Boeing 787 Dreamliner Analysis

Boeing 787 Dreamliner

5/28/2018

Critical Facts:

1. In 2003, Boeing approved the plan to make Boeing 787 Dreamliner and Japan’s All Nippon Airways (ANA) purchased 50 jets in 2004 (KOMONEWS, 2013). After more than three years delayed, the first Boeing 787 Dreamliner was delivered to ANA in September 2011 (Rourke et al., 2015).

1. Boeing 787 Dreamliner has a complexed and unique design, which included one-piece fuselage replacing 1500 aluminum sheets and 50000 fasteners to reduce the weight of plane, decreasing 20% in fuel use and less maintenance time and using new materials (Pearlson & Saunders, 2013, p165-166).

1. Boeing 787 Dreamliner used about 50 suppliers from United States, Japan, Britain, France, Germany, Sweden, South Korea and Italy to make sections of the fuselage, landing gear, parts of the wing, pumps, valves, engines, brakes, doors, waste systems escape slides, tires, tubing, cabin lighting and ducts. (Peterson, 2009).

1. Boeing 787 Dreamliner team build a complex supply chain including over fifty partners scattered in 103 locations to reduce $10 billion cost and reduce new product development cycle time (Pearlson & Saunders, 2013, p166).

1. In September 2007, shortage of fasteners and incomplete software lead to the first delay for three months. In October 2007, the first delivery was postponed for six months because of unfinished work and delay in finalizing the flight control software. In 2008, the delivery was postponed for 15 months due to slow assembly progress and continuing problems with unfinished work from suppliers. In 2009, test flight was postponed because of a structural flaw at the wing-body joint. In 2010, the first delivery was delayed due to engine failure and other issues.  In 2013, Entire 787 fleet in service was grounded due to battery problems (Shenhar et al., 2016).

1. Outsourcing supply chain, global supply chain network, poor planning, poor leadership, poor management decision are the reasons leading to the delay of the Boeing 787 Dreamliner (Peterson, 2009; Pearlson & Saunders, 2013, p165).

1. Based on the 2004 Boeing internal analysis, $5.8 billion was planned for developing the Boeing 787 Dreamliner. Because of unexpected delay for more than 3 years, the cost has been estimated more than $32 billion.   (Gates, 2011).

1. As the major competitor to Boeing 787 Dreamliner, Airbus 380 program was delayed for a couple of years used global supply-chain model which used global supply-chain model (Pearlson & Saunders, 2013, p166).

Analysis:

As one of the world’s largest manufacturers of commercial aircraft, Boeing Corporation made its first delivery of Boeing 787 Dreamliner to ANA on September 26, 2011, after delayed about almost 40 months than originally planned, which experienced a long series of unexpected delays (Shenhar et al., 2016). The actual development cost of the project was estimated at about $40 billion, which was “well more than twice the original estimate” (Mecham, 2011).  Suffering incidents including fuel leaks, a cracked cockpit window, brake problems and an electrical fire, Boeing 787 Dreamliner has most concern due to battery problems and was suspended deliveries of its new 787 Dreamliner aircraft until the battery problem is solved and approved by Federal Aviation Administration (BBC, 2013).  Although Boeing’s vision for the Dreamliner was to make one of the most advanced commercial aircraft ever built and one of the most efficient to operate, long delay in delivery, early service problems and expensive development cost challenged Boeing (Shenhar et al., 2016). In this case analyses, challenges faced by Boeing and possible lessons learned from this special case in the aspects of extensive supply chain.

As one of U.S. Commercial aircraft manufacturers which have faced major competition from European companies, Boeing was decided to develop a new aircraft,787 Dreamliner, to raise revenues by value creating after losing market share to Airbus in the late 1990s (Tang et a., 2009).  Boeing was planned to build the 787 Dreamliner as a revolutionary aircraft with fuel efficiency, airframe primarily constructed with composite materials with improvement in customer travel experience by redesigning the aircraft and offering significant improvements in comfort and utilized a global supply chain network to drastically reduce development cost and time, which lead to a major cause for problems (Pearlson & Saunders, 2013, p165; Tang et al., 2009).  

For traditional supply chain for airplane manufacturing in Boeing such as 737’s supply chain, Boeing plaid the traditional role of a key manufacture who assembles different parts and subsystems produced by thousands of suppliers (Tang et al., 2009). In this strategy of supply chain, Boeing used technological know-how to manage its business process, known as silo perspective, in which each major function within the project form a separate group to ensure that the section of work was done by groups of experts in this function (Pearlson & Saunders, 2013, p165, 137-139; Tang et al., 2009).  

In 787 Dreamliner program, Boeing radically changed the production process to low the cost and development time, which used collaboration as a competitive tool embedded into new global supply chain process (Pearlson & Saunders, 2013, p165-166).  Boeing build an extremely complex supply chain, including over fifty partners located in 103 locations spread over the world to reduce financial risks and new product development cycle time (Pearlson & Saunders, 2013, p166).  The redesigned supply chain for 787 Dreamliner programs was based on a tiered structure, allowing Boeing to foster partnerships with about 50 tier-1 strategic partners, in which assemble different parts and subsystems produced by tier-2 suppliers (Tang et al., 2009).  This supply chain was used to enable Toyota to develop new cars with shorter development cycle times and lower development costs (Tang, 1999).  Theoretically, Boeing could assemble the complete sections from the above tier-1 strategic partners within three days at its plant in Everett, Washington (Tang et al., 2009).  In 787 Dreamliner programs, Boeing outsourced 70% of the development and production activities to shorten development time, fostered strategic partnerships with about 50 tier-1 suppliers to reduce direct supply base, instituted a new risk sharing contract to reduce financial risks, and decentralize the manufacturing process allowing its outsourcing noncritical processes to increase production capacity.