When Boeing announced the 787 luxury jet in January 2003, the company christened it "The Dreamliner." Ten years later, it’s become a nightmare. The litany of problems with the 787 makes an SAP project look like a Swiss watch.
- The 787’s scheduled completion date was August 2007. The first commercial flight didn’t happen until October 2011 -- 50 months late.
- The first three models completed required so many design alterations and part changes that Boeing finally scrapped them.
- To improve fuel economy, the 787 was supposed to weigh several tons less than existing models. The redesigned model makes Acrobat Reader look svelte -- the 787 is seven and a half tons heavier than planned.
- In January 2013, the Federal Aviation Administration grounded the 787 after five different airlines reported problems:
- A Japan Airlines plane caught fire after the batteries (yes, lithium-ion ones) overheated. JAL also reported a fuel leak.
- United found faulty wiring in one plane, as well as a fuel leak in a different spot.
- A 787 for Qatar Airways developed a generator problem during its delivery flight. A plane’s cooling system failed on one Air India plane.
- All-Nippon Air made an emergency landing when its onboard computer reported battery problems and smoke in the engine compartment.
How did Boeing produce the aerospace industry's Jurassic Park? By ignoring every development best-practice in the book.
Grounded in a Nightmare
Boeing's 787 Dreamliner turned out to be a supply chain nightmare, as problems
quickly transformed into canceled orders.
Too many unknowns: Since Boeing hadn't built a new model since 1993, the company re-engineered every component. The body was reshaped to reduce friction; its metal skin was replaced with a carbon-fiber composite. The high-efficiency engines were prototype designs; the mechanical and hydraulic controls were replaced by software-controlled electronics.
Every new design has bugs, which need to be fixed over time. By making every component of the 787 a new development project, Boeing basically ensured that everything could be expected to go wrong.
Changing methodologies: Boeing had always manufactured 60 percent to 70 percent of its plane parts and done all its own assembly. The company managed every supplier directly and used fixed-price contracts (with penalties for late delivery or failed inspections) to drive quality.
For the 787, Boeing decided to outsource 70 percent of the parts and 90 percent of the labor by using a three-tiered production system developed by Toyota. In this model, suppliers (in tier 3) build parts; partners (in tier 2) assemble them into components; and integrators (in tier 1) build the vehicle sections from the components. All Toyota does is the final assembly.
Boeing believed that adding two inspections by different vendors would improve quality. It thought it could trim the 30 days it previously needed to assemble a plane from nuts and bolts down to three. By working with only 50 Tier 1 vendors (not thousands of suppliers), Boeing planned to cut costs by eliminating middle managers and inspectors.
What Boeing overlooked (or, to be blunt, decided to ignore) is that Toyota implemented its process over time, changing steps or suppliers if problems occurred. Since automakers release new cars every year, their suppliers already know how to build many of the components.
Boeing also disregarded this minor detail: Toyota’s recalls and repair rates skyrocketed under the new process. End result? The sticking accelerator in 2009-11 models that caused fatal accidents.
Oh, and planes pass more stringent tests than cars. Because if Toyota screws up, its users can usually get out and walk.
By quadrupling the layers of management, Boeing built a process that compounded failure. Late shipments with defective pieces got slipshod inspections and hurried assembly.
Inept vendor management: As anyone who outsources learns, clear statements, defined requirements, and tough penalties produce better results. Call center agreements must include call volume, time on hold, abandonment rate, and customer satisfaction. Development projects should specify performance levels (speed, volume, and errors), tests required for passage, and bug count. Instead, Boeing replaced its airtight contracts and penalties with partnership agreements and incentives for on-time delivery.
In the past, suppliers worked with Boeing directly, leaving no middleman to blame. The tiered system let each tier point fingers both below (at defective materials) and above (for demands to meet deadlines, not enforce quality).
To dilute accountability further, the 21 vehicle sections in the 787 are built in nine different countries. Each has its own laws -- and courts inclined to take its side.
At one point, Boeing became so exasperated by a partner's repeated failures that it spent $1 billion to buy the plant, just so it could stop making suggestions and begin issuing orders.
Selective listening: Who could have predicted this could happen? Boeing.
At the 2001 annual quality seminar, a Boeing engineer analyzed the impact of outsourcing
on the aerospace industry. Looking at seven planes built by different companies dating back to the 60s, he showed that quality failures (which led to rework and delays) dwarfed cost savings. "Subcontractors," he summarized, "made all of the profits... [Manufacturers] absorbed all of the over-runs."
In 2009, with the 787 already two years late, professors at UCLA’s business school did a case study on why the project failed. Their paper cited research dating back to 1993.
Boeing has already taken a $2.5 billion write-down on the 787. But unless the company can perform an exorcism on the plane’s issues, it might be the tip of the iceberg.
In an effort to steal market share from Airbus, Boeing priced the 787 at $120 million, far below market rate. The strategy worked; between 2003 and 2007, Boeing booked 817 orders.
But after four years of changes and redesigns, the 787 now costs $145 million to $200 million. Over the last four years, buyers have canceled more orders than they’ve placed.
With investigations just beginning, there’s no way to know what else will surface or when the 787 will fly again. Air India has already thrown in the towel and put its 787 fleet up for sale. Boeing could correct the flaws and 787 will rise from the flames like the legendary Phoenix. But based on the way the plane was built, the smart money says Boeing and its 787 will continue to make ashes out of themselves.
— Geoff Beckman is a marketing, communications, strategy, and technology consultant based in Cleveland, Ohio.