Program Evaluation of the Boeing Thesis

Excerpt from Thesis :

Boeing employs conventional methodology, which involves using multiple layers strategic partners for the Dreamliner project, and this has caused a fundamental delay in the project. To enhance reliability and validity of data analysis, data collected through literature survey are categorized into panel a, panel B, panel C, and panel D. The data collected from these panels are checked whether they are going to deliver the same results, and further analysis reveals that the data provide the similar opinion about the causes of delay of the Dreamliner project. Analysis of the data collected is summarized as follows:

Project Methodology implemented for Dreamliner project

Unlike the traditional supply chain methodology adopted by Boeing Company for the past projects, Boeing employs different project methodology entirely for the Dreamliner. Boeing employs unconventional supply chain methodology for the Dreamliner project, and the issue has caused significant delay in the production and deliveries of Boeing 787. Boeing decides to implement unconventional supply chain to reduce development time of Dreamliner from 6 years to 4 years as well as reducing the development costs from $10 to $6 billions. Analysis of data collected reveals that unconventional supply chain is new in the aircraft manufacturing industry, and Boeing was envisaging that the company would enjoy cost reduction by using unconventional supply chain. Boeing decides to expand layers of supply partnership thereby spreading the costs to suppliers. As being revealed in Fig 1, traditional supply chain methodology for aircraft manufacturing allows the company to deal directly with suppliers.

Fig 1: Traditional Supply Chain methodology of Aircraft manufacturing

Before implementing Dreamliner project, Boeing adopted the traditional supply model for the manufacturing of its former projects. The methodology allowed Boeing to deal directly with key suppliers and manufacturers of different parts of the aircrafts. However, to keep the costs low and spread financial risks to the manufacturers and to the partners who assembly the airplane parts, Boeing adopts conventional supply chain system with approximately 50 Tier-1 strategic partners. Strategic partners are those assembling different parts and sub-systems produced by Tier-2 suppliers. Illustration in Fig 2 reveals the supply chain methodology that Boeing is using. Boeing is using several layers of supply chain for the Dreamliner and system translates into project delay and project costs escalation.

Fig 2: Redesigned Supply Chain Model for Boeing 787 project

Analysis of Boeing supply-chain model for the production of Dreamliner project is also revealed in Table 1.

Table 1: Dreamliner Supply Chain Model

Dreamliner Supply Chain

Rates

Rates of Outsourcing

Boeing outsources 70% of the components for the Dreamliner project

Suppliers

50 tier-1 suppliers is being used for the project

Risk sharing contract

Boeing makes no payment to the suppliers until suppliers deliver first unit of the components.

Technology risks

Boeing is unable to detect the technology risks at Tier-l suppliers such as composite fuselage

Cause of Delays

"Management of development and manufacturing at tier-2 suppliers (by tier-1 suppliers) causes delays. Complex product with a complex supply chain -- management of product development across the supply chain very problematic." (Oehmen, Ben-Day & Khan 2010 P5).

Fig 3: Cause of Dreamliner delay: Supply Chain cause

Based on the graph in Fig 3, it is revealed that larger percentages of all Panels agree that supply chain adopted by Boeing is the major cause of the delay of Dreamliner project. Typically, change from the traditional supply chain methodology to unconventional supply chain methodology has escalated the delays, and increase the costs of the projects. A side effect of high degree of outsourcing is the increase in complexity, and "the companies that best understand and control the associated complexities will be the most successful in a disintegrated aircraft industry." ( Rogers, 2009 P. 9). Thus, implementation of the conventional supply chain has translated into multiple risks leading to the project delay.

Composite Fuselage Safety Risks

Dreamliner structure contains 50% of the composite material, 12% titanium and 15% aluminum. However, Boeing Company has never used composite materials for the manufacture of aircraft, and Dreamliner is the first aircraft that Boeing will develop with composite material. Using the composite materials makes Boeing to face series of problems in securing specialist suppliers of composite materials. Moreover, fabricating the aircraft with composite material takes longer time since Dreamliner will be the first project that Boeing will develop with composite materials.

Engine Interchangeability Issues

One of the major benefits of 787 modular designs is its ability to use two different types of engine interchangeable from Rolls Royce to General Electric. However, Boeing is facing technical difficulties and part incongruity. By using two types of engine for Dreamliner, it will take a customer 15 days to change from one of the engine model to the other instead of 24 hours formerly proposed. Series of efforts being implemented by Boeing to maintain 24 hours being proposed for the changing from one engine to the other results into the project delay.( Leeham Co 2005).

Supply Issues

To develop Dreamliner project, Boeing relies on Tier-1 global strategic partners to build and develop the entire section of Dreamliner. Based on the illustration in Fig 2, any break in the supply chain will cause a significant delay in the project. However, in September 2007, Boeing announced that there would be a delay in the planned first flight. Boeing management highlights several ongoing challenges that the company is facing which include system integration activities and part shortage.

"Boeing's original leadership team for the 787 program did not include members with expertise on supply chain risk management. Without the requisite skills to manage an unconventional supply chain, Boeing was undertaking a huge managerial risk in uncharted waters." (Tang, Zimmerman, & James 2009 P. 80).

Illustration of Exostar charged to coordinate supplier development activities reveals the challenges Boeing is facing with Dreamliner project. Coordination is only possible when different suppliers supply timely and accurate information. For example, Vought the Tier-1 supplier hired Advanced Integration Technology (AIT) as a Tier-2 supplier without alerting Boeing before taking the action, and AIT is supposed to coordinate project activities with Tier-2 and Tier-3 for Vought. Moreover, some of the Tier-2 and Tier-3 could not provide accurate information for Exostar system due to the cultural difference. The problem has made Tier-1 not be aware of the delay making Boeing unable to mitigate the delay in timely fashion.

Process Issue

Process risks that Boeing has undergone are another factor causing the delay. Underlying convectional supply chain has caused major delay because project efficiency depends on the timely-delivery of all major sections of Tier-1 partners. However, if Tier-1 delays the delivery, the whole delivery sections will be delayed making the whole project to be delayed. However, Boeing could mitigate the process risks and avoid late delivery by keeping complete safety stocks of different sections. Additionally, risk sharing strategy that Boeing is implementing for its strategic partners, where strategic partners get paid until the first Dreamliner is certified for flight, causes delay for the project. Risk sharing strategy is advantageous in the sense that the contract payment is intended to provide incentive for the strategy partners such as coordination and collaboration their efforts. However, the risk sharing system carries certain risks. The risk sharing strategies for Dreamliner project may make the strategic partners to work slower which may undermining the project timely delivery.

Process risks associated with Dreamliner supply chain is illustrated with Product Development Process (PDP) model. The model argues that development of complex project could take several years to complete. The model is used to estimate the time to complete a complex project and deviation from the laid down rules proposed by the PDP will cause unnecessary delay in the product delivery. The model also serves as a quantitative justification to obtain project improvement.

Design Structure Matrix (DSM) in Table 2 reveals the effects of multiple layer partnership in a project, dependencies and relationships between system components.

Table 2: Design Structure Matrix (DSM) for Dreamliner Project

From Table 2, it is revealed that C. entirely depends on task B. before C. can complete its task. If B. fails to complete its task on time, it would delay C. To complete its task. Moreover, on the fifth column, it is revealed that task B. depend on task E. To be completed. In the fifth row, task E. also depends on tack C. And task D. However, if C. And D. are unable to complete their tasks, E will not be able to complete its task. (Rogers,2009).

The study further uses quantitative tool to reveal the effects of task dependencies. With quantitative technique, it is revealed that task dependencies on project carries substantial risks such cost risks, and project delay. Data in Table 3 reveal that the number 2.7 denotes relative strength of dependence of task B. On task E. Moreover, number 7 denotes duration of 7 days for task C. To complete its project. If there is a constraint on human resources, there would be high…

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