Risk Management Case Study Boeing Dreamliner Essay
Risk Management Case Study Boeing Dreamliner
In 2003, Boeing launched a project to build a new airframe that had the original designation of 7E7 Dreamliner. In January 2005, the aircraft was redesigned the 787 Dreamliner. Boeing’s intent was to utilize new technology and procurement processes to build two versions of the aircraft. The 787-8 was designed to carry 210 to 250 passengers on routes of 7,650 to 8,200 nautical miles and the stretch version (787-9) was designed to transport 250 to 290 passengers on typically longer routes of 8,000 to 8,500 nautical miles.
The advanced technology would allow Boeing to produce aircraft that were more fuel efficient, would produce fewer emissions and had a significantly better cash seat mile cost than competitor’s planes. Some of these changes in technology and process resulted in new risks. This paper identifies and analyzes two of the most challenging risks that Boeing has faced with this project; those being program completion delays and program costs over-runs. Fault trees will be used to aid in the description of causes or systems states for which the primary risks are predicated.
The fault trees illustrate the relationship between the primary risks, the secondary risks and the root causes of each. Although these primary risks are generally identified in all projects, it can be shown that there are root causes that are unique to the Boeing 787 Dreamliner Project. Fault Tree One- Cost Over-runs The potential of cost over-runs are common in most projects or programs and should be part of any risk management plan because it affects one of the three project constraints: time.
Because of this, it is important to not only understand the primary risk, but to also identify secondary risks and ultimate causation. The risk tree below represents several of these factors as they affect the Boeing 787 program. When Boeing began the 787 program, the company leadership decided to outsource many of the engineering functions to their other vendors. In the past, Boeing would produce all the engineering specifications (including mandating construction processes) to its vendors who, then, produced the aircraft subassemblies and ship them to a Boeing assembly facility for final build-out.
In the risk sharing scenario, Boeing would give its vendors the dimensions that were required and the vendors would be responsible for the design and building of the subassembly. The benefit to this was that because the design responsibilities were given to the vendors, some of Boeing’s risks and expenses would be reduced. This reduction in expense would result in greater net and gross profit margin and, thus, greater revenue. Unfortunately, Boeing did not foresee some of the risks in this change in design and procurement process.
Because of the lack of controls that should have come from Boeing, several vendors invested in unnecessary materials. There was not a complete understanding by the vendors of Boeings needs. Another precluding factor was the vast amount of change orders that were subsequent to the vendors not understanding Boeing needs initially. The large numbers of change orders were compounded by the need for the vendors to go back to Boeing to make the prevailing changes valid. The combination of these two factors resulted in immense cost over-runs as a result of change orders.
During the course of the program, Boeing also recognized that some of their vendors were experiencing a lack of quality in their processes and products. Some of these deficiencies were due to the lack of communications between managers at Boeing and those at the external suppliers. Some were just because the vendors did not have adequate quality assurance processes in place. Another factor involved intellectual properties that were not being shared between Boeing and the vendors.
That gap went both ways as the vendors sometime did not give Boeing adequate specifications information and some of the vendors felt that Boeing did not disclose all appropriate specification information to them. This resulted in information “silos” between Boeing and the contractors that did not lend themselves to a good flow of data. To combat these challenges, Boeing embarked on a strategy to purchase some of the vendors. The acquisition costs for the company were obviously not accounted for at the beginning of the project and although those costs may have been operationalized over the fixed expenses, Boeing till suffered and large losses in capital as a result. The result of the large cost over-runs due to change orders and the unforeseen expenses of vendor and supplier acquisitions to compensate for low quality and to regain intellectual properties resulted in a general variance in the cost constraint of the entire program. Either of these two factors could have sunk a less well capitalized organization, but Boeing’s sheer size precluded this even though both factors came to fruition. Fault Tree Two- Program Delay
Variances in the time constraints of projects are also common, but Boeing experienced several challenges because of the use of a carbon fiber composite material that was used in 70% of the aircraft. This change in material was revolutionary, but offered risks that were not fully conceptualized until the engineering phase of the project began. The fault tree below describes the primary risk, the secondary risks and the root causes for each. The engineers and business development divisions at Boeing decided to utilize carbon fiber material for the majority of the 787 airframe structure.
Although the material is more expensive to produce, it is more light weight than aluminum. The benefit of this was to leverage the weight to minimize fuel costs and/or exchange airframe weight reduction for increased payload capacity (passengers or freight). As can be noted on the fault tree, both branches are a direct result of the use of the composite material. Because the use of this material was unprecedented for the application at hand, the actual engineering characteristics had to be calculated. Characteristics such as dynamic load values, flow (Reynolds) numbers and structural stress matrices were produced from scratch.
Like engineering numbers for the aluminum frames no longer applied. The delay caused by accounting for the new material was significant. In addition, many of the calculated results obtained in the engineering phase of the design did not match the results of some of the exercises in the test phase. This forced further delays as engineers re-ran numbers on different flight and load scenarios. These two factors contributed to long delays due to engineering. Re-engineering due to the use of the composite material also had a causative and additive effect on Boeing’s ability to gain Federal Aviation Administration (FAA) Type Certification.
This type of certification is the result of the FAA granting permission for a company to produce a particular airframe for commercial release. No plane gets sold without this certification. The effect of the new material was causative in that the FAA was required to provide new testing criteria because the old criteria pertained to aluminum framed aircraft. The FAA was forced to change the way in which it tested for this reason. The additive effect of the new material was predicated on the fact that there were delays in both FAA engineering testing as well as actual flight testing.
The combination of these three factors resulted in delays in attaining FAA Type Certification. The result of the engineering delays and the delays that were brought about due to FAA Type Certification was a general delay of the overall program. As the fault tree shows, however, the very root cause of these delays centered on the use of the new composite material. As stated before, this use of new material was both causative and additive in regard to the other root factors and the secondary risks due to the iterative nature of both the engineering and Type Certification facets of the new program.
Conclusion The forward thinking by Boeing executives have traditionally resulted in advances in both business practices and engineering processes. The 787 Dreamliner program is no exception to this tradition. However, with this new airframe, Boeing can also be considered as a pioneer in new risk potentials that have not been identified since the inception of modern project and program management. Boeing will build on this experience and provide new technological advances into the future.
University/College: University of Chicago
Type of paper: Thesis/Dissertation Chapter
Date: 7 January 2017
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