Production Delays Results in Delivery

¶ … Production delays results in delivery delays

The plan for 2007

The plan for 2008

The plan for 2009

The plan for 2010

The plan for 2011

Is this project feasible?

Critical factors contributing to the delays in the 787

Why did these delays occur?

Has the 787 program met its stated objectives?

Can the 787 program meet its objectives?

Is the program feasible?

Boeing has been a leader in the aerospace industry for years, however not all of its projects have seen the same level of success. Boeing's latest development is the Boeing 797 Dreamliner. Boeing's hope was that the Dreamliner would allow it to reclaim industry dominance by revolutionizing air travel. Unfortunately, the Dreamliner project has been plagued with significant problems that have caused delays and, in many ways, turned the Dreamliner into a nightmare for Boeing. Many of these delays are attributable to supply chain issues, and those issues have created production delays as significant as three years. The goal of this research is to look at the feasibility of Boeing continuing the Dreamliner project. Generally, a feasibility analysis is conducted prior to a company beginning a project. However, given the substantial problems that Boeing has encountered in transitioning the Dreamliner into reliable mainstream production, it seems appropriate to conduct another feasibility analysis at this point to determine whether it is feasible for Boeing to continue this project or whether it would be a better business decision for Boeing to significantly change the project.

Chapter 1

Problem Definition: Feasibility Study

Background

Boeing has a long history of being a world leader in the aerospace industry. "Boeing is the world's largest aerospace company and leading manufacturer of commercial jetliners and defense, space and security systems" (Boeing, 2011). Boeing produces a tremendous variety of products including "commercial and military aircraft, satellites, weapons, electronic and defense systems, launch systems advanced information and communications systems, and performance-based logistics and trainings" (Boeing, 2011). Not content to rest on historical successes, Boeing continues to meet emerging customer needs by expanding its product line. Boeing has a broad range of capabilities including creating new, more efficient members of its commercial airplane family; integrating military platforms, defense systems and the war fighter through network-enabled solutions; creating advanced technology solutions; and arranging innovative customer-financing options (Boeing, 2011).

The concept of the Boeing 787 Dreamliner began as an ideal commercial airplane -- an airliner that optimized the aeronautical ambitions of Boeing and airlines across the globe. Boeing 787 Dreamliner a family of new, super-efficient airplanes that will bring big jet comfort and economics to the mid-size market. The Boeing 787 will incorporate advanced materials, systems and engines to provide unprecedented performance levels, including a 20-percent improvement in fuel performance on a per passenger basis. This efficiency will mean improved environmental performance. One of the most touted attributes of the Dreamliner is that the airplane is constructed primarily of composite materials or super durable plastics, making it the most fuel-efficient airliner. Boeing manufactures -- in fact, the 787 is reported to consume about 20% less fuel than the Boeing 767, which is similar in size (Norris et al., 2005). The promise of reducing the costs to run an airline through better fuel economy is a change that airplane leasing companies and commercial airlines will enthusiastically support (Norris et al., 2005).

Problem Statement

What are the critical factors that have contributed to the significant delays in Boeing's 787 Dreamliner program? Why have there been such significant delays in Boeing's 787 Dreamliner program? Has the program met its stated objectives? If not, will the program be able to meet its stated objectives? Should the program be continued, modified, or terminated?

Research Objective

The object of this project is to determine the causes in the delays in the Boeing 787 Dreamliner program, if those causes can be eliminated, and the continued feasibility of the project. The Boeing 787 Dreamliner program was meant to fulfill the dreams of aviation enthusiasts and airline management personnel. However, there have been significant difficulties in bringing the product to the market. The goal of this research is to determine the cause of the delays in the Dreamliner program? Furthermore, given the significant delays experienced in the program, a secondary objective is to determine whether the program should be continued, modified, or terminated.

Supply chain problems appear to be at the root of the Dreamliner's problems. Boeing has experienced problems with first-tier suppliers whose learning curves were not as steep as originally projected. For example, Alenia's horizontal stabilizer and the fastener installation issue led to a tremendous amount of travelled work which inevitably resulted in a three-year delay in the entry into service (EIS) of the revolutionary airplane from May 2008 to August or September of 2011. Worse yet, aerospace analysts contend that sizable compensations to customers, coupled with deferred unit cost which has not come down as quick as the airframes wished and an aggressive pricing strategy adopted in the early stage of the program, could very well put the Boeing 787 program in a low-margin, if not forward-loss position. That process, aimed at saving money, has not been as smooth as hoped. Instead, Boeing has been plagued by delays that have forced it to pay airlines millions of dollars in penalties.

Research Problem

Boeing 787 is now the most delayed -- and, according to analysts, the most expensive -- jet in the company's history. Boeing announced a massive $2.5 billion write-off associated with the first-flight delays that now stretch to 28 months, they expressed confidence in its latest revised schedule. The research will attempt to provide insight into one of the problems contributing to the significant delays in the project: supply-side production delays.

The 787 Dreamliner, the latest development from Boeing, was meant to revolutionize air travel and allow Boeing to reclaim its leading position in the Aviation industry. However, supply chain issues have plagued the design and development process, resulting in delays of up to 3 years. My task is to research and identify the root cause of the production delay for the Boeing 787. The study will include a breakdown of data across the various articles and surveys. My study will address these supply chain weaknesses to ensure that Boeing does not experience any further delays in the production of the 787; and second to assess the long-term viability of the current supply chain strategy.

Scope

This research will only focus on supply-side issues contributing to the Boeing 787 delay. The study will focus on a review of the available literature and breakdown data from various articles and surveys, which already provide significant insight into the supply-side problems for the Dreamliner project. The belief is that Data collected from all articles will provide the information to identify the root cause of delay Boeing 787 such as:

1) Incorrect fastener installation and the Boeing machinist strike (Boeing, 2008, Dreamliner).

2) Late discovery of a structural issue that had to do with the side-of-body

(wing-to-body) joint caused a delay until December 2009.

3) International collaboration on manufacturing, a considerable amount of materials were being shipped back and forth internationally.

4) Global supply chain together without thinking through some of the consequences.

5) Some of the technology was not as mature as it should have been.

6) the airliner underwent a number of styling changes as a result of these tests; changes from the earlier proposals included alterations to the nose, fin, and cockpit windows.

Knowing the root cause of the delay, the research will hope to uncover the probability of success of the Dreamliner program.

Chapter 2

Literature Review

Fortunately there is a significant amount of research available on the Boeing 787 Dreamliner. From both business and aerospace perspectives, the history of the Dreamliner has been very informative, because the Dreamliner highlights the importance of the role of supply chain management in the business process. The typical feasibility analysis examines the business' history and future to see whether a new project is a feasible idea. However, for this feasibility analysis, the literature review will not focus solely on the business' history and future, but also on the specific history and future of the Dreamliner project. Therefore, this chapter will serve two functions. First, the chapter provides a brief overview of Boeing's history, both as a business and as an innovator in the aerospace industry. Second, the chapter presents a summary of the information and concepts derived from published articles and text findings concerning the Boeing 787 Dreamliner.

The Dreamliner was not Boeing's first major airline innovation, nor was it the first project that suffered significant problems in production. Boeing launched the Yellowstone Project in the late 1990s with the plan of replacing all of its airplane designs (Norris et al., 2005). One of the first new designs in the replacement program was the Sonic Cruiser, an airplane that would have achieved flying speeds up to 15% higher (approximately mach 0.98) but would burn fuel at about the rate of the existing 767 (Norris et al., 2005). A second airplane design in the replacement program was the 747X, which would have provided better efficiency than the 747-400 with a longer plane body (Norris et al., 2005). Boeing couldn't generate much excitement around the 747X, but the Sonic Cruiser offered stronger appeal (Norris et al., 2005). Continental Airlines was a particularly interested customer, but the feedback from the airlines focused on operational costs (Norris et al., 2005). The attacks of September 11, 2001 (9/11) brought about long-lasting changes in the airlines industry and travel sector. To make matters worse for Boeing, the potential customers for the Sonic Cruiser were U.S. based airlines -- the very airlines that had been most negatively impacted by 9/11. The Sonic Cruiser was officially cancelled by Boeing on December 20, 2002 (Norris et al., 2005). Whether this is attributable to design flaws or simply the dramatically changed economy is not really known, but the reality is that demand for the Sonic Cruiser simply was not sufficient to justify production. In fact, it is the fact that Boeing did end its plans for the Sonic Cruiser that makes a feasibility analysis on the Dreamliner crucial at this point; Boeing has previously begun a feasible project only to encounter changed circumstances that rendered the project no longer viable. It is important for the company to assess whether or not the Dreamliner is another example of that type of scenario.

Not all of the planning for the Sonic Cruiser went to waste. Boeing changed its tact and began work on the more conventionally configured 7E7, announcing the change on January 29, 2003 (Norris et al., 2005). When the airlines industry began to suffer so dramatically, Southwest Airlines stood out as an exception to the rule, retaining profitability in the face of adverse circumstances, so that many airlines began to investigate aspects of Southwest's business model.

Southwest Airlines had made a point in the airlines industry with its point-to-point operations, eschewing the hub-and-spoke practices of most airlines. Apparently, focus group activity around these two modes of operating indicated that a smaller, mid-size twin-jet airplane was more suitable to the profitable point-to-point model, and the 747 type of airline faded even further into the background (Norris et al., 2005). The new 7E7 was touted to be more efficient and environmentally friendly (Norris et al., 2005). The press speculated about whether the "E" stood for those attributes, but Boeing confessed that "E" just referred to "eight." Such a new and imaginative project required a glitzier name, so in July 2003, a competition to name the airliner was conducted (Norris et al., 2005). The online vote count stood at 500,000 and a winning title was selected: Dreamliner (Norris et al., 2005). Dreams become reality as manufacturing begins. The many desirable features of the 787 made it fastest-selling wide-body airplane is history -- 677 orders for the airliner were tallied (Trimble, 2007).

One of the main focuses of the research review is an investigation of what has caused three years of delay in the Dreamliner project, the challenges that Boeing has encountered in the production systems, and the budgetary issues that Boeing has encountered in the project. The goal in examining this research is to determine what Boeing's costs, both financial and other, have been up to this point, whether the project is likely to result in revenue that will cover those costs, whether the project is likely to result in profit, and the most efficient way for Boeing to carry forward with the project: continuing it as is, modifying it, or terminating it.

In late 2003, the Boeing board of directors granted authority to offer the Dreamliner for sale. In April 2004, the program launched, and airlines immediately began placing orders. Between April 2004 and November 2006, 36 customers placed orders and commitments for 456

airplanes from five continents of the world, which made it the most successful launch of a new commercial airplane in Boeing's history (Boeing, 2006).

It is critical to understand what a significant change the Dreamliner was. Boeing was not simply retooling an old design. Instead, it hoped to revolutionize the airline industry. Perhaps the fact that the 787 was so different from existing designs should have prepared Boeing for the delays it encountered in the production phase of the project. "Like any commercial airliner, the Boeing 787 was designed to rigid performance specifications. The aircraft must haul a certain amount of passengers, baggage and freight for a specific distance within a limited cost, and all engineering decisions are usually bound by that reality. Boeing, however, was ready to challenge the dominance of such functional thinking with the 787, and - with little public acknowledgement to date - invented a new process for shaping how an aircraft is designed" (Trimble, 2007). In fact, even the design of the airplane was approached differently than the design of prior models. For example, Boeing brought in French-born marketing guru Clotaire Rapaille to help with the design of the plane, which is different from the typical engineering-dominated design of commercial aircraft (Trimble, 2007). The introduction of Rapaille almost certainly contributed to the appeal of the 787 (Trimble, 2007). However, it may also have contributed to delays, because Rapaille could not have entered the project with the same awareness of the pitfalls one must avoid when creating an airplane.

In November 2006, Boeing issued a press release announcing the forthcoming Boeing 787 Dreamliner. Commercial airlines had indicated a preference for a new type of airline to Boeing. Boeing led a team of worked with several top aerospace companies in order to develop the plane. The early specifications for the airplane were for the 787-8 Dreamliner to "carry 210-250 passengers on routes of 8,000 to 8,500 nautical miles (14,800 to 15,700 kilometers), while the 787-9 Dreamliner will carry 250-290 passengers on routes of 8,600 to 8,800 nautical miles (15,900 to 16,300 km). A third 787 family member, the 787-3 Dreamliner, will accommodate 290-330 passengers and be optimized for routes of 3,000 to 3,500 nautical miles (5,550 to 6,500 km)" (Boeing, 2006). Another goal for the project was unmatched fuel efficiency, using 20% less fuel than comparable similarly-sized airplanes (Boeing, 2006). Furthermore, it was intended to be as fast as the fastest then-existing wide bodied planes, Mach 0.85 (Boeing, 2006). The plane was supposed to be able to carry more cargo than its competition. Moreover, passengers were supposed to see interior improvements, such as increase interior humidity (Boeing, 2006).

Part of the innovation for the Dreamliner was that up to 50% of the primary structure, including the fuselage and wing, were to be made of composite materials (Boeing, 2006). This is an important consideration because changing how the structure was created may have contributed to supply-chain issues. Moreover, when developing the Dreamliner project, Boeing aimed at developing new technologies and process that would help it and "its supplier partners achieve unprecedented levels of performance at every phase of the program" (Boeing, 2006). This change in the manufacturing process was supposed to save supplies and fasteners.

As of November 2006, the program has signed on 43 of the world's most capable top-tier supplier partners (Boeing, 2006). Eleven partners from around the world had started facility construction for a total of 3 million additional square feet to create their major structures and bring the next new airplane to market (Boeing, 2006). The goal was for the 787 program to open its final assembly plant in Everett in 2007 (Boeing, 2006). The first flight was "expected in 2007 with certification, delivery and entry into service occurring in 2008" (Boeing, 2006).

Initially, the public perception of the program was that Boeing was meeting its projected deadlines. In fact, Boeing was unveiled the Dreamliner on schedule on July 8, 2007 (Norris et al., 2005). Moreover, the unveiled project was meeting many of its projected specifications. "One of the most touted attributes of the Dreamliner is that the airplane is constructed primarily of composite materials or super durable plastics, making it the most fuel-efficient airliner Boeing manufactures -- in fact, the 787 is reported to consume about 205 less fuel than the Boeing 767, which is similar in size" (Norris et al., 2005). This reduction in fuel costs was s critical part of the Dreamliner project. The promise of reducing the costs to run an airline through better fuel economy was a change that airplane leasing companies and commercial airlines were eager to support (Norris et al., 2005). In the time leading up to the release of the plans for the Dreamliner, airlines had been battered by years by increased fuel cost, the increased costs of ensuring customer safety, and the wildly fluctuating customer base as travelers react to economic shocks and the threat of terrorism (Norris et al., 2005).

According to Norris et al., there were several features in the Dreamliner that were meant to appeal to customers and their passengers. The plane is a mid-size wide-body, twin-engine jet intended to fly long-range (Norris et al., 2005). The Dreamliner was designed to give a quieter ride to the 210 to 330 passengers it carries as it has noise-reducing chevrons on its engine nacelles or the cover housings that hold the engines but is separate from the fuselage (Norris et al., 2005). These differences were intended to make the plane superior to its competition. However, these differences may also have contributed to the delays.

Moreover, those delays became apparent somewhat early in the process. For example, the Dreamliner was not ready to fly until well-after Boeing's initially-projected test date. Initially, Boeing projected a test flight in the first quarter of 2008. However, in April 2008, the company released a press release that stated:

While significant progress has been made assembling Airplane #1, first flight is being rescheduled due to slower than expected completion of work that traveled from supplier facilities into Boeing's final assembly line, unanticipated rework, and the addition of margin into the testing schedule. The new delivery schedule is based on a more conservative production plan developed with the 787 partner team. That schedule now targets approximately 25 deliveries in 2009.

First flight of the all-new airplane will move into the fourth quarter of this year rather than the end of the second quarter, and first delivery is now planned for the third quarter of 2009 instead of first quarter (Boeing, 2008).

In addition, in that initial press release, Boeing was already beginning to confront supply-chain issues that would impact delivery and performance. In January of 2008, Boeing announced that it would conduct a "comprehensive assessment of its supply chain and production system capabilities to determine the details of the 787's flight test program and initial delivery profile. As a result of the assessment, the first year delivery plan announced today [April 9, 2008] will be followed by a more gradual ramp up to full-rate production than previously planned" (Boeing, 2008). However, the company was confident that these changes would allow them to test the plane in 2008.

The reality is that Boeing continued to experience significant delays in its production and testing process. Rather than occurring in the fourth quarter of 2008, the initial test flight did not occur until December 15, 2009, and flight testing occurred for an extensive period of time, well into 2011. What is remarkable is how well the sales of the airplane did even before Boeing could conduct its testing. "The many desirable features of the 787 made it fastest-selling wide-body airplane is history -- 677 orders for the airliner were tallied (Trimble, 2007). By June 2011, 59 different customers had ordered 827 Boeing 787s. International Lease Finance Company (ILFC), the largest airplane leasing company -- was its biggest customer. Commitments and orders announced by customers for the 787 reached 237 aircraft by the end of 2004 (Trimble, 2007).

As planned, the production the Boeing 787 Dreamliner was going to enter service in May of 2008 (Trimble, 2007). With such an ambitious roll-out and production schedule planned, Boeing collaborated on a large scale with numerous vendors and suppliers around the globe (Trimble, 2007). Production was to take place in the plants at Everett, Washington and a new factory that was built in North Charleston, North Carolina (Trimble, 2007). Moreover, All Nippon Airways was identified as the launch customer for the 7E7 Dreamliner on April 26, 2004 (Trimble, 2007). Fifty aircraft deliveries to begin sometime in late 2008 were specified for the Japanese airlines (Trimble, 2007). All Nippon Airways began to dream of new routes to Moscow, New Delhi, and Denver (Trimble, 2007).