Current Events Paper: The Boeing 787 Dreamliner

Joslyn Roth
Current Events Paper-The Boeing 787 Dreamliner
William Boeing became fascinated with planes after flying in a hydroplane over Lake Washington in 1914. Boeing and his close friend, Conrad Westervelt, decided they could build a better plane after a few more sessions. A small building housed the first design of the Boeing plane and on June 15, 1916 the B&W Model 1 was born. Now, Boeing is the largest aircraft company in the world.
Boeing has a history of being the best aircraft company in terms of leadership and innovation, which is used to create leading aircraft designs. They also use advanced technology and engineering skills to design and develop its products. As a result, Boeing serves nations worldwide with commercial and military
aircrafts.
To remain innovative and competitive, Boeing started brainstorming ideas on how to stand apart from other jetliners. Since the 1950’s, every plane has pretty much looked the same and the only thing that set one apart from another was the price. Boeing was starting to lose market share to Airbus, which really had executives eager to find a new approach. They knew differentiating their products was critical to long-term success.
So began the design of the Boeing 787 Dreamliner. The 787 was going to use carbon fiber on more than half of the wings and the main body of the aircraft to reduce weight and maintenance. They were also going to use an engine that cut fuel consumption by 20 percent. Passengers would notice a huge difference from past models with high ceilings, spacious foyers, and LED lighting. Executives really focused on what people wanted and needed when they flew, which made people feel like the plane was designed just for them.
In building this plane, the company focused on outsourcing parts and issuing sub-contracts to other companies both locally and internationally as a way to lower costs and accelerate development. By outsourcing, the plan was to reduce development time from six to four years and costs from $10 to $6 billion. According to Washington Post, more than 30 percent of the jetliner’s components came from overseas. However, this much outsourcing and sub-contracting really started to cause problems.
One problem that was overlooked was the cultural and language differences and the physical distances involved in an extended supply chain. This created additional risks and involved continuous communication with the suppliers. The on-site involvement generated additional costs and Boeing didn’t plan for such substantial communication or involvement, which led to additional risk.
With 70 percent of components being outsourced, much more than earlier planes, Boeing didn’t realize the additional costs and risks of large scale outsourcing.
By outsourcing, Boeing drove profits and knowledge to suppliers while increasing costs for themselves. So, not only was the work outsourced, but the profits associated with the work were outsourced, too. Outsourcing also requires substantial additional up-front planning. The additional planning helps to avoid the situation where parts do not fit together at final assembly. According to Denning, Boeing outsourced the engineering and construction of the plane long before the product was defined and the relative costs established. This resulted in them being billions of dollars over budget, pushed back delivery schedule, and the first plane was delivered over three years
late.
Along with the large scale outsourcing, they also tried a new outsourcing model along with new technology. The 787’s supply chain was based on a tiered structure that formed partnerships with fifty Tier-1 strategic partners. These strategic partners were to serve as “integrators” who assemble different parts and subsystems produced by Tier-2 and Tier-3 suppliers (Denning, 2013). However, these Tier-1 partners didn’t have the skills or experience to develop different sections of the aircraft or manage their Tier-2 suppliers. In order to regain control of the development process, Boeing had to buy one of the Tier-1 suppliers and help the other suppliers. Also, delays in the production caused profit losses for the strategic partners and Boeing had to pay them compensation.
The new outsourcing model Boeing tried was generated in part from Toyota’s supply chain. Boeing, however, did not implement some of the key elements of the Toyota outsourcing model. Toyota maintains tight control over the overall design and engineering of its vehicles and only outsources to suppliers who have proven their ability to deliver with the required timeliness, quality, cost reduction and continuous innovation (Denning, 2013). Boeing implemented the structure of Toyota’s tiered outsourcing model without the value and practices that make it work and in return had to rely on poorly designed contract agreements.
Another problem was the coordination risk in outsourcing that components won’t fit together when the plane is being assembled.
Dr. L. J. Hart-Smith wrote a paper about how it is necessary for the prime contractor to provide on-site quality, supplier management, and sometimes technical support to minimize potential problems. If this is not done, the performance of the prime manufacturer can never exceed the capabilities of the least proficient of the suppliers (Denning, 2013). On-site support was one of the things Boeing did not plan to provide for its suppliers. They delegated this responsibility to sub-contractors and when they didn’t perform the coordination well, Boeing had to send hundreds of engineers to solve various technical problems. This led to delays in the development of the 787 and they had to redesign the assembly process of the aircraft, which resulted in huge additional expenses that should have been planned
for.
Instead of planning for face-to-face and on-site communications, Boeing implemented Exostar, which is a web-based communications tool. Exostar was supposed to provide supply chain visibility, improve control and integration of business processes, and reduce development time and cost by having suppliers input up-to-date information about the progress of their work. However, due to cultural differences and lack of trust, suppliers did not input accurate or timely data. Because of this, problems weren’t known and no one was on the same page.
Another area Boeing should have planned better for was the leadership team. They needed a leadership team with a proven record in supply chain management and diverse knowledge to help with many different risks. According to Tang and Zimmerman, the leadership team did not include members with expertise on supply chain risk management. This meant Boeing was taking on a lot of managerial risks with such an unconventional supply chain. If Boeing would have put together a better leadership team, they could have identified and looked into the different supply chain risks. It also might have been possible to avoid these potential risks by developing contingency plans and strategies to reduce the impact of these numerous supply chain problems.
There were serious changes in the Dreamliner’s supply chain strategy from the methods used in earlier aircrafts. These changes allowed for the potential of significant risks throughout the process. Boeing's ongoing issues with meeting delivery deadlines are a direct result of its decision to make drastic changes in the design, the development process, and the supply chain associated with the Dreamliner program simultaneously without having the proper management team in place (Tang and Zimmerman, 2009). Boeing could have done a number of things differently to mitigate these risks and hopefully will learn from their mistakes for the future.