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Boeing 787
Dreamliner September 25, 2013
A Case Study for Project Management:
Lessons Learned
2
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
3
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
4
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
5
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
2
4
6
Project Development Expenditures
Cost (Billion) Time (years) • 4 years behind schedule
• ~$11 billion over budget
7
Lessons Learned
8
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)
10
• 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
11
Lesson 3: Cost estimation of a project should
follow a full understanding of all the
underlying costs
12
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?
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