AACE competition in Toronto University

2. Boeing 787
Dreamliner
September 25, 2013
A Case Study for Project Management:
Lessons Learned
2
Abdullah Gaznaii
Alfredo Martinez
Jamie Gregory
Mohamed F. Sollimon
A Case Study for Project Management:
Lessons Learned
Sorted alphabetically :

3. Outline
• The Aerospace Industry – An Overview
• 787 Dreamliner Project
• Lessons Learned
• Conclusion
3

4. The Aerospace Industry
• Aerospace has been an important employer,
providing highly skilled jobs.
• Aerospace manufacturing sector has been the
technological backbone of American
manufacturing.
• Decline in employment:
> 900 thousand in 1989
< 500 thousand in 2013
4

5. Large Commercial Aircraft (LCA)
• Defined as non-military aircraft with a seating
capacity above 100.
• Today the LCA market is a duopoly consisting of
Boeing and Airbus.
• New core business model: Boeing has become a
Systems Integrator
• Boeing 727 (1960): 2% outsourced
• Boeing 777 (1990): 30% outsourced
• Boeing 787 (2013): 70% outsourced
5

6. 787 Dreamliner
• Boeing’s new flagship LCA
• Advanced technology
 Composite material structure
 Propulsion system
 20% fuel reduction
• Multi-tier supply chain
 Cut development costs from $7.3 to $4.2 billion
 Reduce development time by 2 years
6

7. Dreamliner Outcome
Planned
(Tier Structure)
Base
(Traditional)
Actual
$4.2
$7.3
$15.0
2
4
6
Project Development Expenditures
Cost (Billion) Time (years) • 4 years
behind
schedule
• ~$11 billion
over budget
7

8. Lessons Learned
8

9. Lesson 1: Assemble a management team
with requisite expertise
Traditional Supply Chain
Dreamliner Supply Chain
9

10. Lesson 1: Assemble a management team
with requisite expertise
“Without the requisite skills to manage an unconventional
supply chain, Boeing was undertaking a huge managerial
risk in uncharted waters.”
Mike Bair,
Proven marketing
expertise
Patrick Shanahan,
Proven supply-chain management
expertise
(Tang and Zimmerman 2009)
10

11. • New outsourcing model adds complexity,
enforcing need for visibility
• Exostar software alone is not sufficient
• Multi-tier and outsourcing practice led to
inaccurate information inputs
• Recommendations:
 Ground rules for accurate and updated information
 Assess and manage cultural differences
Lesson 2: Supply chain visibility should be
improved to ensure issues are addressed
on time
11

12. Lesson 3: Cost estimation of a project should
follow a full understanding of all the
underlying costs
12
7.3b 4.2b 15b
Estimated cost
(conventional
outsourcing)
Estimated cost
(new outsourcing
model) Actual cost
Does that look right?

13. • Accurate cost estimation is critical input for decision making
and to avoid project overruns.
Reduce Cost
𝑅𝑂𝑁𝐴 =
𝑜𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑝𝑟𝑜𝑓𝑖𝑡 𝑎𝑓𝑡𝑒𝑟 𝑡𝑎𝑥
(𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑛𝑒𝑡 𝑎𝑠𝑠𝑒𝑡𝑠)
Reduce equipment and inventory
Lesson 3: Cost estimation of a project should
follow a full understanding of all the
underlying costs

14. • Taking on increased risk of outsourcing
• Hidden costs of integration, cooperation, and
collaboration
• Increased cost and time necessary to make design
changes through multi-tiered suppliers
Lesson 3: Cost estimation of a project should
follow a full understanding of all the
underlying costs

15. • A single tier-1 supplier could drag
the whole product quality down.
• It is essential to have a strict
supplier selection process to
ensure their qualification in terms
of:
 Technical expertise
 Capacity to deliver on time
 Meeting expected quality
Lesson 4: Improve Tier-1 supplier training
and selection process

16. • In such a high tech. and time critical project
suppliers should be provided with:
 On-site quality control
 Close management of supplier
 Technical support if necessary
Lesson 4: Improve Tier-1 supplier training
and selection process

17. Lesson 5: Proactively manage relationship
with labour unions
• Is Labour union a stakeholder?
• Boeing approved a big change
• Previous history with labour disputes
• Costly 2008 strike (September 7th , 8 weeks)
• Recommendations:
 Utilize previous lesson learned
Incurrent risk assessment and management
 Involve key stakeholders in the decision making process.
17

18. Lesson 6: Risk-sharing contracts need to
include partner specific incentives/penalties
for timely/late work
• All partners slow to the speed of the weakest
link
• Recommendations:
 Incentives for Tier-1 suppliers that meet
milestones early or on time
 Penalties for missed deadlines
 Increase buy-in from Tier-1 suppliers
18

19. Conclusion
19
The project failed to meet the triple constraint:

20. 20

21. 21
Questions?