1.1 In developing the Boeing 787 Dreamliner, Boeing executive management’s initial decisions and project management strategies did not control the four major measurements of project success: time, budget, performance and client acceptance (Pinto, 2013, pp. 35,36). This report analyses the methodology and project management decisions that led to a project crisis and risk to Boeing’s reputation.
2 Boeing history.
2.1 Boeing Aircraft Corporation, with a heritage of aircraft design, manufacture and assembly, dates back to July 1916 (Boeing, 2004). Recent aircraft including 737, 747, 767, and 777 are all designed, assembled and supported by Boeing (Boeing, 2014). 2.2 Boeing commercial aircraft division is a successful aircraft manufacturing company with a proud history of in-house design and manufacture (Boeing, 2014).
3 New aircraft requirement.
3.1 Competition from Airbus, with its increase in market share through the 1990’s to market share leader in 2003 (Hoiness, 2006), led Boeing to decide that a mid-sized, long range aircraft was required for current and emerging markets. Boeing committed to a new aircraft line, the 787 ‘Dreamliner’ (Hoiness, 2006). A significant technology advance to carbon fibre composite fuselage and wing construction with advanced engine technology would aim to reduce fuel burn by 20%, and would provide a better operational experience for airlines and their customers (Boeing Aircraft Corporation, 2014).
4 Outsourcing and Cost overruns.
4.1 Boeing outsourced approximately 70% of development and production to other companies in an attempt to reduce development time and costs (Denning, 2013).
4.2 Early project management decisions to move away from the Boeing model of in-house design and manufacture (Boeing, 2014), to a model of out-sourcing large subassemblies and component sections to around fifty Tier 1 partners (Boeing Company, 2013), would prove disastrous in estimating development costs (Ostrower & Lublin, 2013). Boeing’s reliance on Tier 1 companies to complete assembly integration, control Tier 2 and Tier 3 suppliers and solve problems in design aspects, led to cost and schedule overruns (Denning, 2013).
4.3 Initial budget estimates from Boeing set the 787 costs at about $5 billion (USD). Ostrower stated “Barclays Capital conservatively estimates the program ended up costing around $14 billion (USD), not including the penalties Boeing has had to pay customers for late deliveries” (Ostrower & Lublin, 2013) and aircraft cancellations (Bloomburg News, 2012).
4.4 The financial evidence suggests that Boeing and the 787 project management team did not fully understand the complexities of out-sourcing (Goatham, 2014). In a January 2011 speech at Seattle University, Albaugh is quoted as having said ”We spent a lot more money in trying to recover than we ever would have spent if we’d tried to keep the key technologies closer to home” (Calleam Consulting Ltd, 2013).
5 Project Leadership
5.1 The Boeing Leadership project team did not understand the complexity of the Tier structure (Tang & Zimmerman, 2009). In adopting the Tier assembly approach the leadership team should have used logistics and supply chain management specialists (Denning, 2013).
5.2 Implementation of management strategies to cope with component suppliers is paramount. In a Boeing publication Hart-Smith recognised the risks in out-sourcing and assembly without sufficient design control. He stated that “in order to minimize potential problems, it is necessary for the Prime contractor to provide on-site, quality management, supplier-management, and sometimes technical support” (Hart-Smith, 2001).
5.3 The project leadership team failed to ensure each supplier received adequate design information to implement its part of the project (Tang & Zimmerman, 2009). This demonstrated they did not provide effective leadership nor sufficient communication (Pinto, 2013, p. 133).
6 Design control
6.1 Without fully understanding the complexities or difficulties in introducing a new design, and without a developed set of requirements and detailed design control, project difficulties and delays are inevitable (Denning, 2013). Other companies, for example the Toyota Motor Company, use out-sourcing successfully to trusted companies with a high degree of product design control as a method to reduce costs in production (Denning, 2013).
6.2 The Boeing model adopted was to spread the design and development to suppliers on a global scale with costs met by suppliers (Ostrower & Lublin, 2013). A strategy such as this should have been tightly controlled from the outset. Without this control, difficulties in assembly and ill-fitting parts requiring redesign added to the delays experienced by the project (Denning, 2013), with hundreds of Boeing engineers sent to various companies to solve technical problems (Tang & Zimmerman, 2009).
7 Communication and Cultural Risk.
7.1 Boeing management opted to control Tier 1 and Tier 2 integrators and their suppliers using a computer web based system, ‘Exostar’ (Denning, 2013). This system intended to provide supply chain and logistics visibility and ‘real time’ monitoring to control process, development, time and cost. Due to cultural differences and trust issues with this system, accurate and timely information was not entered by integrators and suppliers (Denning, 2013).
7.2 A Failure to understand the cultural differences with international companies and suppliers, by both integrators and Boeing management, provides evidence that the project did not adequately consider organizational culture or fully understand its effects (Pinto, 2013, p. 79).
7.3 If Boeing had relied on their own ‘tribal’ knowledge culture, rather than outsourcing to other organizations, the cultural and communication risks would have been reduced (Reuters, 2011).
8 Stakeholder management.
8.1 Knowledge of stakeholder capability, strengths, and behaviours should be part of successful project management (Pinto, 2013, p. 58). Boeing’s leadership failed to appreciate that Tier 1 integrators did not have the capability to control the supplier nor the supply chain (Tang & Zimmerman, 2009).
9.1 Boeing’s decision to outsource the design and manufacture of the Dreamliner, along with the introduction of new technology, led to lengthy project delays and additional expenses (Ostrower & Lublin, 2013). Poor communication from the Boeing leadership team, along with cultural misunderstandings, led some key suppliers to mistrust the control systems. Cost overruns, schedule delays and supply chain issues all led to this project failing to meet established goals within estimated parameters of cost, schedule, and quality (Pinto, 2013). 9.2 Modified management strategies were implemented to correct design flaws, provide technical and quality systems support at vast cost (Denning, 2013). These actions have contributed to a project turnaround with increased orders (Boeing, 2014).
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