Boeing 787 case discussion suri gurumurthi, ph.d.

1. Boeing 787 Case
Discussion
Suri Gurumurthi, Ph.D.
World
economy
(GDP)
Airplane fleet Number of
passengers
Airline traffic
(RPKs)
Cargo traffic
(RTKs)
3.2% 3.2%
4.0%
5.0%
5.8%
Key Growth Rates
747 and larger Twin-aisle Single-aisle Regional Jets
$290

2. $1,470
$1,360
$80
Market Potential for Boeing Products
($B)
747 and
larger
Twin-aisle Single-aisle Regional Jets
980
6,750
19,160
2,510
Airplanes Delivery Projections
747 and
larger
Twin-aisle Single-aisle Regional Jets
910
3,480
11,450
3,1601,340

3. 8,290
23,540
2,630
Airplanes in Service
2007 2027
Aviation Market (2007-2027)
Suri Gurumurthi, 2020
2
Region Regional Jets Single-aisle Twin-aisle 747 and larger
Total Deliveries
Asia-Pacific 430 5,440 2,810 480 9,160
North America 1,190 6,080 1,190 90 8,550
Europe 320 4,880 1,490 210 6,900
Middle East 60 660 690 170 1,580
Latin America 110 1,340 250 - 1,700
Russia and Central
Asia 340 460 130 20 950
Africa 60 300 190 10 560
World 2,510 19,160 6,750 980 29,400
3

4. Aviation Market
Values in 2007 $B Regional Jets Single-aisle Twin-aisle 747
and largerTotal Market Value
Asia-Pacific $13 $400 $630 $150 $1,190
North America $40 $420 $250 $30 $740
Europe $10 $350 $320 $60 $740
Middle East $2 $50 $160 $50 $260
Latin America $3 $90 $50 $1 $140
Russia and Central
Asia $10 $30 $20 $4 $60
Africa $2 $20 $40 $1 $60
World $80 $1,360 $1,470 $290 $3,200
4
Aviation Market
Boeing 787 Concept
Progression in 747, 767, 777 families…
787 family (large aircraft)
• 787-8, 210-250 passengers, 8200 mile range
• 787-9, 250-290 passengers, 8500 mile range
• 787-3, 290-330 passengers, 3000 mile range

5. Technology advancements aimed at efficiency
• 50% of structure is composite materials
• One-piece fuselage section (reduced material usage)
• New engines from GE and Rolls-Royce
• 20% improvement in fuel-burn over similar aircraft
• 10% reduction in cash-seat-mile
Priced between $150M and $200M
Globally distributed development and assembly process
• 600+ suppliers
• 70-80% of work done outside Boeing (company claims
otherwise)
Suri Gurumurthi, 2020
5
Cost-Profit Model (Thought Experiment!)
• Suppose profit margin for Boeing = 25% x 150B = 37.5B
• COGS = 150 Billion x 0.75 = 112.5B
• If we assume 20% work share for Boeing ;
• 0.2 x 112.5= 22.5B (Boeing’s share of the cost!)
• This indicates that Outsourcing may be a profitable and
GOOD
strategy!
• However, balance against the risks to the brand from
outsourcing so
heavily
6

6. Suri Gurumurthi, 2020
7
Supply Chain Design:
Global Development & Assembly
Supplier / Company Location Role
Boeing Commercial Airplanes
(announced Nov and Dec 2003) Washington
Airplane development, integration, final
assembly, program leadership
Alenia/Vought Aircraft Industries
(announced Nov 2003) Italy, Texas
Horizontal stabilizer, center fuselage, aft
fuselage
Boeing Fabrication (announced
Nov 2003)
Washington,
Canada, Australia
Vertical tail assembly, movable trailing edges,
wing-to-body fairing, interiors
Spirit Aerosystems Inc.
(announced as Boeing-Wichita
Nov 2003; Apr 2004)

7. Kansas, Oklahoma Fixed and movable leading edges, flight
deck, part of forward fuselage, engine pylons
Fuji Heavy Industries (announced
Nov 2003) Japan
Center wing box, integration of the center
wing box with the main landing gear wheel
well
Kawasaki Heavy Industries
(announced Nov 2003) Japan
Main landing gear wheel well, main wing fixed
trailing edge, part of forward fuselage
Mitsubishi Heavy Industries
(announced Nov 2003) Japan Wing box
8
Supply Chain Models of Design and
Development
9
• “Build to Print”:
• Boeing works with suppliers to develop the
component design and then finalize
• Outsource the production
• Risky in terms of development costs
• Boeing will own the IP of their work

8. • “Build to Spec”:
• Boeing communicates requirements;
• Supplier has to own the design
• Outsourcing the Design
• Far riskier in terms of quality, timeliness
• Supplier owns the IP
Supplier / Company Location Role
Hamilton Sundstrand (announced Feb 2004,
Mar 2004, Jul 2004, Sep 2004) Connecticut
Auxiliary power unit, environmental control
system, remote power distribution units,
electrical power generating and start
system, primary power distribution, nitrogen
generation, ram air turbine emergency
power system, electric motor hydraulic
pump subsystem
Rockwell Collins (announced Feb 2004, Jun
2004) Iowa
Displays, communications/ surveillance
systems, pilot control system
Honeywell (announced Feb 2004, Jul 2004,
Dec 2004) Arizona
Navigation, maintenance/crew information
systems, flight control electronics, exterior
lighting

9. GE Aviation (formerly Smiths Aerospace)
(announced Feb. 2004, Jun. 2004) United Kingdom
Common core system, landing gear
actuation and control system, high lift
actuation system
Goodrich (announced Mar 2004; Apr 2004, Jun
2004, Nov 2004, Dec 2004) North Carolina
Fuel quantity indicating system, nacelles,
proximity sensing system, electric brakes,
exterior lighting, cargo handling system
Messier-Dowty (announced Mar 2004) France Landing gear
structure
Dassault Systèmes (announced Feb 2004) France Global
collaboration tools/software
10
Supply Chain Design:
Global Development & Assembly
Boeing 787 Program Timeline
Apr 2006: Boeing inks $6B deal with Japanese
carbon-fiber company
Apr 2005: External design finalized
Jan 2005: First composite fuselage section rolled-
out

10. June 2004, Air New Zealand places 2 orders and
16 options
April 2004, First batch of 50 orders from All
Nippon Airways
Dec 2003: Everett, WA finalized as assembly site
2000-2003: 7E7 program planned
Suri Gurumurthi, 2020
11
Dec 2008: Firm orders rise to 910 (most for 787-
8)
Aug 2008: First order cancelled by Azerbaijan
Airlines
Jul 2008: Roll-out ceremony
Jun 2008: “Power-on” milestone…
May 2007: Final assembly started…
Jan- May 2007: Major sub-assemblies rolled-out
Dec 2006: “Virtual Roll-out” of assembly. process
June 2006: Major assembly operations started
Modular Assembly: Boeing 787 Dreamlifter

11. • 747 cargo aircraft specially developed for 787 assembly
• Major subassemblies of 787 are manufactured world-wide and
shipped
for final assembly to Everett, WA.
• Aims to reduce subassembly delivery times from 30 to 1 day
target
Suri Gurumurthi, 2020
Source: Boeing.com
Source: Boeing.comSource: Boeing.com
12
-200
0
200
400
600
800
1000
1200
2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003

12. Ax
is
T
itl
e
Orders
737
747
767
777
787
13
Marketing Success!
Boeing Order Backlog
Reality Bites: Boeing 787 Program Delays
Quality and safety implications of fuselage problems
Center wing-box (where wings attach) needed strengthening-
redesign effort required
from Fuji Heavy Industries
Boeing bought out Vought’s share in Global Aeronautica

13. Supplier had no previous experience assembling the fuselage;
subsequent operations
moved to Everett, WA
Fuselage assembly problems at major supplier: Global
Aeronautica (alliance between
Vought Aircraft and Italy’s Alenia) in South Carolina
Suri Gurumurthi, 2020
14
Reality Bites: Boeing 787 Program Delays
First flight delayed to Q2 2009; first delivery Q1 2011
Boeing announces 4500 job cuts
Boeing Machinists strike in 2008; Boeing deliveries hurt
Series of delays announced starting 2007…Mike Bair replaced
80% of Dreamliner is fabricated by outside suppliers- less
control for Boeing
Software glitches- different sub-systems found not working well
together
Aircraft tests heavier than designed
Suri Gurumurthi, 2020
15

14. Reality Bites: Boeing 787 Program Delays
16
Whose fault is it anyway…?
Suri Gurumurthi, 2020
• Some reports blame relatively small tools and fixtures firm for
delays
“Yet the impact of a little-known Texas company that fell
months behind building tools
needed to assemble the plane highlights how a hiccup can play
havoc with Boeing's
tight 787 timetable.
The company, Advanced Integration Technology, has fallen
short supplying Vought Aircraft
Industries, itself the Dreamliner's most troubled supplier.” –
Chicago Tribune, December
2007
• Advanced Integration Technologies disputes the claim
“We had no impact,” AIT President Ed Chalupa recently told
Aerospace Engineering &
Manufacturing magazine regarding 787 delays. “All of our tools
were available. They
did not stop one production item. You saw that the airplane
rolled out the day it was
supposed to. That means our tools were ready and working.”–
SAE.org, September 2008

15. 17
Remedies
Suri Gurumurthi, 2020
• Boeing in-sources the work
“Determining the sequence of putting parts together has been a
huge source of
delays. Boeing, anticipating that suppliers would be doing the
work, did not
engage in the long, detailed engineering planning required to
put tasks in
order. "We were wrong" in thinking Boeing could quickly pick
up where
suppliers had failed, (program manager) Shanahan said.” –
International
Herald Tribune, January 2008
• Boeing looking to shift work back over long term
“Boeing officials are visiting those companies and expect, in
coming weeks, to be
able to project when that work can be done there, on schedule
and at a scale
that will allow 787 production to increase”– International
Herald Tribune,
January 2008
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16. Wall Street Cares about Execution…
Suri Gurumurthi, 2020
Company Role in Program October
10th 2007
January
15th 2008
% Change
Boeing Lead Firm $98.3 $79.3 (19%)
Spirit Aerosystems Fuselage parts $36.5 $26.1 (28%)
BE Aerospace Cabin and seating $43.3 $40.1 (7%)
Honeywell Cockpit $60 $56.7 (6%)
Rockwell Collins Information Systems $73.3 $65.1 (11%)
LMI Aerospace Structural Components $27.6 $23 (17%)
Titanium Metals Metal Supply $33.3 $23.4 (30%)
Precision Castparts Structural, airfoil,
turbine castings
$146.7 $118.6 (19%)
Source: 24/7 WallStreet
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17. Customers care about Execution…
Suri Gurumurthi, 2020
• Customers’ fleet planning affected
“British airlines face increased costs running into hundreds of
millions of pounds,
and expansion plans being blown off course…” – Business
Week, April 2008
• Major customers change business plans, and orders…
“All Nippon Airways of Japan, the launch customer for the 787,
said Thursday its
board had decided to order nine 767-300ERs to help it with lift
capacity
because the 50 Dreamliners it has ordered will be 14 to 36
months late”–
SeattlePI, September 2008
• Boeing faces penalties and direct losses from delays, as many
customers seek compensation
20
Employees care about Execution…
Suri Gurumurthi, 2020
• Boeing machinists strike work
“At the heart of the scrimmage between the International
Association of Machinists

18. and Aerospace Workers and Boeing’s management is the
growing use of contract
workers at factories doing the same jobs as full-time union
employees” – MSNBC,
September 2008
• Boeing reports 38% drop in 3Q earnings over 2007
“Boeing had been gaining a lot of orders at the expense of
Airbus because Airbus had
such long delivery lags on some of the planes. Now Boeing's
delivery lags are going
up. This puts Airbus back into the game”– Standard and Poors
Analyst on
MarketPlace Public Radio, October 2008
• Impact on supply chain
“Vendors including Spirit (Aerosystems) have reduced hours or
fired workers and
withdrawn or lowered profit forecasts.” – MSNBC, September
2008
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Epilogue…
Suri Gurumurthi, 2020
22
Boeing 787 Orders to Date (Green= Delivered)

19. Epilogue
Suri Gurumurthi, 2020
23
Airbus A350 Orders to Date
Boeing 787 Case DiscussionAviation Market (2007-
2027)Aviation MarketAviation MarketBoeing 787 ConceptCost-
Profit Model (Thought Experiment!)Slide Number 7Supply
Chain Design: �Global Development & AssemblySupply Chain
Models of Design and DevelopmentSlide Number 10Boeing 787
Program TimelineModular Assembly: Boeing 787
DreamlifterSlide Number 13Reality Bites: Boeing 787 Program
DelaysReality Bites: Boeing 787 Program DelaysReality Bites:
Boeing 787 Program DelaysWhose fault is it
anyway…?RemediesWall Street Cares about
Execution…Customers care about Execution…Employees care
about Execution…Epilogue…Epilogue
Cases Studies 3 & 4 – Primary Care
A 47-year-old male patient (A) presents to your office c/o
painful and bleeding defecation that started a
couple of days ago. Pt also states that he noticed some
intermittent pruritus on his back. Pt comes
accompanied by his male husband of 45 years old (B), who
states that he had noticed a painless “blister”
on his genital area, but he is not quite sure when it appeared.
Patient A: with no past or family relevant history and NKA

20. Patient B: PMH of seasonal allergic rhinitis and NKS. No other
family or relevant history.
On complete physical examination:
On Patient A: a visible anal fissure in the inferior region of the
sphincter was noted. It is also noticed
disseminated papules in the trunk and macules on palms and
soles.
Patient B: A visible ulceration in the genital area noted and
patient denies pain on palpation. No
adenopathy noted or reported by patient (B).
Since patients are a marital couple, you proceed with
serological testing for each patient (A &B) because
you suspect a sexually transmitted disease. Both patients deny
having or being treating in the past for
STD’s
Lab Results:
Patient A: Leukocytosis - Treponema (Positive) – Non-
Treponema (Positive) – HIV (Negative) – Hepatitis
(Negative)
Patient B: Treponema (Positive) – Non-treponema (Negative) –

21. HIV (negative) – Hepatitis (Negative)
--------------------- Do not include the above section in your
paper. ONLY THE QUESTIONS BELOW-------
Please answer the following questions in APA format and
include in-text references.
1) What serological lab works would you order to obtain the
above results? (Be specific with the lab
names)
2) What is the diagnosis for Patient A?
3) What is the diagnosis for Patient B?
4) What would it be the differential diagnosis for patient A and
patient B?
5) How are you going to treat Patient A? (Be specific and
include the time of treatment)
6) How are you going to treat Patient B? (Be specific and
include the time of treatment)
7) What would be the possible cause of this infection if both
patients did not have any sexual encounter
outside their relationship in the last year?