PROJ6003 Project Execution and Control TORRENS Assessment Case Study UNIVERSITY 2022 AUSTRALIA The Boeing Dreamliner For Boeing Commercial Aeroplanes the week of January 14, 2013 has been a bad one. Images of firefighters tackling a fire onboard a Japan Airlines 787 in Boston and pictures of an All Nippon 787 with its emergency exit slides deployed in Japan have flashed across the Internet. For the second time in a little over a week the meltdown of a lithium ion battery has resulted in an onboard emergency for one of the company's flagship 787 aircraft. Combined with a string of other problems (Figure 1) media outlets have focused public attention by cataloguing problems with the aircraft type. In the interests of public safety, a Federal Aviation Authority (FAA) directive has resulted in a worldwide grounding of the 787 fleet (the first such grounding of a large commercial aircraft type since 1979). Figure 1: Other issues with the aircraft US Fuel tanks Cockpit LBE BOEING Electronics Engines Brakes GETTY IMAGES Fuel tanks B Jan 2013: Take-off aborted after about 150 litres of fuel spill from Japan Airlines Dreamliner in Boston 13 Jan: Same aircraft experiences another, separate fuel leak while undergoing tests in Tokyo Electronics 4 Dec 2012: A United Airlines 787 makes emergency landing in New Orleans after electrical problems 13 Dec: Qatar Airways 787 grounded after electrical power distribution problems 17 Dec: United finds electrical problem in second aircraft 7 Jan 2013: Fire starts in lithium ion battery pack of Japan Airlines 787 in Boston 8 Jan: United Airlines also finds faulty wiring to battery Engines July 2012: Fan shaft on engine fails during runway tests at Charleston International Airport 11 Jan 2013: Oil leak found in engine of All Nippon Airways 787 flight Brakes O 9 Jan 2013: All Nippon Airways cancels flight when computer wrongly reports a brake problem Cockpit 11 Jan 2013: Cockpit window on an All Nippon Airways Dreamliner cracks during a Japanese domestic flight. The plane lands safely with no injuries 15 Jan: Another Dreamliner operated by ANA makes an emergency landing at Takamatsu in Japan after a smoke alert goes off Source: Gregory, M. (January, 2013). Boeing 787: Dreamliner's lithium ion batteries probed, BBC News. Retrieved from https://www.bbc.comews/business-21059605 "The contents of this Case Study were adapted from the references to sult the requirements of the PROJ6003 subject's assessments and are the property of Torrens University Australia.PROJ6003 Project Execution and Control TORRENS Assessment Case Study UNIVERSITY 2022 AUSTRALIA The 787 has had a difficult birth. Plans to build the plane were first announced to the public in January 2003. At that time the development costs were projected to be $58 and the aircraft was to enter commercial service in 2008. While sales of the aircraft were strong, the development of the aircraft turned out to be significantly more challenging than anticipated. The use of composite materials instead of the traditional metals and decisions Boeing made about how to share the development of the aircraft's with suppliers, resulted in a project that was considerably more complex than anticipated. More than 3 years late and many billions of dollars over budget, the 787 finally entered commercial service in Sep 2011. The project Boeing Corporation was one of the world's largest manufacturers of commercial aircraft, ranking 27th on the Fortune 500 list in 2016. When it announced the delivery of its first 787 Dreamliner transporter to its first customer, All Nippon Airways, in September, 2011, it was almost 40 months later than originally planned, after a long series of unexpected delays. The actual development cost of the project had been estimated at about US$40 billion but came in over twice the original estimate. The Dreamliner was designed to be a revolutionary project in terms of physical characteristics, technology, management style, financing, design and engineering management, quality assurance, and assembly processes. Many of these initiatives were intentionally taken on to benefit from new developments in aviation technology and to speed up design and development; however, they posed unexpected challenges for both the company and the project team. The Shared Development One of the most significant strategic decisions Boeing made in the 787 project related to out- sourcing. Historically Boeing had both designed and manufactured most of the parts for their aircraft. For the 787 project a decision was made to move further towards a systems integration model. In the integration model Boeing would partner with third party suppliers around the world who would help design, manufacture and supply components for the aircraft. Those components would be shipped to Boeing factories in the USA and assembled into the final product. On paper the decision to act as a "systems integrator" rather than manufacturer had appeal. It spreads the risk and moves costs to the suppliers while reducing the investment needed by Boeing. In financial language the out-sourcing of work can also increase "Return on Net Assets" (RONA), a measure of financial performance or efficiency for an organization. Increasing RONA is often regarded by senior leadership as a positive thing as it makes a company appear to be financially more efficient. According to available sources it was a desire to increase RONA that set the context within which the out-sourcing decisions were made. "The contents of this Case Study were adapted from the references to sult the requirements of the PROJ6003 subject's assessments and are the property of Torrens University Australia.PROJ6003 Project Execution and Control TORRENS Assessment Case Study UNIVERSITY 2022 AUSTRALIA The new organizational paradigm adopted by Boeing for the development of Dreamliner included the decision to outsource an unprecedented portion of the design, engineering, manufacturing, and production to a global network of 700 local and foreign suppliers. With more than 70% foreign development content, this decision turned Boeing's traditional supply chain into a development chain. Tier-1 suppliers became responsible for the detailed design and manufacturing of 11 major subassemblies, while Boeing only did system integration and final assembly. Figure 2 lists the project's major subassemblies and their tier-1 suppliers. Furthermore, Boeing came up with a new risk and revenue sharing contract with its suppliers, called the "build-to-performance" model (as differentiated from the more typical "build-to-spec" or "build-to-print" models). According to the model, contract suppliers bore the non-recurring R&D cost up-front, owned the intellectual property of their design, and got paid a share of the revenues from future aircraft sales. Under this model, the suppliers' roles were dramatically changed from mere subcontractors to strategic partners who had a long-term stake in the project. This model created some risks, which caused extensive integration problems and additional delays. Figure 2: 787 Project's Tier-1 Suppliers Tail fin- PARTS NOT SHOWN Boeing (Frederickson, Wash.| Wingtips Landing gear KAL-ASD Messier Dowty Horizontal stabilizer (Korea) [England) Alenia (Italy) Wing/body fairing Forward Center fuselage Boeing (Canada fuselage Alenia (Italy Kawasaki Landing gear doors (Japani Boeing (Canadal - Aft fuselage Vought Cargo access doors Forward fuselage [Charleston, S.C.1 Saab (Sweden) Spirit (Wichita, Kan.) Main landing gear wheel well Passenger entry Kawasaki (Japan) doors Latecoare (Francel Fixed trailing edge Kawasaki (Japan) Movable Engines - trailing edge GE (Evendale, Ohio) Boeing Engines (Australial Rolls-Royce (Englandi Center Wing Engine nacelles wing box Mitsubishi Fixed and movable leading edge Goodrich Fuji (Japan) (Japan) Spirit (Tulsa, Okla ) [Chula Vista, Calif.) Graphic research and design by David Badders, Seattle Post-Intelligencer. Sources: The Boeing Co, Vought Aircraft Industries Inc., GE Aviation, Rols Royce, Airbus, PPG Industries, Diehl Aerospace, Evergreen Aviation Technologies Corp. (EGAT) Source: Vega, G. (n.d.). Leadership implications in complex projects: The Boeing Dreamliner and Jim McNerney. Project Management Institute. In this new assembly method, subcontractors were required to integrate their own subsystems and send their preassembled subsystems to a single final assembly site. The goal was to reduce Boeing's integration effort by leveraging subcontractors to do more work compared with previous projects. This meant that the assembly of the 787 Dreamliner could be described as a System of "The contents of this Case Study were adapted from the references to sult the requirements of the PROJ6003 subject's assessments and are the property of Torrens University Australla.PROJ6003 Project Execution and Control TORRENS Assessment Case Study UNIVERSITY 2022 AUSTRALIA Systems-a complex set of elements that must work together to be successful. The large group of systems that had to be integrated into this aircraft demanded an unusually concentrated focus on teamwork among the subassemblers. The challenge was to encourage or support collaboration while recognizing the competitive nature of the subassemblers. However, many of these subcontractors were not able to meet their delivery schedules due to lack of experience in subsystem design and integration, as well as insufficient guidelines and training. What Boeing's senior management failed to adequately take into consideration was the affect that the out-sourcing would have on the project and its overall lifecycle costs. Out-sourcing may eliminate some types of cost, but it introduces layers of additional costs. Quality problems, communications problems and the challenge of making changes to components being made under contract rather than in-house, all added layers of cost. The problems also extended the project schedule by more than 3 years, which further increased costs. The lithium-ion batteries debacle The lithium-ion batteries used in Boeing's 787 Dreamliner are central to the design of a plane which is billed as being lighter and 20% more fuel efficient than earlier generations of jet. This type of battery has an unusually high energy density, which means the units can be smaller and thus lighter for a given amount of power than traditional batteries. All planes have batteries, but the Dreamliner needed especially powerful ones because its control systems are driven entirely by electrical signals in place of the hydraulic controls seen on earlier generations of jet. To meet the need for low weight and high-power output, the designers opted for the same lithium ion technology as used in the batteries of most modern smartphones and laptop computers, where the demands are rather similar, but on a much smaller scale. Another reasoning behind this choice was that lithium-ion units have another big advantage: they can be moulded into a variety of shapes. This flexibility means the battery can be designed to fit in awkward places, important when space is at a premium. During the design phase, regulators expressed concerns and insisted on a new specially drawn- up set of regulations to ensure battery safety. Lithium-ion units were already known to have a number of potentially serious safety drawbacks. They need more careful management than other types of battery. Unless carefully managed, these batteries can be prone to what is referred to as "thermal runaway" due to the nature of its chemistry. Once the battery reaches a certain temperature, it can start self-heating with potentially disastrous results. The units are also seen as especially vulnerable to problems and leaks of battery fluid. Once the problems start, the fluid is prone to ignite. "The contents of this Case Study were adapted from the references to sult the requirements of the PROJ6003 subject's assessments and are the property of Torrens University Australia.PROJ6003 Project Execution and Control TORRENS Assessment Case Study UNIVERSITY 2022 AUSTRALIA After the two battery incidents occurred that led US regulators to order the 787 to be grounded, the causes of such was still unknown. It could be the batteries themselves, the charging system or the plane's electrical system. Experts say the problems with the batteries were unlikely to be of a fundamental nature that requires the plane to be redesigned or the batteries entirely replaced. The chances are it is a manufacturing issue or a failing in how the battery packs are looked after. CEO's Leadership approach Supply chain and design delays increased, as did Boeing's financial losses, including penalties for late delivery of the aircraft. CEO McNerney had to face some hard facts based on earlier decisions. He acknowledged that his new paradigm may have been flawed, "We got a little bit seduced that it would all come together seamlessly and the same design rules would be applied everywhere in the world and corners wouldn't be cut and financial realities wouldn't hit certain folks." McNerney's approach to workers, suppliers, and labor resources was notably off-putting, according to many in Washington State, Boeing's corporate home. Since 2011 when Boeing opened its non-unionized South Carolina assembly plant where salaries were approximately $10/hour less than those of the unionized workers in Washington State, worker relationships have been troubled. S While admirers have touted his efficiency and ability to deliver profits, alienated professionals at every level, along with union members, have described McNerney as "cold-blooded." One labor specialist stated, "A lot of employees feel top management doesn't value them, treats them as expendable...[creating an atmosphere of] lowered trust, anger and disgruntlement." According to Richard Aboulafia, noted aerospace specialist, "Management believes if it continues to squeeze suppliers and labor, the problem[s] will be solved. Again, the track record here is not great. Most of the manufacturing world tell a very different story. Whether it's with cars, aircraft or turbines, productivity improvements often come from the shop floor. That means convincing the people who build things to identify ways to reduce scrap, improve work flow and eliminate defects. To promote the kind of process improvements that happen in the factory, a work force needs incentives (...)" McNerney's management style created its own problems. He vacillated between maintaining his dispassionate, hands-off general management style with multiple-times per day meetings with executives during the Dreamliner grounding crisis. His revolving door policy for managers in charge of the 787 project (four in as many years) generated a sense of uncertainty at all levels in the company and increased pressure to meet goals quickly. This focus on urgency caused him to reflect, after having resolved the major problems in the Dreamliner, that the plane could have 5 "The contents of this Case Study were adapted from the references to sult the requirements of the PROJ6003 subject's assessments and are the property of Torrens University Australla.PROJ6003 Project Execution and Control TORRENS Assessment Case Study UNIVERSITY 2022 AUSTRALIA been completed sooner had Boeing listened more to the customer and less to innovative technology. As described by an anonymous former Boeing executive, "The sense I always got from him in meetings is that it could have been any business..If we'd been making cameras or autos or doing bond trading, it would have all been the same to him. The net effect is distancing from the people who come to work there every day, who bring their hearts and souls to it and want to make it more than a job." Final contributing Factors The 787 project is one more example in which Senior Management failed to understand the costs, challenges and risks of their decisions and in which the sound advise of technical experts was ignored and trumped chasing a higher RONA value. John Hart-Smith, a world-renowned aeronautical engineer and a senior technical fellow at Boeing presented an internal paper entitled "Out-Sourced Profits - The Cornerstone of Successful Subcontracting" at Boeing's annual Technical Excellence Symposium in February 2001. In the paper Hart-Smith outlined how the costs of out-sourcing were being underestimated and how the out-sourcing strategy could undermine the knowledge base upon which the organization was based. Granted it is hard for senior people to know what advise is good advise and which is not, but the fact that Boeing had purchased the Douglas Aircraft company meant that internally they did have a very good reference model against which to check. In the end, financial measures were too narrow to capture the full costs involved. Difficulty managing and integrating across a large supply chain and development partners. TORRENS "The contents of this Case Study were adapted from the references to sult the requirements of the PROJ6003 subject's assessments and are the property of Torrens University Australla.PROJ6003 Project Execution and Control TORRENS Assessment Case Study UNIVERSITY 2022 AUSTRALIA Assumptions and Reflection Consider yourself to be the new Project Manager of this project that is facing many challenges, some yet to come. - What issues can you identify from the project? What further costs could you identify from the new shared development model? What risks can you identify from the build-for-performance model make for Tier-1 suppliers? And what would be the further impact on the project? - What processes would you put into place to improve communication within the international supply chain, considering the 700 suppliers? Boeing addressed this by creating Tier-1 suppliers for 11 subassemblies, but flaws were still present in the process. -+ How would you address the lithium-ion battery issues? What Quality Management processes would you put in place to uncover the root-causes of these problems? What would you have done differently? What changes would you implement? How could you try and recover the project? These reflections should support you in addressing the requirements of your assessments. TORRENS UNIVERS "The contents of this Case Study were adapted from the references to sult the requirements of the PROJ6003 subject's assessments and are the property of Torrens University Australla.PROJ6003 Project Execution and Control TORRENS Assessment Case Study UNIVERSITY 2022 AUSTRALIA References: Calleam Consulting (February, 2013). Boeing Commercial Aeroplanes. Why do Projects Fail? Retrieved from https://calleam.com/WTPF/?p=4617 Gregory, M. (January, 2013). Boeing 787: Dreamliner's lithium ion batteries probed. BBC News. Retrieved from https://www.bbc.comews/business-21059605 Vega, G. (n.d.). Leadership implications in complex projects: The Boeing Dreamliner and Jim McNerney. Project Management Institute. TORRENS UNIVERSITY AUSTRA *How to cite this: Torrens University Australia (2022). The Boeing Dreamliner. PROJ6003 Project Execution and Control - Assessment Case Study. "The contents of this Case Study were adapted from the references to sult the requirements of the PROJ6003 subject's assessments and are the property of Torrens University Australia