1. Industry Business Cases Tim Krivanek The Boeing Company February 1, 2010

2. Objective Review how Project Proposals are made Discuss Financial Justification of Design Solutions

3. Situation Customers not happy with current product Technological innovations Target Improve customer satisfaction (cost, performance, etc. ) Proposal Design new car with additional features

4. Mock Design Solution New car design Loudspeaker Backseat bubble Fancy Fin Personalized hood ornament Interior Features

5. COST $$$ Non-recurring costs One time, start-up costs Product Design Facilities Tools Recurring cost or benefit On-going costs Sustaining production costs (labor) Materials (non-labor) Considerations

6. Costs/benefits Non-recurring costs One time, start-up costs Product Design – 50,000 hrs ($2.5M) Shop floor plans – 10,000 hrs ($.4M) Facilities – New assembly line ($5M) Tools – jigs, routers, etc ($2M) Total = ~$10M

7. Costs/benefits Recurring costs/savings (compared to current product) Labor 10 hours more per unit for features, produce 100 units per month 1000hrs increase per month ($30,000/month), $360K/year Materials $5,000 more per unit, $500K per month, $6M per year Total = ~$6.4M per year

8. Costs/benefits Non-recurring costs = $10M Recurring Cost = $6M per month Net Present Value Return on Investment ~13-20 % Payback Weight Savings Price increase Market penetration

9. Alternatives Recurring costs/savings (compared to current product) Labor – OFFLOAD PRODUCTION TO CHINA 10 hour more less per unit for features, produce 100 units per month 1000hrs increase savings per month ($30,000/month), $360K/year Materials – New material solution – plastics, thinner, lighter $5,000 more less per unit, $500K per month, $6M per year Total savings = ~$6.4M per year

10. Costs/benefits Non-recurring costs = $10M Recurring Savings = $6M per month Net Present Value Return on Investment ~13-20 % Payback Weight Savings Price increase Market penetration

11. Summary Use situation, target, proposal when suggesting design solutions Always consider costs when making decisions Questions??