Program Evaluation of the Boeing

Program Evaluation of the Boeing 787 Dreamliner

Fundamental objective of this study is to investigate the factors leading to the delay in the Dreamliner project. The Dreamliner project is a multi-billions dollar project that Boeing is implementing for more than 8 years. The study is divided into five chapters. Chapter 1 identifies the problem that the thesis attempts to address. One of the fundamental problems the study identifies is that Boeing is implementing Dreamliner project and due to some factors, the company is experiencing the delay in the project delivery, and the delay has stretched to more than 28 months. The project attempts to investigate the factors leading to delay and assess long-term viability of the project.

The study also reviews literatures such as several research articles, academic books, and academic journals. From the review of the literatures, it has been revealed that a new supply chain methodology adopted by Boeing for Dreamliner has been one of the critical factors leading to the delay of Dreamliner. Typically, Boeing employs an unconventional supply-chain methodology in the development of Dreamliner. A new methodology involves using multiple layers of strategic partners for the project, and inability to effectively manage all the strategic partners translates into project delay and costs escalation of Boeing 787.

The study employs quantitative technique in the data collection. Analysis of the data collected reveals that Boeing is unable to effectively manage the supply chain process. Supply chain process adopted by Boeing reveals that successful relationship of the strategic partners is one of the critical factors for the project success. Failure of one the strategic partner could affect the tasks of multiple strategic partners and the whole factors have led to the delay in the project delivery.

To address future delay in a project delivery, the study suggests that there is a need for future research on the application of unconventional supply chain methodology in a complex project. There is a need for future research on the method to apply the new methodology to mitigate project delay and cut costs.

Summary of the Literature

The study confirms the research problem and reveals that Boeing is experiencing a delay in the launching of Boeing 787 making the company to write off $2.5 billion associated to the first-flight delays. Common themes supporting the study is that the Dreamliner is designed to provide the Airlines with unmatched fuel efficiency because Boeing 787 is supposed to use 20% less fuel than the total quantity of fuel consumed by the similar aircraft of its size. The fuel efficiency has been attributed to the advanced in technology and other common idea found in the research is that innovation, which remains the focus of customers, makes Boeing to develop a super-efficient airplane. To enhance customer satisfaction and demonstrate exceptional application of new technologies, Boeing has used 50% composite materials to develop the structure of Boeing 787. Designed with modern system architecture, Boeing 787 offers increase functionality and efficiency. Moreover, Dreamliner is built with Rolls-Royce and General Electric engine, and Boeing 787 new engine reveals a great contribution to the advanced in technology. Since Board of Director has approved Dreamliner for sale, its demand has been exceptionally strong, 59 customers from 37 countries have placed orders for the Dreamliner valued more than $178 billion.

Despite the significant contribution that Dreamliner will add to the aviation industry, there is a significant delay to the successful completion of the project. While Dreamliner is supposed to bring innovation into the aviation industry, the delay in the project has made Boeing to incur high costs in the design and production of Dreamliner. Factors leading to the delay have been attributed to the series of testing cancellation and delay in the production process. Extensive testing that has been implemented only makes the company to undergo number of changes with the design and specifications. From 2007 and until 2011, there has been production delay of Boeing 787. Additionally, new methodology that Boeing has adopted in the supply chain for the project materials has also caused the delay. To cut costs, 70% of materials being used to develop Dreamliner have been outsourced from Boeing strategic partners. Boeing has also implemented multiple layers relationships with its strategic partners, and inability to effectively manage its strategic partners has caused a significant delay in the Dreamliner project.

While Boeing has already secured commands from many firms especially from International Lease Finance Company (ILFC), which is the biggest customer of Boeing, the delay in the order delivery could lead to the order cancellation since there is a need to implement testing for Dreamliner before being delivered to customers. However, Year 2012 is assumed delivery target of the Dreamliner. By making the delivery of Dreamliner a reality, Boeing will maintain its top position in the Aviation industry.

Data Analysis and Synthesis

Data collected for this study undergoes quantitative analysis to enhance data validity and reliability. Research employs quantitative data analysis because it is very easy to administer and it incorporates relatively large number of samples, survey questions, and easier to summarize. (Zawawi, 2007). To enhance dependability, credibility and trustworthiness of the data collected, the study cleans the data to enhance data integrity. One of the techniques that the study employs to clean the data is by using explanatory data analysis. Explanatory analysis identifies and rectifies errors discovered in the dataset. The study thoroughly inspects all data and all erroneous data are corrected or removed. The statistical technique is also employed for further analysis. The study employs descriptive statistics to summarize the raw data. Major objective for using descriptive statistics is to correlate data with the research project. The data are presented in tables, graphs and charts to enhance correlation of the data with the study. (University of West England 2006).

The major aim is to identify the factors leading to the production delay of Boeing 787. The study also addresses the supply chain weakness to identify solution to the problem.

Data collected reveals Boeing relies on Tier-1 global strategic partners to develop and build the entire section of Dreamliner. A break in supply chain has led to a significant delay in the overall production. The delay includes part shortage, and Tier-2 and Tier-3 suppliers do not often provide accurate and timely information and Tier-1 suppliers are often not aware that their actions could cause delay in Boeing 787 production. (Tang & Zimmerman 2009).

Additionally, there is a growing concern that Being 787 is 8% overweight or 2.2 metric tons overweight lead to a 15% reduction in range. Thus, delay occurs in response to the production and delivery date. Typically, underlying 787-supply chain is likely to cause delay because the Tier-1 strategic partners depend on Tier-2 and Tier-3 to deliver materials that Boeing requires for the timely deliveries. Unless, Boeing keeps different safety stocks, the company may face challenges in addressing delay problem.

Methodological Limitations

While the study has exhaustively covered the factors leading to the delay in the delivering of Boeing 787, this study is unable to foresee the actual date that Boeing is likely complete the production of Dreamliner and making the aircraft available for use. Underlying assumption of this study is that there is still a supply chain delay for the timely completion of Being 787, however, Boeing may announce shortly after this study has been completed that the Boeing has successfully completed the design and production of Boeing 787. Such sudden announcement will make the recommendations, such as the methods to mitigate the delay, invalid for Dreamliner project. Although, the recommendations may not be totally useful for the Boeing because the company might have completed its project, however, the recommendations might still be relevant for the aviation industry and the other aviation company that is likely to enter into the similar project in the future.

More importantly, the researcher has implemented all the precautions that data collected through secondary research are reliable and valid for the research purpose, however, there could be errors in the secondary data collected, which the researcher might not easily detect due to the insignificant of the error. Additionally, the study employs quantitative technique for data collection and data analysis; however, there are some limitations in using quantitative technique for methodological approach.

First limitations of quantitative data are that it might not be rich and detailed. Survey technique used to collect data might not provide all the information needed for the interpretation of research findings. Additionally, large amount of data characterized by quantitative data may require more sophisticated data analysis approach. Among the limitations of quantitative approach is that "it is somewhat inflexible and artificial. It provides very little understanding towards the actions demonstrated by people and as a result, make it difficult to predict any changes in the future." (Zawawi, 2007 P. 2). Since data collected through quantitative approach are not from natural setting, the research may not explore deeply into the phenomenon.

Chapter 4: Data Analysis

Analysis of the data collected reveals the cause of delays and consequences to the company. In the Dreamliner project, Boeing adopts different methodology from the traditional methodology to develop Dreamliner project. 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 workload and increase in the hours that would be allotted to labor. (Rogers,2009).

Table 3: DSM Quantitative Technique for Dreamliner Project

Additionally, data in Table 4 reveal the effects of process dependencies on a complex project such as Dreamliner. Analysis of data in the Table 4 reveals the percentage of process dependencies upon the other. The numbers at the diagonal reveals intra-functional dependency while the numbers off the diagonal reveal inter-functional dependency.

Table 4: Effect of Process Dependencies for Dreamliner Project

Grouping the intra-functional dependency together, it is revealed that the intra-dependency results to 43% which is very high for a successful project. A project carrying 43% process dependency carries relatively high risks.

Illustration in Fig 4 also reveals that as partners depend on one another in a complex project, and likely to rework a project is relatively high. The histogram in the graph reveals that there is no likely for reworking since it carries minimal risks and failure. However, the chart in the graph reveals that there could be a substantial rework in the project because it carries high significant of failure mode and risks. (Rogers,2009).

Fig 4: Effect of project dependency on the Project Delivery.

Deviation

From Fig 4, it is reveals that Dreamliner due time is above the 50% which is the deadline for the project delivery. From the graph, anything above 50% increases the project business days which will make a company to continuing delaying the project. This is the effect of process dependency in a project as being discussed by the Product Development Process model. Increase in the level of dependency in a project, the increase in the likelihood of a project delay or project failure.

Labor Factor

With increase in outsourcing that Boeing has adopted for the Dreamliner project, some workers began to be concerned about their job security, and the concern led to strike. In 2008, more than 2008 employee went to strike, and the worker's strike has significant effect on Boeing strategic partners leading to project delay. For example, Spirit Aerosystems, one of the key strategic partners of Boeing reduced its work schedule for employee. Typically, reduction in work schedule has translated into project and delivery delay. Despite the labor strike, illustration in Fig 5 reveals that the number of people who agree that the labor issue is the cause of Dreamliner delay is nearly equal to the number who disagree that labor issues is the cause of delay