Boeing’s 787 Dreamliner: Failure to Launch It was never supposed to be this difficult. When Boeing announced the development of its newest and most high-tech aircraft, the 787 Dreamliner, it seemed that it had made all the right decisions. By focusing on building a more fuel-efficient aircraft, using lighter composite materials that saved on overall weight and resulted in a 20% lower fuel consumption, outsourcing development work to a global network of suppliers, and pioneering new assembly techniques, it appeared that Boeing had taken a clear-eyed glimpse into the future of commercial air travel and designed the equivalent of a “home run”—a new aircraft that ticked all the boxes. Airline customers seemed to agree. When Boeing announced the development of the 787 and opened its order book, it quickly became the best-selling aircraft in history, booking 847 advance orders for the airplane. With list prices varying from $161 to $205 million each, depending on the model, the Dreamliner was worth billions in long-term revenue streams for the company. The aircraft was designed for long-range flight and could seat up to 330 passengers. Most industry analysts agreed: With the introduction of the Dreamliner, the future had never seemed brighter for Boeing. But when the first delivery dates slipped, yet again, into 2012, four years behind schedule, and the company’s stock price was battered in the marketplace, Boeing and its industry backers began trying to unravel a maze of technical and supply chain problems that were threatening not just the good name of Boeing, but the viability of the Dreamliner. Derisively nicknamed the “7-L-7” for “late,” the project had fallen victim to extensive cost overruns and continuous schedule slippages, and had recently encountered a number of worrisome structural and electrical faults that were alarming airlines awaiting delivery of their aircraft. These events combined to put Boeing squarely on the hot seat, as they sought to find a means to correct these problems and salvage both their reputation and the viability of their high profile aircraft. The time frame for the development of the Dreamliner offers some important milestones in its path to commercialization, including the following: • 2003—Boeing officially announced the development of the “7E7,” its newest aircraft. • 2004—First orders were received for 55 of the aircraft from All Nippon Airlines, with a delivery date set for late 2008. • 2005—The 7E7 was officially renamed the 787 Dreamliner. • July 2007—The first Dreamliner was unveiled in a rollout ceremony at Boeing’s assembly plant in Everett, Washington. • October 2007—The first six-month delay was announced. The problems identified included supplier delivery delays and problems with the fasteners used to attach composite components of the aircraft together. The program director, Mike Bair, was replaced a week later. • November 2008—Boeing announced the fifth delay in the schedule, due to continuing coordination problems with global suppliers, repeated failures of fasteners, and the effects of a machinist strike. The first flight was pushed out until the second quarter of 2009. • June 2009—Boeing announced that the first flight was postponed “due to a need to reinforce an area within the side-of-body section of the aircraft.” They further delayed the first test flight until late 2009. At the same time, Boeing wrote off $2.5 billion in costs for the first three 787s built. • December 7, 2009—First successful test flight of the 787. • July 2010—Boeing announced that schedule slippages would push first deliveries into 2011. They blamed an engine blowout at a test bed in RollsRoyce’s plant, although Rolls denied that its engines were the cause of schedule delay. • August 2010—Air India announced a $1 billion compensation claim against Boeing, citing repeated delivery delays for the twenty-seven 787s it had on order. • November 9, 2010—Fire broke out on Dreamliner #2 on its test flight near Laredo, Texas. The fire was quickly extinguished and the cause was attributed to a fault in the electrical systems. The aircraft were grounded for extensive testing. With that technical mishap, it was feared that the delivery date for the aircraft would be pushed into 2012. • January 19, 2011—Boeing announced another delay in its 787 delivery schedule. The latest (and seventh official) delay came more than two months after the Dreamliner #2 electrical fire. All Nippon Airways, the jet’s first customer, was informed that the earliest it could expect delivery of the first of its 55-airplane order would be the third quarter of 2011, though expectations were high that the airline might not receive any aircraft until early 2012, making final delivery nearly 3½ years late. There is no question that the Dreamliner is a stateof-the-art aircraft. The 787 is the first commercial aircraft that makes extensive use of composite materials in place of aluminum, both for framing and for the external “skin.” In fact, each 787 contains approximately 35 tons of carbon fiber-reinforced plastic. Carbon fiber composites have a higher strength-to-weight ratio than traditional aircraft materials, such as aluminum and steel, and help make the 787 a lighter aircraft. These composites are used on fuselage, wings, tail, doors, and interior sections, and aluminum is used on wing and tail leading edges. The fuselage is assembled in one-piece composite barrel sections instead of the multiple aluminum sheets and some 50,000 fasteners used on existing aircraft. Because of the lighter weight and a new generation of jet engines used to power it, the Dreamliner has a lower cost of operations, which makes it especially appealing to airlines. Additionally, the global supply chain that Boeing established to manufacture components for the aircraft reads like a who’s who list of international experts. Firms in Sweden, Japan, South Korea, France, England, Italy, and India all have major contracts with Boeing to supply parts of the aircraft, which are shipped to two assembly plants in the United States (one in Washington and the other planned for South Carolina) for final assembly and testing before being sent to customers. In short, the 787 is an incredibly complicated product, both in terms of its physical makeup and the intricate supply chain that Boeing created to produce it. So complicated is the 787 program, in fact, that it may be the case that in developing the Dreamliner, Boeing has simply tried to do too much at one time. Critics have argued that creating a new generation aircraft with composite materials while routing an entirely new supply chain, maintaining quality control, and debugging a long list of unexpected problems is simply beyond the capability of any organization, no matter how highly skilled in project management they may be. Suppliers have been struggling to meet Boeing’s exacting technical standards, with early test versions of the nose section, for example, failing Boeing’s testing and being deemed unacceptable. Boeing has undertaken a huge risk with the Dreamliner. In a bid to hold down costs, the company has engaged in extreme outsourcing, leaving it highly dependent on a far-flung supply chain that includes 43 “top-tier” suppliers on three continents. It is the first time Boeing has ever outsourced the most critical areas of the plane, the wing and the fuselage. About 80% of the Dreamliner is being fabricated by outside suppliers, versus 51% for existing Boeing planes. Jim McNerney, chief executive of Boeing, has admitted that the 787 development plans, involving significant outsourcing, were “overly ambitious”: “While game-changing innovation of this magnitude is never easy, we’ve seen more of the bleeding edge of innovation than we’d ever care to see again. So we are adjusting our approach for future programs.” McNerney continued, “We are disappointed over the schedule changes. Notwithstanding the challenges that we are experiencing in bringing forward this game-changing product, we remain confident in the design of the 787.” Three years Later—Update on the Status of the Dreamliner Boeing’s 787 officially entered commercial service on September 25, 2011, with Air Nippon of Japan. As of 2014, there were orders placed for 1,031 Dreamliners and a total of 162 had been delivered and were in service worldwide. Since introduction, Dreamliners have logged more than 500,000 hours in the air with 21 carriers. Troubles with reliability continue to dog the Dreamliner, however. Although original concerns about cracks and structural flaws in the composite materials appear to have abated, since its debut in late 2011, the 787 has experienced a series of malfunctions, including a three-month grounding of the global fleet in 2013 after battery meltdowns on two planes. Air India, which hasn’t reported an annual profit since 2007, and low-cost airliner Norwegian Air built their growth plans around the composite-material airliner and its promise of more fuel-efficient operation. However, both airlines have reported dissatisfaction with the current state of Dreamliner quality and reliability, throwing their operating strategies into question. Air India, which has ordered 27 of the aircraft, was forced to divert one of its 787s to Kuala Lumpur as recently as February 2014 as a precaution after a software fault on a flight to New Delhi from Melbourne. They recently announced that they would be seeking compensation from Boeing after the carrier found that its Dreamliners are not as fuel efficient as Boeing claimed when selling them. In January 2014, Japan Airlines, one of the biggest operators of the Dreamliner, found a battery cell in an empty jet smoking during preflight maintenance. Randy Tinseth, Boeing’s vice president of marketing, said reliability levels are climbing as the company works closely with airline operations personnel and makes other changes. “All of our customers are seeing improvement in reliability over time,” Mr. Tinseth said, but he declined to predict when the 787 would match the 777’s track record exceeding 99% reliability. “We continue on a positive trajectory,” he said, “but when we get there, it’s difficult to predict.”18 Questions 1. In evaluating the development of the 787 Dreamliner, what are some of the unique factors in this project that make it so difficult to accurately monitor and control? 2. Comment on the following statement: “In trying to control development of the 787, Boeing should have been monitoring and controlling the performance of its suppliers.” Do you agree or disagree that Boeing’s project management should have been fully extended to its suppliers? Why? 3. As you read the case, what do you see as the critical issues that appear to be causing the majority of the project delivery and quality problems?
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