Boeing Doesn’t Know That "Profit = Price – Cost" ?


Arizona Republic:

For the thousandth time, the Toyota principle is that prices are set by the market, therefore Profit = Price – Cost. The old industrial mindset was a “cost plus” approach where Price = Cost + Profit. This quote below makes it sound like Boeing, for all their lean work, is still thinking the old way.

“Boeing spokesman Todd Blecher said cost savings from a renewed focus on lean manufacturing has given the company some pricing flexibility. ‘We will not, however, do any deal that we consider irresponsible or a bad business deal simply to grab market share,' he said.”

I would say the cost reductions have given them “profit flexibility”, mainly in the upward direction. The price is set by the market (as a factor of demand for planes, fuel costs, and competition from Airbus, right?) Or do I not understand this, that aerospace is different?

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Mark Graban is an internationally-recognized consultant, author, and professional speaker who has worked in healthcare, manufacturing, and startups. His latest book is Measures of Success: React Less, Lead Better, Improve More. He is author of the Shingo Award-winning books Lean Hospitals and Healthcare Kaizen, as well as The Executive Guide to Healthcare Kaizen. He also published the anthology Practicing Lean that benefits the Louise H. Batz Patient Safety Foundation, where Mark is a board member. Mark is also a Senior Advisor to the technology company KaiNexus.

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