumer. Market research was carried out which showed that 200 passengers capacity was available. The element of fuel costs had to be considered especially in an environment in which fuel costs were rising in order to make sure that the prices were kept at a competitive level in order to cater to the needs of the consumer.
The certification decision had to be made along with the decision between a two or three seater. Modifications were done in order to add to the future capacity, along with making it more light weight and the fuel cost element was given high priority.
In order to make sure that every phase was according to the rules and regulations audit teams were prescribe who had to review all aspects such as technology, finance, manufacturing and management.
The costing phase was carried out after the designing phase. The initial cost was mostly kept for the research and development purposes. The costs were estimated using a parametric estimating technique. This method allowed Boeing to weight the costs of the design characteristics such as weight etc and had to examine the historical relationships as well.
In order to make this calculation, the assembly hours had to be studied. In order to carry out this calculation, the managers took benchmarked data and for every major section of the plane the number of labor hours per pound of the plane was identified. The result was multiplied by the expected weight and than subsequently by the factor that showed the historical experience of the relationship between labor hours and weight.
At the end, a learning curve was applied to estimate the number of labor hours required to build the first 747. Parametric estimates could be used in accordance with differences in the plane programmes. In certain cases, fewer labor hours were required than predicted while in other cases more labor hours could be required than predicted.
The same process was done in the Master Phasing process which established the program schedule and the benchmarking of major milestones. Para metrics were used for the purpose of linking of interdependent groups. Another important element was the supplier management which allowed Boeing to effectively manage its risk management. A Japanese and Australian corporation was taken on board as program participants who were provided rigorous details as to the requirements.
These participants were asked to work together with the Boeing engineers due to Boeing’s policy of working along side their suppliers. Both agreed to a technology transfer and in the case of the Japanese, the initial difficulties were in terms of the tedious tasks of transferring heavy machinery amongst some.
The production management; an important component of the Project management itself, comprised of 2 primary critical task including maintaining schedules and ensuring that learning curves were met. Hence, unanticipated changes had to be met at the same as the time that learning activity was going on.
The above tasks allowed Boeing to make sure that its value management was maintained in order to maintain the satisfaction of the consumer and its own image. An important element of this paper is in reference to change management. It was done through a careful tracking process of all the subsequent changes which were implemented by keeping in mind three important strategies. These were; installing old parts as originally planned, retrofitting new ones amongst some of the changes.
But these changes had to be done keeping in mind a certain tie line as if the deadlines were not met that could disaster for an airline company like Boeing where time is extremely valuable.
Learning curves were used for there assembly line process as well. However, Boeing came up with certain production and suppliers which resulted in the learning curve and schedules were not disrupted by the modification process. However, the risk had to be analyzed as well.
The above Boeing case study would be compared with a project which required the setting up of Hotel. Though, the cases are quite different yet the scale of the Hotel project was quite large as well and required a number of people, with a large technical team with a lot of risks attached to it. This paper would review the Hotel case study wit reference to the roles and responsibilities, interfaces with other processes, flow of information, time, cost value and the overall improvements.
The Hotel’s case study comprised of setting a Hotel in a mountainous region. The initial fears were related to the fears of the cost factor versus demand, the technicalities involved, the type of people required- international chefs and all, the time factor, the current unfavorable negative climate for such an investment and the value aspect.
The Management had the initial fear of opening up a five star hotel considering the current unfavorable environment which had taken a hit due to the loss of tourists as a result of security issues. The initial cost had to be weighed against the amount of tourists and hence, the project had to be analyzed by forecasting a number of factors.
The role and the responsibility of the top management was to conduct a feasibility study in which they not only had to foresee the potential demand and supply, but at the same time measure the exact requirements sin order to meet the requirements as per the Hotel regulatory act, and then compete with a highly competitive market.
In the Hotel business the type of facilities offered, the image of luxury, exclusive, and the brand name of the Hotel cold go a long way in establishing the Hotel’s image itself. The feasibility study had to weigh the risk of the location against the benefits of that particular location. The feasibility of the location had to be measured against the potential risks involved with the construction in a mountainous region.
The management had to chalk out the responsibilities of its own management team – with certain schedules. All the above could be compared to the case scenario of Boeing which too risk required a careful risk analysis but in tat case it was more to do with the huge capita deployment and the low success rate of the industry. Though the Hotel had a risk of investing so much capital, the risk factor more came into play not due so much due to the fear of success itself but due to the unfavorable external environment.
The management of the Hotel had to more expertise in customer relationship while the management involved in the case of Boeing was required to have greater expertise in the engineering and technical side. The management in Boeing also had greater individual responsibilities as there were separate design teams etc while the management in regard to the Hotel was designated more by its post.
The responsibilities could be compared as well as- Boeing had a management which was involved more with the product development itself while the Hotel Management was more involved with the customers directly.
The interfaces of the processes themselves are a huge contrast- Boeing‘s processes were primarily linked by the supplier chain and the production chain while the Hotel’s processes were linked by the consumer and his demands. Hence, while one required more technical finesse one required greater consumer knowledge.
The communication and information channel were pretty different as well. Boeing was more careful about meeting their time and production schedules and hence, time was the key. Time efficiency did play a role but quality had a huge role in play in the upkeep of any Hotel and its demand. Hence, the basic differences were due to the difference in priorities.
The improvements in the Hotel business were done in over a shorter time and were easy to carry out while the modification of Boeing required greater time and carried more risk as well.
Hence, this paper reviewed a case study while highlighting a cross comparison between two industries and their subsequent production processes.
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