IB 150 Lecture Notes - Lecture 5: Korean Air, Leading Edge, General Electric Genx

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IB 150 – Lecture 5
Boeing 787 Case Study
Boeing 787 Dreamliner
It is a long range, mid-size wide body. Its variants seat 210 to 310 passengers
First flight: December 15, 2009
Top speed: 593mph(954km/h)
Wingspan: 197’ (60 m)
Cruise speed: 567 mph (913km/h)
Introduced: October 26, 2011
Engine types: General Eletric, GEnx, Rolls-Royce Trent 1000
Huge Costs of the Dreamliner
Numbers built: 512 b January 2017, 1202 ordered
Program cost: U$32 billion (boeing’s expenditure as of 2011)
Unit cost:
787-8: U$224.6 million (2015)
787-9: U$264.6 million (2015)
787-10: U$306.1 million (2015)
Estimated to break even at around 1900 aircrafts it would take 20 years for them to make
profit, and by then this plane would probably be obsolete
The Game Changer
Boeing focused on the costumers
Boeing pitched the 787 from the outset as an aircraft that would wow passengers with its
comfort
Increase profitability by airlines with its fuel economy (20%)
It helps change the business model of the airline industry
“City pairs”
“Point-to-point” vs. “Hub and spoke”
How the 787 was Built
Almost everything is outsourced!
Even component design and research and development
Just gave each company what they were supposed to do and hoped to just assemble all
together with no problem
70% of the place is outsourced!
Subcontracted Assemblies
Wing manufacturers (Mitsubishi Heavy Industries, Japan, central wing box)
Horizontal stabilizers (Alenia Aeronautica, Italy; Korea Aerospace Industries, South Korea)
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Fuselage sections (Global Aeronautica, Italy; Boeing, North Charleston, USA; Kawasaki Heavy
Industries, Japan; Spirit AeroSystems, Wichita, USA; Korean Air, South Korea);
Passenger doors (Latécoère, France)
Cargo doors, access doors, and crew escape door (Saab, Sweden)
Softwear development (HCL Enterprise India)
Floor beams (TAL Manufacturing Solutions Limited, India)
Wiring (Labinal, France)
Wing-tips, support fairings, wheel well bulkhead, and longerons (South Korea)
Landing gear (Messier- Dowty, UK/France)
Power distribution and management systems, air conditioning packs (Hamilton Sundstrand,
Connecticut, USA)
Rudder, wing-to-body fairing panels, leading edge and panels for the vertical fin, and other
composite parts (China)
Over 70% of the value of Boeing’s new 787 Dreamliner was provided by outside suppliers,
including engineering work in USA, Australia, France, Japan and Italy.
This was a much higher share than in the previous airplanes of the company where less
than 50% was outsourced. While outsourcing was supposed to reduce the 787’s
development time from six to four years and cut development costs by 40%, the end result
was the opposite.
The project was billions of dollars over budget and over three years behind schedule.
However, outsourcing was not the only reason for 787’s problems.
The Big Question: Why?
The boeing 747 was sold for $20 million a unit – most successful aircraft
What are the key benefits to Boeing’s outsourcing strategy?
Primary reason: cost reduction
Quick to market: beating the competition
Quick to change
Markets are changing so you have to be lean and flexible to change too! New ideas and
change in demand
It allows boeing to do what it does best: assemble airplanes!
Who else will benefit?
Traveling public
Cabin comfort, lower fare, more direct service
Beoing’s supplier
More business, gain technology, learn expertise
Airlines
More flights, lower operating costs, better image
Who will lose out?
Airbus: beoing’s main competitor
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