Boeing 787

Dreamliner September 25, 2013

A Case Study for Project Management:

Lessons Learned

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Abdullah Gaznaii

Alfredo Martinez

Jamie Gregory

Mohamed F. Sollimon

A Case Study for Project Management: Lessons Learned

Sorted alphabetically :

Outline

• The Aerospace Industry – An Overview

• 787 Dreamliner Project

• Lessons Learned

• Conclusion

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The Aerospace Industry

• Aerospace has been an important employer, providing highly skilled jobs.

• Aerospace manufacturing sector has been the technological backbone of American manufacturing.

• Decline in employment: > 900 thousand in 1989

< 500 thousand in 2013

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Large Commercial Aircraft (LCA)

• Defined as non-military aircraft with a seating capacity above 100.

• Today the LCA market is a duopoly consisting of Boeing and Airbus.

• New core business model: Boeing has become a Systems Integrator

• Boeing 727 (1960): 2% outsourced • Boeing 777 (1990): 30% outsourced • Boeing 787 (2013): 70% outsourced

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787 Dreamliner

• Boeing’s new flagship LCA

• Advanced technology Composite material structure

Propulsion system

20% fuel reduction

• Multi-tier supply chain Cut development costs from $7.3 to $4.2 billion

Reduce development time by 2 years

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Dreamliner Outcome

Planned(Tier Structure)

Base(Traditional)

Actual

$4.2 $7.3

$15.0

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4

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Project Development Expenditures

Cost (Billion) Time (years) • 4 years behind schedule

• ~$11 billion over budget

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Lessons Learned

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Lesson 1: Assemble a management team

with requisite expertise

Traditional Supply Chain

Dreamliner Supply Chain

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Lesson 1: Assemble a management team

with requisite expertise

“Without the requisite skills to manage an unconventional

supply chain, Boeing was undertaking a huge managerial

risk in uncharted waters.”

Mike Bair, Proven marketing expertise

Patrick Shanahan, Proven supply-chain management expertise

(Tang and Zimmerman 2009)

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• New outsourcing model adds complexity, enforcing need for visibility

• Exostar software alone is not sufficient

• Multi-tier and outsourcing practice led to inaccurate information inputs

• Recommendations: Ground rules for accurate and updated information Assess and manage cultural differences

Lesson 2: Supply chain visibility should be

improved to ensure issues are addressed on time

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Lesson 3: Cost estimation of a project should

follow a full understanding of all the

underlying costs

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7.3b 4.2b 15b

Estimated cost (conventional outsourcing)

Estimated cost (new outsourcing

model) Actual cost

Does that look right?

• Accurate cost estimation is critical input for decision making and to avoid project overruns.

Reduce Cost

𝑅𝑂𝑁𝐴 = 𝑜𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑝𝑟𝑜𝑓𝑖𝑡 𝑎𝑓𝑡𝑒𝑟 𝑡𝑎𝑥

(𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑛𝑒𝑡 𝑎𝑠𝑠𝑒𝑡𝑠)

Reduce equipment and inventory

Lesson 3: Cost estimation of a project should

follow a full understanding of all the

underlying costs

• Taking on increased risk of outsourcing

• Hidden costs of integration, cooperation, and collaboration

• Increased cost and time necessary to make design changes through multi-tiered suppliers

Lesson 3: Cost estimation of a project should

follow a full understanding of all the

underlying costs

• A single tier-1 supplier could drag the whole product quality down.

• It is essential to have a strict supplier selection process to ensure their qualification in terms of: Technical expertise

Capacity to deliver on time

Meeting expected quality

Lesson 4: Improve Tier-1 supplier training

and selection process

• In such a high tech. and time critical project suppliers should be provided with:

On-site quality control

Close management of supplier

Technical support if necessary

Lesson 4: Improve Tier-1 supplier training

and selection process

Lesson 5: Proactively manage relationship

with labour unions

• Is Labour union a stakeholder?

• Boeing approved a big change

• Previous history with labour disputes

• Costly 2008 strike (September 7th , 8 weeks)

• Recommendations: Utilize previous lesson learned

Incurrent risk assessment and management

Involve key stakeholders in the decision making process.

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Lesson 6: Risk-sharing contracts need to

include partner specific incentives/penalties for timely/late work

• All partners slow to the speed of the weakest

link

• Recommendations:

Incentives for Tier-1 suppliers that meet milestones early or on time

Penalties for missed deadlines

Increase buy-in from Tier-1 suppliers

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Conclusion

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The project failed to meet the triple constraint:

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Questions?