Case analysis boeing 787


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This is a descriptive analysis of Boeing 787 case. A final solution is suggested at the end of analyses.

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  • Hi Ashish, Just wondering why you have a next gen B747 on a slideshow about the B787?
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Case analysis boeing 787

  1. 1. ASHISH  JUDE  MICHAEL   What  went  wrong?                                                                                                                                                                                                                                                                             Boeing  787:  Dreamliner                                                                                                                                                                                                                                                                             A  detailed  analysis  of  issues  causing  delay  of  Boeing  787  and  suggesting  a  model   which  would  had  prevented  these  issues.                                                                                                                                                                                                           (This  case  analysis  is  only  for  academic  purpose)   P G P E x   2 0 1 2 -­‐ 1 3   I I M   S h i l l o n g       Boeing  787:Case  Analysis  
  2. 2. 2   Boeing  787:Case  Analysis     Introduction  (Extract  from  Case):   In  April  2008,  Boeing  confirmed  a  delay  in  the  787-­‐airplane  and  announced  a  14-­‐ mont  delay  in  delivering  Boeing’s  most  anticipated  airplane.  The  Boeing  787-­‐ airplane,  to  be  put  in  service  in  2008  Initially,  has  become  Boeing’s  best-­‐selling   new  plane  ever;  as  of  September  2008,  the  Boeing  Company  had  orders  for  895   airplanes  from  58  customers  worldwide  with  an  estimated  backlog  value  of  $151   billion  (see  Exhibit  1).   Although  not  a  full-­‐blown  crisis  such  as  the  one  faced  by  Airbus  with  its  A380   airplane  delays,  the  announcement  was  nonetheless  a  potentially  serious  setback   for  Boeing.  Notes  the  Wall  Street  Journal:  “Some  analysts  believe  Boeing  could  be   liable  for  as  much  as  $4  billion  of  concessions  and  penalty  payments  to  airlines   for  missed  deadlines.  Boeing  plans  to  book  the  first  25  deliveries  at  zero-­‐profit   margin  to  cover  penalties.”1  Analyst  estimates  indicate  that  the  delay  could  cost   Boeing  over  $2  billion  dollars  in  penalties  alone,  plus  additional  R&D  expenses   over  the  next  few  years  (see  Exhibit  2).  According  to  Boeing’s  revised  schedule,   the  first  test  flight  of  the  787-­‐airplane  was  expected  to  be  carried  out  in  late   2008,  and  the  first  deliveries  in  the  3rd  quarter  of  2009.  The  company  also   planned  a  dramatically  slower  ramp-­‐up  in  production;  Boeing’s  goal  now  is  to   produce  10  787s  a  month  starting  in  2012,  a  figure  significantly  lower  than   originally  planned  (see  Exhibit  3).  Notes  Boeing’s  787  spokesperson,  Yvonne   Leach,  the  average  delay  for  all  58  787-­‐customers  is  expected  to  be  about  20   months.     Problems  Statement:   Delay  in  planed  scheduled  of  Boeing  787  and  the  heavy  loss  (about  4  Billion  USD)   incurred  to  Boeing  because  of  that.     Objective:   Find  the  reasons,  which  caused  the  delay  and  analyze  them,  suggest  the  probable   solutions  for  the  prevention  and  corrective  action  of  this  problem.     Methodology:    Analyzing  the  problem  from  Supply  Chain  Management  (SCM)  perspective  and   tackling  the  problem  by  studying  the  implication  of  various  suggestions   suggested  and  implementing  the  same  in  the  present  scenario.  Keeping  in  mind   the  cost  of  implementing  this  suggestion  should  not  exceed  the  cost  of  penalty   paid  by  Boeing,  time  and  complexity.  As  I  am  not  having  exact  data  I  will  only  be   discussing  the  different  approaches,  which  can  be  used  for  analyzing  &  solving   the  problem  faced  by  Boeing  787  program.       Problem  Analysis:   If  we  read  the  case  we  can  find  that  there  were  more  than  one  problem  which   cumulatively  gave  rise  to  this  delay.  I  will  be  discussing  each  one  by  one:     1.  Unexpected  Shortages  of  Fasteners.              Unexpected  Shortage  of  fasteners  made  Boeing  to  pressurized  suppliers  for   quick  delivery  and  they  rushed  to  make  the  fasteners  as  a  result  they  did  not   properly  documented  the  work  as  required  by  federal  authority.      
  3. 3. Boeing 787:Case Analysis   3       2.Underestimation  of  work  content  in  the  task  of  writing  flight  control  codes:   Both  Boeing  and  Honeywell  initially  underestimated  the  work  content,  which   was  there  in  writing  these  codes  as  a  result  they  were  now  scrambling  to  write   them.     3.  From  bleeding  edge  to  leading  edge:   Boeing  introduced  first  time  a  game  changing  innovation  which  they  call   “Bleeding  edge”  in  order  to  have  a  “Leading  edge”.  This  innovation  was  the   extensive  usage  of  carbon  fiber  (composites)  technology.  787  used  as  much  as   50%  of  its  total  weight  of  composited  as  compared  to  12%  in  777.  (Exhibit  7)     This  helped  to  reduce  the  weight  of  aircraft  and  hence  improve  the  fuel   efficiency.  But  if  the  components  of  the  aircraft  are  too  light  which  was  the  case   with  central  wing  box  needed  strengthening.  To  over  come  this,  engineers   devised  a  patch  for  first  6  aircraft  and  will  change  the  design  after  seventh  one.   Designing  patch  caused  Boeing  months  delay  and  re-­‐designing  the  central  wing   box,  which  was  the  responsibility  of  Boeing’s  partner,  now  became  Boeing’s   concern.   This  a  big  problem  unless  the  flight  test  are  cleared.      4.  Boeing’s  business  strategy:     Boeing  out  sourced  a  large  amount  of  responsibilities  to  overseas  (Spain,  Italy,   France,  Australia  and  Japan).  This  projest  has  the  maximum  number  of   outsourced  components  (Exhibit  5)  .  There  are  as  many  as  risk  sharing  50   partners.     This  caused  delay  in  fuselage  assembly  because  of  the  breaking  of  supply  chain   between  the  suppliersi.e.  Vought  received  parts  from  Japan  &  Australia  where   else  Isreal  Aircraft  Industries  was  doing  all  things  by  itself  for  similar  parts  and     another  was  the  lack  of  aerospace  experience  of  workforce  among  some   suppliers  ie.  Spirit  Aero-­‐Systems.     5.  Revised  plan:   Responding  quickly  to  the  delay  Mr.Shanahan  revamped  787  executive  team  and   reorganized  into  :   1) Airplane  development.   2) Global  Supply  Chain   3) The  final  assembly  and  delivery.   Also  Boeing  sent  its  employees  stationed  at  each  suppliers  factory  in  order  to   have  better  control  over  the  supply  chain.  Vought’s  &  GA’s  plant  problem  is  fixed   by  Ex-­‐Boeing  managers  in  each  plant.  Production  activities  were  rationalized  and   areas  of  responsibilities  were  re  drawn  to  speed  up  aircraft  production.     6.  Potential  Treats:   Strikes  by  Labor  and  Engineers  are  threatening  Boeing  now.  The  labor  strike  is   basically  against  the  outsourcing  done  by  Boeing  and  the  pressure  caused  by     Boeing  on  the  employees  to  start  assembly  of  aircrafts  with  thousands  of   shortages.  And  the  engineers  want  to  reduce  the  number  of  contract  jobs  created   by  Boeing.  Both  of  the  unions  want  more  Jobs  and  are  against  the  business  
  4. 4. 4   Boeing  787:Case  Analysis     strategy  of  Boeing,  The  strike  is  such  a  big  problem  that  if  there  are  three  strikes   and  it  will  be  very  difficult  for  Boeing  to  run  the  show.     Hypothesis  Development  &  Analysis:   In  hypothesis  development  I  will  try  to  solve  the  listed  problems  with  each  one   of  the  below  states  strategy:       1.Lean  Management:       Specify  the  value  desired  by  the  customer.   Identify  the  value  stream  for  each  product.   Make  the  flow  continuously.   Introduce  pull  between  all  steps  where  continuous  flow  is  possible.   Manage  towards  perfection.     Principle  behind  lean  management  is  to  reduce  waste.    Above  stated  matrix   shows  how  we  can  implement  LEAN  concept.  If  we  consider  the  problem  faced   by  Boeing  and  try  to  solve  them  one  by  one  we  will  find  if  Lean  is  useful  for  us.   Problem  with  LEAN  is  that  it  is  basically  works  at  tactical  or  operational  level   and  it  takes  time  to  implement.  Implementation  of  LEAN  leads  to:   1. Speed  up  the  value  chain.   2. Waste  elimination.   3. Value  system  redesign.     1.Unexpected  Shortage  of  Fasteners:          First  question  arises  why  the  fasteners  felled  shortage?  There  can  be  two   scenario’s  either  less  quantity  was  ordered  or  they  were  wasted  during   assembly.   The  first  scenario  may  be  due  to  the  mistake  during  ordering  which  is  generally   negligible.  Second  scenario  may  be  possible  that  the  available  quantity  of   fasteners  were  wasted  during  assembly.  LEAN  Management  can  address  this.  By   giving  limited  number  of  fasteners  to  an  operator  whose  job  is  only  to  do  that   particular  job  in  a  lean  production  line.       2.Underestimation  of  work  content  in  the  task  of  writing  flight  control  codes:          This  is  a  lapse,  which  can  contribute  to  a  strategic  level  forecasting  &  planning   failure.  In  this  case    we  can  implement  LEAN  at  operation  level  by  speeding  up   the  coding  process  which  can  be  said  as  a  Corrective  action  rather  than   preventive  action.  Hence  we  cannot  solve  this  problem  by  LEAN.     3.  From  bleeding  edge  to  leading  edge:   Boeing  has  tried  some  innovative  technology  and  this  problem  aroused  during   R&D  phase  and  LEAN  concept  can’t  help  us  much  in  solving  this  problem.     4.  Boeing’s  business  strategy:     The  difficulty  to  manage  the  supply  chain  among  the  suppliers  and  Boeing.    The   problem  was  regarding  the  balancing  of  supply  chain  and  ensuring  that    product  
  5. 5. Boeing 787:Case Analysis   5     flows  continuously.  Lean  would  have  helped  at  operational  and  at  most  tactical   level  but  not  strategic  level.     5.  Revised  plan:   We  can  see  the  role  of  LEAN  when  Mr.Shanahan  revamped  787  executive  team   and  reorganized  into  :   1) Airplane  development.   2) Global  Supply  Chain   3) The  final  assembly  and  delivery.   4) Sending  Boeing  representatives  to  supplier’s  location.     6.  Potential  Treats:   The  major  reason  for  strikes  stated  is  the  anger  due  to  the  number  of  jobs   Outsourced.  Hence  here  also  Lean  concept  can’t  be  applied.     Thus  we  can  see  that  we  can  help  us  in  fixing  some  issues  (2  out  of  6)  but  not  all   by  LEAN  Concept.   Main  drawback  is  cannot  be  used  as  a  tool  for  strategic  supply  chain   improvement  tool.  We  can  achieve  Island  of  excellence  in  an  organization  by   implementing  only  LEAN  and  will  take  lot  of  time  to  yield  results.       2.Six  Sigma:             D   Define  the  customer,  Critical  to  Quality  issues,  business  process.   M   Measure  the  performance  of  business  of  the  business  process.   A   Analyze  to  determine  the  root  cause  and  opportunities  for  improvement.     I   Improve  the  process,  develop  and  deploy  implementation  plan.   C   Control  the  improvement  to  keep  on  new  course.     By  implementing  Six  Sigma  we  can  achieve:   1. Variation  Reduction.   2. Stability  &  Accuracy     In  this  problem  we  and  attack  the  problem  at  microscopic  level,  we  can   standardize  various  processes  and  reduce  the  variations.  We  will  try  to  solve   each  problem  by  Six  sigma  and  see  how  efficient  is  it  in  present  case.     1.Unexpected  Shortage  of  Fasteners:     If  we  assume  that  the  shortage  rise  was  due  to  the  bad  quality  of  fasteners   supplied  by  supplier.  Six  Sigma  would  had  help  the  supplier  to  reduce  its   variation  so  that  the  fasteners  would  had  been  standardized  and  this  problem   would  had  been  prevented.                      In  other  words  Boeing  can  demand  its  suppliers  and  its  own  factory  to   adhere  to  Six  Sigma  level  in  critical  processes.     2.Underestimation  of  work  content  in  the  task  of  writing  flight  control  codes:   We  can’t  help  this  problem  just  using  Six  Sigma.  
  6. 6. 6   Boeing  787:Case  Analysis       3.  From  bleeding  edge  to  leading  edge:   Design  by  Six  Sigma  technique  would  have  helped  in  preventing  this  problem.   And  also  for  redesigning  we  should  follow  the  same.     4.  Boeing’s  business  strategy:     Six  Sigma  can’t  help  business  strategy,  as  Six  Sigma  is  operation  level  concept  not   a  strategic  level.      5.  Revised  plan:   Revised  plan  can  take  help  of  Sig  Sigma  when  the  Boeing  repersentatives   stationed  at  supplier  premises  pressurize  them  to  improve  their  critical   processes  to  Six  Sigma  level.     6.  Potential  Treats:   Sig  Sigma  may  not  help  us  in  solving  the  threat  of  strikes.     In  brief  we  can  say  that  thought  at  operational  level  we  may  improve  the   scenario  but  at  strategic  level  we  cannot  do  by  utilizing  Six  Sigma.       3.SCOR  (Supply  Chain  Operation  Reference)  Model:       SCOR  helps  us  optimizing  supply  chain  as  a  whole  by:   1. Top  down  analysis     2. End  to  end  view   Above  diagram  gives  a  general  end-­‐to-­‐end  view  of  a  supply  chain.  And  in  next   diagram  shows  the  implementation  of  SCOR  Model.    
  7. 7. Boeing 787:Case Analysis   7         SCOR  is  a  SCM  reference  models  it  integrate  the  well-­‐known  concepts  of  business   process  reengineering,  benchmarking  and  process  measurement  into  a  cross-­‐ functional  framework.   The  below  stated  diagram  explains  how  it  helps  in  strategic  supply  chain   management.    
  8. 8. 8   Boeing  787:Case  Analysis     Lets  try  to  solve  problems  faced  by  Boring  through  SOCR  Model.     1.  Unexpected  Shortages  of  Fasteners.   If  we  assume  that  the  shortage  occurred  because  of  the  non-­‐receipt  of  items  from   suppliers  we  can  solve  the  issue  by  SCOR  but  Quality  issues  of  supplier  can’t  be   covered.     2.Underestimation  of  work  content  in  the  task  of  writing  flight  control  codes:   This  could  have  been  prevented  if  SCOR  model  would  have  been  adopted.     3.  From  bleeding  edge  to  leading  edge:   This  is  a  design  issue,  which  cannot  be  solved  by  SCOR.     4.  Boeing’s  business  strategy:     SCOR  is  a  strategic  tool  to  optimize  strategy  hence  it  could  have  been  used.     5.  Revised  plan:   Revised  plan  could  have  been  much  better  if  they  would  have  used  SCOR  model   completely.     6.  Potential  Treats:   Redefining  the  supply  chain  strategy  can  arrest  potential  threats,  which  can  also   be  done  by  following  SCOR  model.  But  it  may  not  solve  the  complete  problem.       We  can  see  that  SCOR  model  would  have  been  able  to  help  us  to  solve  many   problems  but  not  all.       4.Convergence  Model  (Six  Sigma+Lean+SCOR)   Convergence  model  is  the  intersection  of  Six  Sigma,  Lean  &  SCOR.  The  diagram   below  shows  clearly  what  is  Convergence  Model.          
  9. 9. Boeing 787:Case Analysis   9       First  I  will  explain  how  Six  Sigma  model  (DMAIC)  is  followed  in  Supply  Chain   Excellence  perfectly  synchronize  with  each  other.  “Define”  can  be  used  to  supply   chain  definition  and  priorities,  “Measure”  can  be  used  to  analyze  “SCOR”  card,   “Analyze”  analogous  to  Work  and  information  flows,  “Improve”  to   implementation  plan  and  “Control”  to  Deployment  Organization.       Define   Supply  chain  definition  and  priorities.   Measure   Analyze  basis  of  competition  (SCORcard).   Analyze   Work  and  Information  Flows.   Improve   Project  definitions  and  implementation  plan.   Control   Deployment  organization.     We  can  also  say  that  Six  Sigma  can  be  used  to  control  the  microscopic   parameters  of  SCOR  model.     Now  I  will  discuss  how  each  attribute  of  SCOR  both  Internal  &  Customer  can  be   achieved  by  either  Six  Sigma  or  Lean.   In  below  stated  matrix  it  is  shown  how  each  attribute  is  related  to  a  Metric  or   Activity  and  the  approach  we  should  use.       Customer   Reliability   Perfect  Order  fulfillment.   Six  Sigma   Responsiveness   Order  Fulfillment  Cycle  time.   Lean   Flexibility   Supply  Chain  Flexibility.   Lean       Internal   Costs   Supply  Chain  Management  Cost.   Lean   Cost  of  Goods  Sold  (COGS).   Lean  &  Six  Sigma   Assets   Cash  to  cash  cycle  time.   Lean  &  Six  Sigma   Return  on  supply  chain  fixed  assets.   Lean  &  Six  Sigma   Return  of  Working  Capital.   Lean  &  Six  Sigma     Now  we  will  try  to  solve  the  problems  using  SCOR  model  and  also  how  actually   the  problems  were  solved  actually.     1. Unexpected  Shortages  of  Fasteners.   We  can  assume  this  problem  would  had  arise  because  of:   a) Low  quality  of  fasteners  sent  by  supplier:  This  can  be  solved  by  improving   quality  and  implementing  Six  Sigma  at  suppliers  premisis.   b) Limited  quantity  was  ordered  and  was  wasted  during  assembly  at  Boeing   assembly.  To  prevent  this  LEAN  concept  can  me  implement  in  Being   Assembly  line.   c) As  a  result  of  shortage  Boeing  pressurized  suppliers  for  quick  delivery   and  they  rushed  to  make  the  fasteners  as  a  result  they  did  not  properly   documented  the  work  as  required  by  federal  authority.  Here  SCOR  model   comes  into  play  Boeing  would  have  dilated  risk  by  keeping  more   suppliers  also  requirement  of  documentation  of  process  would  had  been   floated  to  supplier  along  with  other  additional  requirement.  And  plan  
  10. 10. 10   Boeing  787:Case  Analysis     would  have  been  drawn  in  keeping  in  mind  the  lead-­‐time  taken  by   supplier  and  also  strategy  in  case  the  supplier  misses  its  delivery   schedule.     2.Underestimation  of  work  content  in  the  task  of  writing  flight  control  codes:            This  could  have  been  controlled  if  both  LEAN  and  SCOR  would  had  been   followed.    LEAN  for  standardization  and  proper  scheduling  so  that  correct   estimate  regarding  completion  of  activity  can  be  determined.  SCOR  in  the  case  of   properly  re-­‐arranging  this  activity  in  supply  chain  plan  and  also  a  back-­‐up  plan  if   this  gets  delays  which  other  activity  can  be  completed.       3.  From  bleeding  edge  to  leading  edge:   Using  50%  composite  material  was  going  to  be  break  through  innovation  in   Aircraft  manufacturing.  SCOR  would  have  enabled  to  properly  plan  and  given   some  cushion  for  solving  problems  like  these  and  integrate  that  plan  with  the   supply  chain  so  that  this  problem  would  not  had  affected  this  assembly  like  in   such  a  critical  manner.          4.  Boeing’s  business  strategy:     Convergence  is  the  most  appropriate  tool  to  optimize  a  vast  supply  chain   network  with  so  many  risk  partners.  As  a  project  with  such  level  complexity  we   have  to  control  quality  of  its  and  suppliers  (tier  1,2&3),  On  Time  Delivery  (OTD)   of  its  own  &  suppliers,  control  on  overall  cost  of  supply  chain  and  the  real  time   flow  of  information  among  all  risk  partners.  A  holistic  picture  is  required.   If  we  see  Convergence  model  Quality  related  parameters  can  be  taken  care  by   Six-­‐Sigma,  OTD  and  Cost  control  by  LEAN  concept  and  real  time  information   flow,  holistic  picture  and  other  supply  chain  optimization  by  SCOR  model.     5.  Revised  plan:   If  we  observe  the  revised  plan  closely  they  have  adopted  some  parameters  of  Six   Sigma  and  SCOR.  For  example  sending  representatives  into  supplier’s  premises   to  ensure  good  quality,  OTD  and  correct  information  flow.  LEAN  was  missing  as   it  will  take  lot  of  money  to  stationed  your  representative  at  each  factory  location   of    a  supplier.  It’s  an  additional  cost  to  Boeing.       6.  Potential  Treats:   Potential  threats  of  strikes  would  also  had  been  reduced  by  opting  convergence   model  as  the  frustration  in  the  employees  due  to  unplanned  activities  would   have  been  less.  They  would  have  saved  more  on  cost  and  would  have  given   incentives  to  both  engineers  and  employees.                                  Hence  I  definitely  would  have  suggested  Boeing  management  to   Implement  Convergence  model  for  management  of  their  supply  chain  instead  of   adopting  partly  some  solutions  Six  Sigma  ,  LEAN  &  SCOR  in  bits  and  pieces.  As   overall  synergy  of  these  three  can  bring  wonders.          
  11. 11. Boeing 787:Case Analysis   11         Suggested  Solution:     Lean   ✔   ✖   ✔   ✔   ✔   ✖   Six  Sigma   ✔   ✖   ✔   ✖   ✔   ✖   SCOR     ✖   ✔   ✖   ✔   ✔   ✖   Convergence   ✔   ✔   ✔   ✔   ✔   ✔     The  above  matrix  you  can  see  that  by  adopting  Convergence  model  we  can  attack   simultaneously  all  the  problems  and  solve  them.  That  will  take  less  time  as   compared  to  solve  each  problem  with  different  approach,  as  all  of  these   problems  are  interlinked.         Conclusion:   I  was  not  able  to  add  much  of  mathematical  analysis,  as  I  wanted  to  analyze  the   case  by  descriptive  analysis  rather  than  analytic,  as  I  was  not  having  the  exact   cost  of  implementing  these  models  at  a  scale  which  Boeing  require  them.  For   understanding  them  I  need  some  company  confidential  data.   But  still  with  the  amount  of  penalty  levied  on  Boeing  amounted  to  2507  Million   USD  for  initial  310  aircrafts  and  a  whooping  4  Billion  USD  is  anticipated  for   entire  project.  This  is  a  huge  amount  and  we  would  have  implemented   Convergence  model  in  much  lesser  than  this.   For  Vast  &  Complex  Global  Supply  Chain  like  Boeing  787  Convergence  is  a   complete  SCM  management  model.         -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐              
  12. 12. 12   Boeing  787:Case  Analysis      
  13. 13. Boeing 787:Case Analysis   13        
  14. 14. 14   Boeing  787:Case  Analysis                                  
  15. 15. Boeing 787:Case Analysis   15         Reference  Case:     Boeing 787: The Dreamliner (B) from Foster Business School; University of Washington (Exhibits are taken from the case it self). Sources: 1. SCOR, Lean and Six Sigma – Supply Chain Synergy by Douglas Kent and Hitesh Attri. 2. Supply Chain Operations Reference (SCOR) Model Convergence with Lean and Six Sigma by Matthew J. Milas.