On the aviation side, costs and delays have been the price for developing game-changing aircraft programs that will transform the economic profile of the airline industry. On the rail side, rail integrators (which turn component assemblies into complete trains) are facing higher costs and penalties due to setbacks in high speed and regional passenger train projects across Europe.
Keeping the development and production planning of new products within budget and on schedule is a challenge for any manufacturer. But recently, the costs associated with setbacks have risen to new heights: Aviation and rolling stock development programs are experiencing delays of as much as four years, costing manufacturers significant additional engineering hours and hundreds of millions of dollars in cost overruns. At the same time, the contractual penalties that manufacturers must pay their customers, especially in the aviation industry, are soaring, reaching billions of dollars.
- Why are manufacturers struggling to deliver their aircraft and trains on time and on budget?
- How should they approach product development differently?
- Are there lessons for how other companies should approach product development as well?
Costs and Delays Take Off ($Billion)
Recent aircraft program development costs from preliminary design to 2014
People are pushing aircraft and train manufacturers to rethink procurement development
By Bernard Birchler, a partner, Eric Ciampi, a principal, and Archag Touloumian, an associate, in Oliver Wyman’s Manufacturing, Transportation, and Energy practiceDOWNLOAD PDF