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Essay: Discovering Why the Boeing 787 Dreamliner was a Successful Aircraft

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  • Published: 1 April 2019*
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  • Tags: Boeing essays

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Section 1: Goal, Scope and Rationale

During the early 2000s, two of the largest commercial airplane manufacturers in the world had differing ideas of what the future of air travel industry would be like. Airbus created the 550-seat A380, designed to carry passengers between congested hub airports in bulk. Instead of going head to head with Airbus and build a large-capacity hub-to-hub aircraft, Boeing announced in 2003 that they are going to build the 787 Dreamliner. Previously named the 7E7 until January of 2005, the 787 is a much smaller aircraft designed to carry 200-300 passengers over long distances in order to bypass busy hub airports and reduce travel time by taking out the need for layovers (Mason, 2007). In doing this, Boeing aims to build an aircraft that enhances the passenger’s in-flight experience while reducing operational costs for the airlines. By using a structure that is more than 50% composite, the 787 can sustain higher cabin pressure and humidity to simulate conditions at a lower altitude and significantly improve the flight experience (Gantenbein, 2007). At the same time, this innovation allows the 787 to be 20% more fuel efficient than its predecessor, as reported by launch customer All Nippon Airlines after the 787’s first commercial flight on October 26 2011 (Slayton and Spinardi, 2016). Moreover, unlike traditional alumunium fuselages, the Dreamliner’s composite fuselage requires 35 percent fewer scheduled maintenance labor hours, therefore further reducing the cost for the airlines (Hale, 2006). Altogether, these innovations contribute to a revolutionary aircraft that fulfills Boeing’s goal for the Dreamliner project, which is to build an aircraft that creates value for their customers (Tang and Zimmerman, 2009).

Section 2: Strategy Alignment

As said in section 1, Boeing believes that the future of commercial air travel lies in comfortable and economical flights between city pairs. Boeing is convinced that people will much prefer to fly directly to their destinations instead of making lengthy stopovers in congested hub airports (Boeing, 2003). This became apparent in 1999 when the company executives came up with the idea of the Sonic Cruiser. Equipped with canards near the nose, a delta wing, twin tails and a futuristic cabin, the 250-seat airliner was designed to travel long distances at mach 0.95, approximately 20% faster than common commercial jets. Unfortunately, the demand for commercial air travel plummeted after the September 11, 2001 attacks and the Sonic Cruiser concept was dropped because its increase in speed demanded the same increase in fuel consumption (Gantenbein, 2007). However, their strategy to build an army of long-range mid-sized airplanes remained and Boeing announced the 787 Dreamliner on December 16, 2003, right on the eve of the 100th anniversary of powered flight. Boeing plans to build up to 3,500 787s over the next 20 years, valued at more than $400 billion (Boeing, 2003).

Section 3: Management of Risk

The Boeing 787 Dreamliner is a revolutionary aircraft, filled with new and unproven technologies that inevitably have significant risks along with it. However, the biggest risk taken by Boeing in this project is their unconventional approach to the supply chain. The 787’s supply chain is built upon a tiered structure, in which Boeing works with approximately 50 tier-1 strategic partners, 28 of which are overseas (Sople, 2012). The tier-1 partners act as “integrators”, supplying Boeing with major sections of the aircraft that they assembled from smaller parts and subsystems built by tier-2 and tier-3 suppliers. This allows Boeing to theoretically “snap” the aircraft together in their final assembly plant in Everett, Washington in only 3 days. Under this program, the strategic suppliers are bound to a risk-sharing contract that does not allow them to receive payment until the first 787 is delivered to the customers. The contract acts as an incentive for the strategic partners to collaborate in the development process. With this plan, Boeing aimed to reduce the development time of the 787 from 6 to 4 years and the development cost from $10 billion to $6 billion (Tang and Zimmerman, 2009).

According to Crandall, Crandall and Chen (2014, p. 503), “Approximately 70% of the Dreamliner is outsourced compared to 35%-50% for previous Boeing models”. Boeing took a tremendous risk as the technology that is used in the 787 was relatively unproven, let alone adding the daring supply chain that affects such a big portion of the project. Outsourcing is a major risk because of three reasons. Firstly, some of the tier-1 strategic partners may not have adequate technical knowledge to develop and manufacture the airplane sections and to manage the tier-2 suppliers. When problems surface, Boeing has no choice other than to send expertise to the tier-1 partners, adding to their costs (Denning, 2013). Secondly, the risk sharing nature of the contract is unfair for the tier-1 partners that deliver quicker as there is a potential of them being penalized unfairly should there be a delay with the other partners. Therefore, the incentive to deliver faster may diminish and entice the companies to work slower (Tang and Zimmerman, 2009). Lastly, the large amount of companies involved with the project means Boeing has to make sure that there is continual communication and on-site involvement with these suppliers, which incurs additional costs. Moreover, the communication may have to be done through barriers such as time difference and language that adds to the complication (Denning, 2013).

In order to mitigate these risks, Boeing took several actions. Firstly, Boeing acquired Vought Aircraft Industries–the weakest tier 1 partner–to take control of their operations and directly manage their tier 2 suppliers. Secondly, the risk-sharing contract was modified to reward the partners that are on time and penalize those that are late (Tang and Zimmerman, 2009). Lastly, Boeing hired Exostar–an expert in supply chain management–to improve communication with suppliers by increasing the supply chain visibility (Exostar, n.d.).

.Section 4: Conclusions: Evaluation of Project Success

When Boeing set off on the 787 Dreamliner project, their goal was to build an aircraft that creates value for its customers, the airlines and more importantly the passengers. Seen from this perspective, the project was a success. For the customers, Boeing made a plane that is quieter, has a lower cabin altitude and bigger windows, not to mention brings them right to their destination without lengthy stopovers. The airlines benefit, non-stop routes to more and smaller cities, better fuel consumption, less maintenance hours and easier repairs. ANA (All Nippon Airlines) reported a $98 million saving a year in fuel expenditure (Here’s Why the Boeing 787 Is a Huge Success, 2016). Boeing benefits too, the 787 is Boeing’s best selling new airplane ever, with 895 orders from 58 customers worldwide as of September 2008 with an estimated backlog value of $151 billion (Michael, 2012).

However, that did not all come smoothly. The Dreamliner project is notorious for the amount of delays that it experienced. According to Michael (2012), Boeing 787’s spokesperson Yvonne Leach reported an average 20-month delay for the 58 customers that cost Boeing $4 billion in concessions and penalty payments to the airlines. Boeing also went way over budget with their development of the 787, as the initially planned $6 billion development cost rose to $32 billion. Analysts predict that in order to offset these costs, Boeing needs to sell at least 1300 787s, which at the current production rate will take at least 8 years (Wu, 2015). Therefore in terms of the amount of money that Boeing has earned from the project, it has yet to be successful.

In conclusion, with the 787 Dreamliner project, Boeing has delivered a revolutionary aircraft that will be the benchmark for long-range, aircrafts for the future. The road to the delivery was not particularly smooth, but it got to the destination. As more airlines start to appreciate the true potential of the 787, Boeing will be able to sell more 787s and cover the costs, and eventually become profitable.

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