Boeing is the world’s largest manufacturer of commercial airplanes and military aircraft and world’s leading aerospace company. Boeing operates the space shuttle and international space station for his major client National Aeronautics and Space Administration (NASA). Customers of Boeing spread around the world more than in 90 countries. Its head quarter is in Chicago, it employs more than 157000 employees across the United States and in 70 countries. Boeing has made a commercial plane like 767, 777, and his recent successful plane 787 which create history in getting the maximum orders from the customer.
Since the late 1990s, the rivalry between The Boeing Company (Boeing) and the European consortium Airbus Industries (Airbus) has been intense. Recently Airbus mounted a direct challenge to Boeing’s dominance in the large aircraft category (the Boeing 747 Jumbo Jet) with the development of the Airbus A380, unveiled in January 2005. Boeing has only one competitive model in the form of the ‘787’ when compared to Airbus ‘A 380?.But after 10-12 years again the need of new plane will emerge which will compete with the rivalry’s modern Aircrafts. So for the future perspective Boeing has planned to go for a plane which will start a new era of Aircrafts with its latest blended wing technology, body of composite fiber material and 1000 passengers’ capacity and create a bench line in the aviation industry for the next generation future aircraft. The Boeing-797 is the double Decker plane which will help the Boeing to make their position much stronger in the aviation industry and capture the largest market share for Boeing.
2.0 Project Roles and Responsibilities:
Stakeholders are those persons who directly-indirectly influence the design of the project. They will provide project requirements and after completions they are the one who will reap the benefits of the project.
Primary Stakeholders: Airlines around the world
Secondary Stakeholders: Passengers, Crew of Airplane, Employees of Boeing, Government, and NASA (for its blended wing technology).
O Contractors and Suppliers:
Supplier: The organization which supplies parts or services to another organization known as supplier
Contractor: People who provide his/her services to another entity according to the term and conditions prescribed in the contract. He/She is not a permanent employee of the organization and doesn’t work regularly for the company.
This project would require more than 100 contractors including major contractors and sub contractors. For detailed List of suppliers and contractors please see appendix no.2
Some Major Sub contractors:
Rolls-Royce or GE aircraft engines which was hired to develop engines for the plane.
Green Hills Software of Santa Barbara to write the operating system for the on-board flight-control computers.
Astronautics Corp. of America to built instrumentation system.
LMI AEROSPACE St. Charles, Mo. LMI supplies sheet-metal parts used on the wings, fuselage, and interior.
KREISLER INDUSTRIAL Elmwood Park, N.J. to make fuel lines
WESTERN FILTER GROUP Valencia, Calif supplies filtration equipment for the hydraulic-control lines.
Honeywell for Navigation Package, Health Management System, and Flight control electronics.
Kawasaki Heavy Industries for Main Landing Gear Wheel well.
Liebherr – Aerospace Toulouse for Environmental Control Systems
Kaiser Electro precision (Rockwell Collins) for the pilot controls (i.e. wheel, column)
Mitsubishi Heavy Industries a Japanese company for the wings manufacturing
O Project Team:
The project team is the combination of resources like analyst, designer, engineers etc. They can be part time or full time resources.
Understand the allocated task
Complete the allocated task within assigned budget, time and quality.
O Project Manager
The Project manager is the person who is responsible for the management of the project on the day-to-day basis. He/She ensures that resources are effectively allocated to the tasks through out the life cycle of project. He/she has to manage and monitor the progress of the project against the baseline of the project.
According to the PMBOK, the project manager has four major areas of responsibilities:
Identify the need for the project
Establish achievable objectives
Maintain the balance between Scope, Time and Cost.
Understand and satisfy the persons involved in a project
Designer understands the business need and designs a solution which will meet the business need. His responsibility is to design model and framework with the help of required technology to achieve the optimum solution of the business need to the client.
Customer: People who actually use the deliverable of the project. They help to define the business requirements.
3.0 Communication Plan:
A communication plan is a document that defines:
Information of what tasks need to finish.
The ways in which those task can be finished.
To whom the associated information will be addressed.
Please see communication plan for Boeing-797 project in appendix no.5
4.0 Project Schedule:
Project schedule shows the timing allocate to the work packages in the WBS and it shows the position and timing of milestones and specific events of the project (Lock, 2007)
Total duration of the project
Milestones: Milestone is a schedule event which shows the completion of major activity in the project.
There are seven major milestones establishes during the scheduling of execution phase:
O Milestone 1: Concept Approval.
O Milestone 2: Distribution of work packages.
O Milestone 3: Completion of Major Assembly
O Milestone 4: Completion of Power-On stage of aircraft.
O Milestone 5: Completion of Wing-break test.
O Milestone 6: Completion of Gauntlet test.
O Milestone 7: Market Launch of Aircraft.
Resource Loading: Resource loading is the process to assign a task to each employee of the working on the project by project manager.
For the definition of the Power-On stage, Wing Break test, Gauntlet Test please refers Appendix no. 11 and for the dependencies of activities, resource loading please refers the Gantt chart of Boeing-797 in Appendix no. 4
Budget estimation is very important measure to control the cost through out the project life cycle against the estimated cost of the project (Turner, 1999).
The estimated budget for the project is 8 billion pound. Approximate 50% of the total budget around ?4 billion is allocated for the research and development of the project. The estimated budget for the Planning and Execution phase is ?2.8 billion & ?1 billion respectively. And estimated budget for the closeout phase is ?.2 billon. For the allocation of the budget during execution phase please refer Appendix no.8
6.0 Issues and Challenges at each phase of the project:
Issues & Challenges in Initiation Phase:
Concept Approval: The concept approval is a big challenge for this kind of aircraft. It involves lots of research and development and so many changes in design until the concept get approval.
Financial Aid: As this project involves lots of research and development it will need a continuous flow of money for the smooth and uninterrupted completion of this phase.
Copyright issues: During R&D stage due to the use of highly advanced technology there is chances of copyright issues of technology imposes by another competitor organization.
Issues & Challenges in Planning Phase:
Resource Allocation: This is one of the major tasks involved in planning stage. Allocation of resources to the task need to be very accurate and prices because project cost and speed is depend on the efficiency of the resources used in the project.
Efficient Project plan: Development of an effective project plan is a major challenge for the project manager. This is the document on which project success depend. The bad project plan can cause an overrun of the project schedule and cost.
Issues & Challenges in Execution phase:
Supply Chain: Managing a supply chain is a major challenge of this project because delay in one sub assembly or important component from supplier could cause a delay of whole project.
Major Assembly: completion of major assembly on time for the first prototype is challenge.
Issues & Challenges in Close out phase:
Market Launch: Market launch of prototype on schedule is major challenge for an organization. As the orders of the product would have already received and the customer is waiting for the product the delay in launch of product could cause a cancellation of orders and damage to the image of the organization.
Decommission: Successful decommission of such a big project is a challenge for project manager because decommission of project is very important task of this phase as it involves creation of important documents like closeout reports. These reports will help in same kind of future projects for referencing. If source of referencing is not correct or accurate then it may affect the future projects.
7.0 Project Environmental Appraisal:
It is the systematic and comprehensive method to review the project in terms of environment, technical, social, and economic aspect to find out whether project will meet its objectives or not.
The SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis is the analysis of factors that will the impact the effectiveness of the organization.
Highly skilled & trained engineers:
Boeing has highly skilled and trained engineers to work on this project. The certified and highly experienced engineers and scientist are the strength of Boeing. Strong and efficient R&D teams have been delivered many big and complicated projects in the past.
Employees are enthusiastic about this project:
The enthusiasm of employees toward this project is big strength of this project. This project provides a platform to the engineers and scientist to learn the new technologies.
Specialized Crew Training:
Boeing has the highly advanced training rooms and highly skilled trainers to train the teams of this project with the latest tool and technologies.
A comparatively large scale use of composites material:
The uses of composite materials make this plane lighter in weight, and help in less fuel consumption. Boeing has already used composite material in its recent aircraft so they have experience of using the composite material.
Advanced Design and technologies:
The expertise of Boeing in latest technology like fly by wire technology and blended wing technology ensure the success of the project. Boeing has already used fly by wire technology in its recent plane 787 successfully. This plane unique design accommodates 1000passengers without much increase in shape as compared to Airbus A380.
Up front involvement with airlines and engineering:
This project needs strong relations with the stakeholders and customers, which Boeing already has. The Boeing understands the requirements of each airline very well and regular communication with the airlines regarding their requirements help Boeing to plan their future planes. The regular updating in engineering field is one of the strength of Boeing which helps this project to become successful.
Foundation for the future aircraft designed for long journeys:
With the help of this plane the Boeing will start a new era of planes in the aviation field. The designed of this plane used as a milestone for the next generation future aircrafts which travel the long journey with the less fuel consumptions at higher speed.
• Big capital expenditures on manufacturing facilities and Training:
To train the employees on specific high end technologies for this project requires a high class infrastructure training rooms. Also require a expensive tools and machinery help in manufacturing the plane.
• If the 797 failed, Boeing may have difficulty in obtaining money for future aircraft development:
This project involves a large amount of money and the failure of this project could cause a big financial damage to the Boeing. In future project stakeholders might not get ready to invest on this kind of big projects.
• Extensive outsourcing strategy led to major delays:
The use of innovative supply chain strategy of “buying more, make less” increase a dependency on the suppliers. The delay of major sub assembly could lead to a delay in major assembly. These delays affect the planned schedule and could incur an extra cost.
• R&D prices are high:
The R&D cost of this project is very high. Approximate 65%-70% of the total project cost is going to use in R&D phase. The research and development of new technologies and materials for this plane require large amount of time and money.
• Matching with defined Timescale, deadlines and pressure:
Delays in supply chain or any other department can cause a delay in production of plane which increases the pressure of completing the project within the specified timescale.
• Projecting the airline and passenger’s needs:
This project is the opportunity to project the airline and passenger’s need and filling the holes of requirement in market not met by existing planes. This project attracts the customer due to its capability of meeting the requirements or needs of the user.
• Acquiring a long range market:
By launch of this plane Boeing will able to acquire the aviation market for a long time as there is no another plane in the market which can compete with Boeing’s 797 plane.
• Market poised for growth:
This project boost the market growth by strengthens the place of Boeing in market.
• Fulfill the need of change in aircraft market and get large market shares to Boeing:
From a long time the need of change in aircrafts is emerging, this plane not only showing changes in its shape also in its design too. The changes can be seen in the use of technology and process used in the manufacturing of the plane. All these changes results into a unique plane which fulfill the need of customer and as there is no such kind of plane is available in the market it helps the boeing to get market shares.
• Global influences:
Influence the world with the capability of Boeing in aircraft manufacturing. This project provides a platform where Boeing has an opportunity to show his capability to build such a unique plane with the use of high end technology.
Reaction of passengers of plane:
Not sure how passengers would react on a plane which looks completely differently what they used to travel. It may time to adjust them with this design and understand the benefit of this design.
Restriction of use at old airports:
This plane face a problem of parking due to small size aircraft stands at old airports. Due to its size and requirement of modern tool and techniques for maintenance and repair this plane face problem at the old airports.
The Legal threat from the competitors over technology or information issues is very common in such kind of big project. As sometime competitors try to slow down the speed of project or stop the project so that they can make they ready for the competition and speed up and modified their projects to compete with Boeing plane.
Changes of Government policies:
The changes in regulation and policies imposed by government like new environmental act, noise standards etc could lead to a delay or stop the project. Sometime change in policies and regulation also cause the change in design of the plane which incur the extra cost and time to the project.
Lose of Key Staff to the competitive organization:
There is a risk of lose of key staff working on the project to the competitive organization. This may slow down the project speed and progress, risk of leakage of sensitive and important information to the competitors.
8.0 Investment Appraisal for Boeing-797
NPV of this project is positive and IRR of this project is more than the standard Rate of interest or Weighted Average Capital Cost (WACC) of company.
Suggestion: As the value of calculated IRR is more than the standard Rate of interest, NPV is positive and early returns of the investment shows that project is favorable and organization must take for a organization’s future growth and benefit.
9.0 Procurement Plan:
Procurement Plan is the document which provides information regarding the purchasing of goods and services, criteria to choose the supplier, type of contract, procedure to manage the suppliers.
The Boeing procurement plan governs the purchase of the material in right quantity of right quality at right time and at right price from the right sources. All procurement actions follow the all applicable laws, regulations and contractual obligations. All suppliers and their representatives are treated fairly and impartially.
For faster and effective procurement Boeing used an e-procurement technique known as Exostar. This website provides a platform for Boeing to share the information, the technology and help to maintain an effective communication with contractors and suppliers. Exostar is a online aerospace and defense trading exchange and it’s co-founded by Boeing with other aerospace and defense equipment’s leading manufacturers like BAE Systems, Lockheed Martin Corp., Raytheon Co. and Rolls Royce.
Following are the important procurement steps followed by Boeing during different phase of the project life cycle:
I) Initiation Phase: Requirement Step
Requirement Step: In this step Boeing conducts a “make vs. buy” analysis, if company decides product (equipment, services, project resources, etc.) will be purchased, then company go to the Requisition Step. Company creates a statement of work, define the product specifications (e.g. design, performance, functional), and identifies major project milestones.
II) Planning Phase: Solicitation Step
Solicitation Step: This step includes receipt of proposals, negotiation with vendors, evaluation of the proposals and award of contract.
III) Execution Phase: Contract Administration
Contract Administration: In this step company manages the contract by working closely with vendors and by regular reviews to ensure that terms, conditions and requirement of the contract are met.
IV) Closeout Phase: Closeout
Closeout: In this step company receive the product and verify it with the contract requirements, if it is met the requirements then accept the product or service. And company makes final payment after ensuring that there are not any outstanding invoices.
10.0 Contract Strategy:
The contract strategy determines the level of integration and complexity of design, construction and ongoing maintenance of the project, and it should support the prime objectives of the project in terms of risk allocation, delivery, incentives etc.
There are a number of different contract strategies, but each company has its own specified contract strategies for the specific projects because one contract and its strategy will not be able to meet with the requirement of each project.
The Boeing contract strategy emphasizes on the importance of competitive bidding as they believe it’s a very effective business practice. Before awarding a contract they consider the ability, capability, financial status, integrity, reliability, geographical conditions and performance, quality of product offered, delivery and overall relations with the customers of the potential supplier.
11.0 Administration of Contract:
The purpose of the contract administration is to ensure that supplier/contractor delivering the product or services met with the requirement of contract.
There are some important steps of contract administration:
Interpret the specifications.
Ensure the quality of the product or service.
Manage the Administrative, Budget changes and contract modification if needed.
Resolve the contract disputes.
Terminate the contract if supplier or contractor failed to met the requirement of the contract.
Manage the risk associated with the contract.
The Boeing Company administers the contract with the help of different kind of forms, which contains all the conditions and regulations help to administer the contract successfully.
For e.g.: To administer the purchase contract the Boeing has a Form D1 4305 1500 (Rev. 2/96). This form consist 46 terms and condition to review and administer the purchase contract. For further information of this form please refer Appendix no. 10 II) Boeing’s Contract Administration Form
12.0 Supply Chain Strategy & Issues:
Supply chain is the entire network of different entities like organization, resources, People etc to supply the end product to the final customer.
Design and Efficiency are not the only things about this new aircraft this project contains a production supply chain strategies which make it possible for Boeing to complete this aircraft in a record time. This kind of projects requires a very effective and efficient supply chain because the slightest delay at any point in supply chain can paralyze the production of the aircraft. For Boeing this new aircraft means the revamped supply chain.
Traditionally Boeing used a strategy in which it is a main manufacturer and contracting with the thousand of suppliers for individual parts and systems later when parts and supplier reached to Boeing they labouredly assemble them into finished product. But for the 787 project they had used new supply chain strategies which includes major suppliers will design & build the entire sections of the aircraft and later shipped them to the Boeing for the final assembly and testing i.e. “Making less, buying more”.
In this way major portion of the aircraft will actually be built by Boeing’s global partners. To speed up the assembly Boeing need to achieve a whole new level of collaboration with key suppliers around the word. For effective Supply chain process Boeing used a internet trading exchange tool known as Exostar. All the suppliers need to register on the Exostar and direct procurement of design and part can be done on Exostar. Exostar is an e-tool which ensures that all the partners and suppliers of the project were in close communication about every aspect of Production, logistics, and design.
For effective supply chain process the visibility of updated and latest data from Boeing to the required suppliers is very important. It helps suppliers to ensure that they are adhered to the production plan. On the Exostar the supplier can view the information regarding the engineering changes, production delays, part orders and the like. Whenever there is a specific major changes in the process or design suppliers came to know about it and do the changes within specified time without incurring extra cost to the project.
With the help of Exostar the Boeing can have a better control of the whole supply chain. Exostar allows a Boeing to control and limit the flow of information to the tier1 or tier 2 suppliers. The Exostar work as an “Early warning system” it warns any disruption and error in a supply chain so that Boeing knows about the potential problem in advance to head off the impacts of those problems further along the chain. E.g.: If the supplier delivered an invoice through the Exostar with wrong unit price then Exostar identify the discrepancy between invoice and purchase order and send it back to the supplier.
Issues and Challenges:
The supply of the major sub assemblies from the different suppliers for the major assembly of the aircraft need to arrive on time and in precise order so that plane can roll out the assembly line on the schedule. Major risk involved in the supply chain is Schedule risk. The issues like delay in one major subassembly could cause delay in the production of the aircraft and increase and change in defined schedule.
Some of the major issues are as follows:
Design changes of the aircraft leads to the supply chain delays.
Limited engineering resources inside the Boeing.
Improper communication leads ambiguity between supplier and client. It could cause delay in supply of sub assemblies or parts.
Some of the major challenges are as follows:
Synchronizing thousand of suppliers and deliveries to build an aircraft.
Assuring safe and on time deliveries of the sub assemblies from the supplier.
Benefit of this strategy:
Strategy focuses on making less & buying more, driving the supply-chain complexity and supplier dependency. But with this strategy Boeing set out to do something revolutionary by tapping suppliers not only for parts, components and material but also innovation. And this helps Boeing to set out the new platform to market as soon as possible. It also help to reduced the business risk by reducing its dependence on its own operations like organized the labor in the production process.
Some other benefits of this strategy are as follows:
Control on spending the money.
Performance Incentives and Delivery reliability.
Focus on partnerships- Best practices, data exchange etc.
Early problem detection, to implement control measure in advance.
13.0 Type of Contract:
Boeing used a FFP (Firm Fixed Price) contract and they have their own specified designed contract forms based on FFP contract type.
A firm-fixed-priced contract is a type of contract which made for a price that is not subject to pay any extra cost on the basis of contractor’s cost experience during performing the contract.
This contract type places maximum risk to the contractor and full responsibility for all costs & resulting profit or loss. It provides maximum incentive for the contractor to control the costs and perform the task effectively and imposes a minimum administrative burden upon contracting parties.
14.0 Type of Contract Form:
Boeing does not have any traditional contract form. Boeing has different specified contract form, each contract form especially designed according to the product or goods. For procurement of goods or services for defense helicopter or for commercial plane they have different contract forms. Each contract form varies according to their product or services but all the contract forms are based on the prime contract i.e. “FFP Contract”.
There is a sample contract form of Boeing is attached in Appendix no. 10,
I) Boeing’s Procurement Contract Form for further information.
15.0 Legal Issues:
Following Legal issues might arise during this project:
The financial laws of any business are many in number and they varied from location to location. There are always new rules, regulation and taxes are imposes by government and they are changing regularly so it’s necessary for us to keep update with the latest tax laws and other financial regulation.
This project involves large amount of money so it’s necessary for the Boeing to follow all the financial laws to protect themselves from any financial law’s infringement which can cause an extra cost to the project.
This is the most common legal issue in any business. In this project where the suppliers and contractors are more than hundred in numbers the legal issues are very common. To minimize these issues it is necessary for both the parties involved in contract should read and understand the contract properly.
Advertising’s legal issues arise when a company says pretty much anything they want to in advertising to sell their product. These legal issues arise generally in small business where the product is small and cheap, and then it is easy to fool the public. But it’s not easy to do in the big projects like making of aircraft for the world renowned company because the big product like aircraft is not going to advertise on the television for the general consumers.
The way company runs his business is one of the most important legal aspect need to be consider. Company must make sure that his business operations are governed by federal, state and local laws. In the organization there are so many laws of different department need to be considered during operation of the company or project like laws regarding human resources, tax reporting deadlines, and required insurance.
The common saying “better safe than sorry” definitely applies to laws that govern the business of the organization because company needs to be extra careful as competitors are always ready to pick this kind of mistake or error so that they can highlight this issue and damage the brand image of company and fail the project.
16.0 Disputes between Stake holders and Competitors:
The dispute between stake holders will arise when there is disagreement between the stakeholders regarding their personal interest or when interest of one stakeholder is opposite to another stakeholder.
If the dispute between stakeholders will not solve early then it may lead to the change in project’s definition, scope and objectives. Mostly dispute between stakeholders resolved by any one of the form of Alternative Dispute Resolution (ADR) method i.e. Arbitration, Mediation and Negotiation. Usage of ADR form depends on the complexity of the dispute. “Litigation” is the last option for the company to solve the dispute as it involves lots of money and time.
Disputes between stakeholders can be reduced and solved by following methods:
Improved communication: More attention need to be given to dispute management in the organization so that it helps to increase more open relationship with the stakeholders.
Stronger relationships: The relationship between stakeholders will improve with the help of effective communication between the stakeholders. The stronger relationship helps to build a better understanding between the stakeholders.
Encouragement of appropriate solution: Problem and issues should identify at early stage and dealt with appropriate and most satisfactory outcome for the stakeholders.
Corporate culture: The culture of the organization should be flexible and solution oriented. And the management and the employees take the responsibility to solve the problem or issue at their level.