Boeing 767

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Harvard Business School

Rev. April 1, 1991

The Boeing 767: From Concept to Production (A)
In August 1981, eleven months before the first scheduled delivery of Boeing’s new airplane, the 767, Dean Thornton, the program’s vice president-general manager, faced a critical decision. For several years, Boeing had lobbied the Federal Aviation Administration (FAA) for permission to build wide-bodied aircraft with two-, rather than three-person cockpits. Permission had been granted late in July. Unfortunately, the 767 had originally been designed with a three-person cockpit, and 30 of those planes were already in various stages of production. Thornton knew that the planes had to be converted to models with two-person cockpits. But what was the best way to proceed? Should the changes be made in-line, inserting new cockpits into the 30 planes without removing them from the flow of production, or off-line, building the 30 planes with three-person cockpits as originally planned and then retrofitting them with two-person cockpits in a separate rework area? Either way, Thornton knew that a decision had to be made quickly. Promised delivery dates were sacred at Boeing, and the changes in cockpit design might well impose substantial delays.

The Airframe1 Industry
Commercial aircraft manufacturing was an industry of vast scale and complexity. A typical 767 contained 3.1 million individual parts; federal regulations required that many be documented and traceable. There were 85 miles of wiring alone. Manufacturers employed thousands of scientists and engineers to develop new technologies and production systems, and also to attack design problems. Facilities were on a similarly grand scale. Boeing assembled the 747, its largest commercial airplane, in the world’s largest building+62 acres under a single roof—with a work force of 28,600 people. Few companies were able to marshal such massive resources. In 1981 the industry had only three major players: the American manufacturers, Boeing and McDonnell Douglas, and the European consortium, Airbus. A fourth manufacturer, Lockheed, left the commercial airplane industry in 1981 after its wide-bodied jet, the L-1011, had incurred losses of $2.5 billion. Boeing and McDonnell Douglas were competitors of longstanding; Airbus, on the other hand, made its commercial debut in May 1974. It was not generally regarded as a serious competitive threat until 1978, the date of its first large sale to a U.S. airline. By 1981, Airbus had sold 300 planes to 41 airlines, and had options for 200

1An airframe is an airplane without engines. Technically, Boeing competed in the airframe industry. In this

case, however, the terms airframe, airplane, and aircraft are used interchangeably. Associates for Case Development Janet Simpson and Lee Field and Professor David A. Garvin prepared this case as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. Copyright © 1988 by the President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685 or write Harvard Business School Publishing, Boston, MA 02163. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Harvard Business School.



The Boeing 767: From Concept to Production (A)

more. It received direct financing and subsidies from the French, Spanish, German, and British governments. 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....
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