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Boeing 787 dreamliner project lessson learned

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AACE competition in Toronto University

AACE competition in Toronto University

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  • 1. 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 :
  • 2. Outline • The Aerospace Industry – An Overview • 787 Dreamliner Project • Lessons Learned • Conclusion 3
  • 3. 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
  • 4. 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
  • 5. 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
  • 6. 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
  • 7. Lessons Learned 8
  • 8. Lesson 1: Assemble a management team with requisite expertise Traditional Supply Chain Dreamliner Supply Chain 9
  • 9. 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
  • 10. • 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
  • 11. 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?
  • 12. • 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
  • 13. • 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
  • 14. • 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
  • 15. • 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
  • 16. 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
  • 17. 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
  • 18. Conclusion 19 The project failed to meet the triple constraint:
  • 19. 20
  • 20. 21 Questions?