BOEING DREAMLINER 787-

PRODUCTION MODEL
ALP-1 Operations Management (MAN730-2109-1)

Index Word Count: 219

Reference Word Count: 181
Subject Word Count: 1642
Total Word Count: 1942

By Team 1 Amit, Anubhav, Animesh, Ankur, Animesh

and Porntip
1 CONTENTS
1 The pros and cons of the Boeing production model.............................................................................2
1.1 Pros:.............................................................................................................................................2
1.1.1 Outsource more....................................................................................................................2
1.1.2 Reduce direct supply base....................................................................................................2
1.1.3 Reduce financial risks..........................................................................................................2
1.1.4 Increase production capacity without incurring additional costs..........................................3
1.2 Cons:............................................................................................................................................3
1.2.1 Supply Risks........................................................................................................................3
1.2.2 Process Risks.......................................................................................................................3
1.2.3 Management Risks...............................................................................................................3
1.2.4 Labor Risks..........................................................................................................................3
1.2.5 Demand Risks......................................................................................................................3
2 If the 787 delays and cost overruns are more teething troubles adapting to the new production model.
4
2.1 Assembling a Leadership Team with Requisite Expertise...........................................................4
2.2 Obtaining Internal Support Proactively........................................................................................4
2.3 Improving SC Visibility to Facilitate Coordination.....................................................................4
2.4 Proactive Management of Customer Expectation and Perception................................................4
3 the possibility of Boeing’s failure to handle the culturally diverse partners in SC Network................5
3.1 System Compliance.....................................................................................................................5
3.2 Supplier management..................................................................................................................5
3.3 Quality control and audit.............................................................................................................5
4 if lacunae in the 787 designs are primarily responsible for its current woes........................................6
5 Suggest remedial measures to bring the 787 projects back on track and future directions for similar
projects of Boeing.......................................................................................................................................7
5.1 Improve Supply Chain Visibility...............................................................................................7
5.2 Improve Strategic Supplier Section Process and Relationships.........................................7
5.3 Modify the Risk-Sharing Contract...........................................................................................7
5.4 Proactive Management Team.................................................................................................7
5.5 Proactive Labor Relationship Management...........................................................................8
5.6 Proactive Customer Relationship Management....................................................................8
6 Reference:............................................................................................................................................9

ALP-1 Operations Management by Team 1 Page 1 of 11

1 THE PROS AND CONS OF THE BOEING PRODUCTION MODEL

1.1 PROS:
1.1.1 Outsource more
By outsourcing over 70% of the development and production activities under the 787
program, Boeing can reduce the development time by utilizing suppliers' capacity to
foster various parts all the while. Likewise, Boeing might decrease the expense for the
development of the 787 by taking advantage of Component Before 787 Program 787 Program
suppliers' knowhow. As Boeing outsource more,
Sourcing 35% to 50% 70%
correspondence and coordination among Boeing strategy

and its suppliers became essential for the Supplier relation Contract based Strategic partnership
with tier 1 suppliers
success of the 787-development program.
No. of suppliers 1000s Approx. 50 tier 1
1.1.2 Reduce direct supply base supplier
To decrease development time and cost for the
Supply contract Fix-price & LD Risk sharing
Dreamliner, Boeing encouraged strong
associations with around 50 level-1 supplier who Assembly time 30 days for Boing for final 3 days
testing
will plan and fabricate different parts of the plane
and transport them to Boeing. By decreasing its
immediate supplier base, Boeing could concentrate a more significant attention on
working with level-1 suppliers.

1.1.3 Reduce financial risks

Boeing initiated another risk-sharing agreement Under Supplier 1
the 787 program. Key suppliers won't get contractual
payment until Boeing launches its first 787 to client. Supplier 2
This agreement payment term was expected to boost
key partners to facilitate and work together on their Boing Final
Supplier 3
Assembly
improvement plans. Although this agreement forces
specific financial risks for Boeing's essential suppliers Supplier 4
if delivery times are missed, they are boosted by being
permitted to claim their IPR, which would then be Supplier 1000
licensed to different organizations later on.

ALP-1 Operations Management by Team 1 Page 2 of 11

1.1.4 Increase production capacity without incurring additional costs
1.1.2 Ti 1.1.1 Ti
Decentralizing the assembling system would
Supplier 1
permit Boeing outsource noncritical processes.
The aim was to reduce the capital cost for the Supplier 2
improvement program for 787. Likewise, under Fabricator 1
Supplier 3
the 787-production network, Boeing needs just Pre-assembly
2
three days to collect finish areas of the
Boing final Supplier 4
Dreamliner at its plant assembly
Supplier
Erector 3
1000
1.2 CONS:
Fabricator 50
1.2.1 Supply Risks
Boeing depends on its level 1 worldwide
strategic partners to create and assemble whole segments of the Dreamliner dependent
on unproven technology. Any break in the SC network can create enormous setbacks
for the launch.

1.2.2 Process Risks

The basic plan of the 787-production network is likely going to create huge setbacks
since its efficiency depends on the synchronized just-in-time deliveries of all major
sections from Boeing's tier-1 strategic partners.

1.2.3 Management Risks

As Boeing utilized an unconventional SC Network to create and fabricate its Dreamliner,
Boeing needs to assemble a leadership team that includes some members who have a
proven supply chain management record with expertise to prevent and anticipate
certain risks as well as to develop contingency plans to mitigate the impact of different
risks.

1.2.4 Labor Risks

As Boeing expanded its outsourcing effort, Boeing laborers became anxious about their
professional stability.Boeing's strategic partners additionally felt the impacts of the
strike.

1.2.5 Demand Risks

As Boeing reported a progression of postponements, a few clients lost their trust in
Boeing's airplane development capability. In response to Boeing's production and
delivery delays and the uncertainty around 787's drawn-out facility, a few clients have
started dropping requests for the Dreamliner or relocating towards renting contracts
instead of buying the plane out and out.
ALP-1 Operations Management by Team 1 Page 3 of 11
2 IF THE 787 DELAYS AND COST OVERRUNS ARE MORE
TEETHING TROUBLES ADAPTING TO THE NEW PRODUCTION
MODEL.
By inspecting the inherent risks related to Boeing's SC network and investigating
Boeing's receptive moderation methodologies introduced before, we have fostered the
accompanying experiences that different makers might think about while dealing with
their supply chains for professional new item advancement.

2.1 ASSEMBLING A LEADERSHIP TEAM WITH REQUISITE EXPERTISE

By all accounts, apparently, Boeing's principal issue was brought about by its endeavors
to take on an excessive number of unprecedented changes all the while. These
progressions incorporate unproven innovation, flighty SC chains, problematic suppliers'
ability to take on new jobs and obligations, and dubious IT coordination frameworks.

2.2 OBTAINING INTERNAL SUPPORT PROACTIVELY

Organizations among the executives and work are fundamental for organizations to
carry out new drives, including new item improvement programs. Even though their
advantages are frequently skewed, better correspondence of business methodologies
with association laborers is a proactive advance towards keeping away from expensive
specialist strikes.

2.3 IMPROVING SC VISIBILITY TO FACILITATE COORDINATION

Other than the need to perform due diligence in crucial supplier performance to
guarantee that the chosen supplier has the inherent ability and the responsibility for
progress, an organization should consider developing more great responsibility in return
for exact data instantly. Excessively depending on IT system is profoundly risky while
dealing with another task.

2.4 PROACTIVE MANAGEMENT OF CUSTOMER EXPECTATION AND

PERCEPTION
Because of the inherent risks of new airplane development, an organization should
proactively help its clients set appropriate assumptions, particularly regarding the
potential delay brought about by different sorts of risk. Setting fair assumptions at the
beginning would diminish potential client dissatisfaction not too far off.

ALP-1 Operations Management by Team 1 Page 4 of 11

3 THE POSSIBILITY OF BOEING’S FAILURE TO HANDLE THE
CULTURALLY DIVERSE PARTNERS IN SC NETWORK

To work with cooperation and coordination with supplier’s, Boing developed an online
software instrument named Exostar to acquire SCM, further develop control and
incorporation of basic business processes, and lessen development time and cost for
Manufacturing Business Technology. However, Boing did not analyzed the
supplier/location based demographic behavior.

3.1 SYSTEM COMPLIANCE

Due to cultural differences, some tier-2 or tier-3 suppliers did not often enter accurate
and timely information into the Exostar system. As a result, various tier-1 suppliers and
Boeing were not aware of the delay problems in a timely manner, which makes it
difficult for Boeing to respond to these problems quickly.

3.2 SUPPLIER MANAGEMENT

Absence to merge constantly the short- and long-term program administration in each
level or each country then, it caused delayed and impacted to other production. It
seemed that it missed the deep process alignment in each stage to ensure the
production timeline and quality.

3.3 QUALITY CONTROL AND AUDIT

Each country or region could have the different standard of the quality control then, it is
more complicated to control or align to merge each part. Hence, it should set one
standard to control at least to mitigate the diverse partnership quality standard
management and control and reduce quality issues and lack of close audit on supplier
design system and development and responsibility hence, it seemed that it’s too late
once it found each issue.

 Lack of build supplier control problem or database to monitor and chose correct
suppliers.
 Underestimate to foresee uncontrol factors along the production processes in
each level like geographical or political challenges to causes some barrier or
obstacles.

ALP-1 Operations Management by Team 1 Page 5 of 11

4 IF LACUNAE IN THE 787 DESIGNS ARE PRIMARILY
RESPONSIBLE FOR ITS CURRENT WOES. 
The existing system is appreciated as it habitual and has already been proven.
However, innovation or contemplation has its inherent risk but is solicited to strive for
continual improvement. Boeing tried an experimental and more effective supply chain
and took steps to mitigate/minimize/accept the risk too, which was later proven to be
inadequate. It is not more than a hind-side bias to criticize the shortcomings. The 787
SC design was adopted by many automobile sectors globally.

By implementing risk correction & prevention measures as listed below, the design can
be improved effectively:

Risk Factor Reactive risk mitigation Proactive risk mitigation

strategy strategy

Technology Modify design Demographic analysis

throughout the SC for effective
IT system for data sharing
Supply Reverse integration. Purchase Better control for tier 2 supplier
company at the bottleneck stage selection

Process Visit & handholding support to tier Better risk sharing opportunity &
2 suppliers incentive plans
Management Include SME for SCM Involve SCM expert for
evaluating & governing the
entire network
Labour Increase incentive & reduce Perform outreach and
outsourcing or non0critical items communicate outsourcing
strategy & the reason behind
Customer Public relation campaigns to built Collaborative approach with
customer’s confidence. customers and regular progress
updates

ALP-1 Operations Management by Team 1 Page 6 of 11

5 REMEDIAL MEASURES TO BRING THE 787 PROJECTS BACK
ON TRACK AND FUTURE DIRECTIONS FOR SIMILAR
PROJECTS OF BOEING.

5.1 IMPROVE SUPPLY CHAIN VISIBILITY

To further develop data exactness, Boeing should have necessitated that every partner
and supplier give all pre-required data in the SC network connections instead of
depending on alarms produced from the program solely after they were
straightforwardly impacted.

5.2 IMPROVE STRATEGIC SUPPLIER SECTION PROCESS AND RELATIONSHIPS

To assess every supplier's technological capacity and production network, the
management ability for creating and assembling a specific part of the Dreamliner would
have empowered Boeing to choose a more professional level 1 vital supplier, which
could keep away from or diminish potential deferrals brought about by unpractised ones
level 1 suppliers.

5.3 MODIFY THE RISK-SHARING CONTRACT

Although the deferred payment term related to the risk sharing agreement was planned
to lessen Boeing's financial risk, it didn't give appropriate motivating forces to level 1
suppliers to complete their jobs early. If some strategic partners are unequipped for
fostering their segments as per the arranged schedule, the whole development plan is
pushed back.

5.4 PROACTIVE MANAGEMENT TEAM

Boeing should have chosen the right people for the job at the outset of the program,
permitting them to expect and stay away from the risks related to its original SC network
structure. Likewise, recognizing the sources of potential problems and having the
experts set up would moderate many the risks and permit Boeing to respond more
quickly and effectively when problems occurred.

ALP-1 Operations Management by Team 1 Page 7 of 11

5.5 PROACTIVE LABOR RELATIONSHIP MANAGEMENT
Boeing's system brought about dissatisfaction among Boeing's engineers to build its
outsourced activities to outer suppliers. Had the labor union overall dissatisfaction with
regards to Boeing's outsourcing strategy been considered, Boeing might not have
chosen to outsource 70% of its parts. Regardless of whether this outsourcing system
was justified financially, Boeing might have dealt with its work relationship proactively by
talking about the cycle, extending employment opportunity affirmations, and acquiring
purchases from unions.

5.6 PROACTIVE CUSTOMER RELATIONSHIP MANAGEMENT

Recognizing the risks associated with innovative product development, proactive
customer relationship management is critical to help customers set proper expectations
when placing their orders. Better correspondence with clients through the improvement
interaction can empower an organization to deal with clients' insights throughout the
whole item development process.

Risk Factor Reactive risk mitigation Proactive risk mitigation

strategy strategy
Technology Modify design Demographic analysis
throughout the SC for effective
IT system for data sharing

Supply Reverse integration. Purchase Better control for tier 2 supplier

company at the bottleneck stage selection

Process Visit & handholding support to tier Better risk sharing opportunity &
2 suppliers incentive plans

Management Include SME for SCM Involve SCM expert for

evaluating & governing the
entire network

Labour Increase incentive & reduce Perform outreach and

outsourcing or non0critical items communicate outsourcing
strategy & the reason behind

Customer Public relation campaigns to built Collaborative approach with

customer’s confidence. customers and regular progress
updates

ALP-1 Operations Management by Team 1 Page 8 of 11

6 REFERENCE:
 Boeing website www.boeing.com.

 Crown, J. (2008, April 4). Will Boeing pay for delays? Spiegel Online

International.

 Dyer, J., & Ouchi, W. (1993). Japanese style business partnerships: Giving

companies a competitive edge. Sloan Management Review, 35(1), 51-63.

 Gates, D. (2008, Nov. 2). Boeing strike ends: Machinists back on the job Sunday.

Seattle Times.

 Retrieved April 2009 from Gunsalus, J. (2007, Dec 11). Boeing sticks to revised

787 Dreamliner schedule. Bloomberg Press.

 Hawk, J. (2005, May).The Boeing 787-Dreamliner: More than an airplane.

 Hucko, C. (2007, April 28). Airbus A380 vs. Boeing 787: Poll reveals that

passengers prefer a smaller plane. Suite101.

 Kwon, D., Lippman, S. A., McCardle, K., & Tang, C. S. (2009). Time-based

contracts with delayed payments. Working paper. Los Angeles: UCLA Anderson

School.

 Leeham Co. (2005, July 18). 787 is not meeting 24-hour engine change promo,

lessor says. Leeham Co. LLC.

 Lunsford, J. (2007, Oct 11). Boeing, in embarrassing setback, says 787

Dreamliner will be delayed.

 The Wall Street Journal, pp. A1, A16. Lunsford, J. (2007, Oct 17). Boeing

replaces head of 787 Dreamliner program. The Wall Street Journal.

ALP-1 Operations Management by Team 1 Page 9 of 11