Boeing 787 Dreamliner Project Delays: Supply Chain Analysis

Introduction and Study Overview

The fundamental objective of this study is to investigate the factors leading to the delay of the Dreamliner project. The Dreamliner project is a multi-billion-dollar initiative that Boeing has been implementing for more than eight years. The study is divided into five chapters. Chapter 1 identifies the core problem the research attempts to address: Boeing is experiencing significant delay in the delivery of the Dreamliner project, a delay that has stretched beyond 28 months. The study investigates the factors behind that delay and assesses the long-term viability of the project.

The study reviews literature including research articles, academic books, and academic journals. From this review, it is revealed that the new supply chain methodology adopted by Boeing for the Dreamliner has been one of the critical factors contributing to the delay. Boeing employs an unconventional supply chain methodology in the development of the Dreamliner — one that involves using multiple layers of strategic partners. Inability to effectively manage all these strategic partners has translated into project delay and cost escalation of the Boeing 787 Dreamliner.

The study employs quantitative techniques for data collection. Analysis of the collected data reveals that Boeing is unable to effectively manage its supply chain process. The supply chain model adopted by Boeing demonstrates that successful relationships among strategic partners are critical for project success. Failure of even one strategic partner can affect the tasks of multiple other partners, and this interdependency has contributed substantially to delay in project delivery.

To address future delays in project delivery, the study recommends further research on the application of unconventional supply chain methodology in complex projects, particularly on methods to mitigate project delay and reduce costs.

Literature Review Summary

The study confirms the research problem and reveals that Boeing is experiencing significant delay in the launching of the Boeing 787, forcing the company to write off $2.5 billion associated with first-flight delays. Common themes in the supporting literature establish that the Dreamliner is designed to provide airlines with unmatched fuel efficiency — specifically, the Boeing 787 is intended to use 20% less fuel than comparable aircraft of similar size. This fuel efficiency is attributed to advances in technology. Another recurring theme is that innovation, which remains a central focus for customers, drove Boeing to develop a super-efficient airplane.

To demonstrate exceptional application of new technologies, Boeing used 50% composite materials in the structure of the Boeing 787. Designed with a modern systems architecture, the 787 offers increased functionality and efficiency. The Dreamliner is also built with Rolls-Royce and General Electric engines, and the new engine design represents a major contribution to its technological advancement. Since the Boeing Board of Directors approved the Dreamliner for sale, demand has been exceptionally strong — 59 customers from 37 countries have placed orders valued at more than $178 billion.

Despite the Dreamliner's significant potential contribution to the aviation industry, there has been a serious delay in completing the project. The delay has forced Boeing to incur high costs in design and production. Contributing factors include a series of testing cancellations and production process delays. Extensive testing required multiple changes to design and specifications. From 2007 through 2011, production delays persisted continuously. Additionally, the new supply chain methodology Boeing adopted — under which 70% of materials are outsourced from strategic partners — has further compounded the delay. Boeing's implementation of multiple layers of strategic partnerships, combined with an inability to effectively manage those relationships, has caused significant delay throughout the Dreamliner program.

While Boeing had already secured major orders — including from the International Lease Finance Company (ILFC), its largest customer — continued delivery delays risk order cancellations, particularly given the testing requirements before aircraft can be delivered. Year 2012 was assumed as a delivery target for the Dreamliner, and meeting that target was considered essential to Boeing maintaining its leading position in the aviation industry.

Data Analysis and Synthesis

Data collected for this study undergoes quantitative analysis to enhance validity and reliability. Quantitative data analysis is employed because it is relatively easy to administer, accommodates a large number of samples and survey questions, and produces results that are straightforward to summarize (Zawawi, 2007). To enhance dependability, credibility, and trustworthiness, the study cleans the data to ensure integrity. One technique used is exploratory data analysis, which identifies and corrects errors in the dataset. All data are thoroughly inspected, and erroneous entries are corrected or removed. Descriptive statistics are then employed to summarize the raw data, with the major objective being to correlate findings with the research questions. Data are presented in tables, graphs, and charts to facilitate that correlation.

The major aim is to identify the factors leading to production delay of the Boeing 787. The study also addresses supply chain weaknesses in order to identify solutions.

Data collected reveal that Boeing relies on Tier-1 global strategic partners to develop and build entire sections of the Dreamliner. A break in the supply chain has led to significant overall production delay. Such breaks include part shortages; Tier-2 and Tier-3 suppliers often fail to provide accurate and timely information, and Tier-1 suppliers are frequently unaware that their actions can cause downstream delays in Boeing 787 production (Tang & Zimmerman, 2009).

There is also a growing concern that the Boeing 787 is approximately 8% overweight — roughly 2.2 metric tons — which leads to a 15% reduction in range, further contributing to production and delivery delays. The underlying supply chain structure is likely to sustain delay because Tier-1 strategic partners depend on Tier-2 and Tier-3 suppliers to deliver materials on time. Unless Boeing maintains adequate safety stocks, the company will continue to face challenges in addressing delay problems.

Chapter 4: Detailed Data Analysis

Analysis of the collected data reveals both the causes of delays and their consequences for the company. In the Dreamliner project, Boeing adopted a methodology different from its traditional approach. Boeing employs an unconventional supply chain methodology involving multiple layers of strategic partners, and this has caused a fundamental delay in the project. To enhance reliability and validity, data collected through the literature survey are categorized into Panel A, Panel B, Panel C, and Panel D. Data from these panels are cross-checked for consistency, and further analysis confirms that they provide similar findings regarding the causes of the Dreamliner delay.

Unlike the traditional supply chain methodology Boeing had used for past projects, Boeing adopted an entirely different — unconventional — supply chain methodology for the Dreamliner. This approach caused significant delay in production and deliveries of the Boeing 787. Boeing implemented the unconventional supply chain with the intent of reducing development time from six years to four years and reducing development costs from $10 billion to $6 billion. Analysis reveals that this unconventional supply chain model was new to the aircraft manufacturing industry, and Boeing anticipated it would achieve cost reductions by expanding layers of supply partnerships and spreading costs to suppliers.

Under the traditional supply chain model, Boeing dealt directly with key suppliers and manufacturers of different aircraft parts. Under the redesigned model for the Dreamliner, Boeing works with approximately 50 Tier-1 strategic partners who assemble different parts and sub-systems produced by Tier-2 suppliers. Boeing outsources 70% of the components for the Dreamliner project under a risk-sharing contract in which Boeing makes no payment to suppliers until the first unit of components is delivered. The complexity introduced by this multi-tier structure has translated directly into project delay and cost escalation.

As noted by Oehmen, Ben-Day, and Khan (2010, p. 5): "Management of development and manufacturing at tier-2 suppliers (by tier-1 suppliers) causes delays. Complex product with a complex supply chain — management of product development across the supply chain [is] very problematic." Larger percentages across all data panels agree that the supply chain adopted by Boeing is the primary cause of the Dreamliner's delay. As Rogers (2009, p. 9) observed: "The companies that best understand and control the associated complexities will be the most successful in a disintegrated aircraft industry."

The Dreamliner's structure contains 50% composite material, 12% titanium, and 15% aluminum. However, Boeing had never previously used composite materials in aircraft manufacturing, and the Dreamliner is the first Boeing aircraft to be developed with composite materials. This created challenges in securing specialist suppliers of composite materials and extended fabrication timelines, as the relevant processes and supply networks had to be developed from scratch.

One of the major benefits of the 787's modular design is its ability to use two interchangeable engine types — Rolls-Royce and General Electric. However, Boeing encountered technical difficulties and parts incompatibility. Rather than the originally proposed 24-hour engine change window, customers would require 15 days to switch from one engine model to the other. Boeing's repeated efforts to restore the 24-hour standard resulted in additional project delays (Leeham Co., 2005).

Boeing relies on Tier-1 global strategic partners to build and develop entire sections of the Dreamliner. Any break in the supply chain causes significant delay across the program. In September 2007, Boeing announced a delay to the planned first flight, citing ongoing challenges including systems integration difficulties and parts shortages.

As Tang, Zimmerman, and James (2009, p. 80) noted: "Boeing's original leadership team for the 787 program did not include members with expertise on supply chain risk management. Without the requisite skills to manage an unconventional supply chain, Boeing was undertaking a huge managerial risk in uncharted waters."

The coordination platform Exostar, charged with managing supplier development activities, highlights the communication challenges Boeing faced. Effective coordination requires all suppliers to provide timely and accurate information. In one documented case, Vought — a Tier-1 supplier — hired Advanced Integration Technology (AIT) as a Tier-2 supplier without informing Boeing in advance. AIT was supposed to coordinate project activities with Tier-2 and Tier-3 suppliers for Vought. Additionally, some Tier-2 and Tier-3 suppliers were unable to provide accurate information to the Exostar system due to cultural and organizational differences. As a result, Tier-1 suppliers were often unaware of emerging delays, leaving Boeing unable to mitigate problems in a timely manner.

Process risks represent another significant source of delay. The unconventional supply chain caused major delays because overall project efficiency depends on the timely delivery of all major sections from Tier-1 partners. When a Tier-1 partner delays its delivery, that delay cascades to all subsequent sections, ultimately affecting the entire project. Boeing could potentially mitigate these process risks by maintaining complete safety stocks of different sections.

Additionally, the risk-sharing strategy Boeing implemented — whereby strategic partners receive payment only after the first Dreamliner is certified for flight — introduced its own risks. While the arrangement is intended to incentivize coordination and collaboration, it may have the unintended effect of allowing strategic partners to work at a slower pace, undermining timely project delivery.

Process risks are further illustrated through the Design Structure Matrix (DSM) model and the Product Development Process (PDP) model. The PDP model argues that developing a complex project can take many years and that any deviation from established rules will cause unnecessary delay. It also serves as a quantitative tool for obtaining project improvement justifications. The DSM analysis reveals the effects of multiple-layer partnerships — specifically, dependencies and relationships between system components. If one task (for example, Task B) fails to complete on time, all tasks that depend on it (such as Task C) will also be delayed. The DSM quantitative analysis further demonstrates that task dependencies introduce substantial cost and schedule risks.

Analysis of process dependency data reveals an intra-functional dependency rate of 43%, which is considered very high for successful project delivery. A project carrying 43% process dependency carries relatively high risk of delay and failure. As partners become increasingly interdependent in a complex project, the likelihood of rework rises substantially — and the data confirm that the Dreamliner's due-time indicator exceeded the 50% threshold that marks the deadline boundary, meaning business days continuously accumulate beyond the planned completion point.

With the increase in outsourcing that Boeing adopted for the Dreamliner project, some workers became concerned about their job security, and this concern led to a strike. In September 2008, more than 28,000 employees went on strike, which had a significant effect on Boeing's strategic partners. For example, Spirit AeroSystems — one of Boeing's key strategic partners — reduced its employee work schedules in response. This reduction in work schedules translated directly into project and delivery delays. Survey data indicate that responses regarding labor as a cause of delay were nearly evenly split, suggesting that while labor contributed to the delay, it was not universally identified as a primary cause.

As Boeing continued to announce delays in Dreamliner delivery, some customers began to lose confidence, and a number cancelled their orders. Some customers who had initially ordered aircraft shifted to leasing rather than purchasing outright. This led to a significant reduction in demand for the Dreamliner from 2004 through 2011, with total order volumes declining in correspondence with each successive delay announcement.