The document provides a case study on the lessons learned from Boeing's 787 Dreamliner project. It summarizes that Boeing aimed to cut costs and development time through an unconventional supply chain model where 70% of the work was outsourced. However, this resulted in the project being over budget by $11 billion and 4 years delayed. Key lessons identified include: assembling a management team with supply chain expertise, improving supply chain visibility, fully understanding all underlying project costs before estimating, improving supplier training and selection processes, proactively managing labor unions, and implementing risk-sharing contracts with incentives and penalties for partners.

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?