Boeing Dreamliner

Overview
Boeing announced in December 2002 that it would begin the development of a cost-efficient twinjet. The
Boeing 7E7, which was later designated the 787 and nicknamed the Dreamliner, was expected to be a
revolutionary new plane and a much needed boost for Boeing. However, only a few years into its
development and production, the Dreamliner ran into serious issues. More surprisingly, aspects of the
planes production that were initially hailed as innovative played a significant role in these troubles.
Today, it is not clear whether the 787 will ever deliver on its promise of substantial profits for Boeing.
The Beginning (2003-2007)
The 787 was an offshoot of the Sonic Cruiser project, whose objective was to produce a plane that could
obtain higher-than-typical flying speeds. The shakeup of the airline industry due to September 11, 2001
and subsequent changes in both consumer behavior and fuel costs changed the objective of airlines and
aircraft producers from speed to cost efficiency. Therefore, the Sonic Cruiser project was shut down, and
its resources were diverted to the 787 project.
The major selling point of the Dreamliner was its fuel efficiency. The 787 was projected to use
approximately 1 gallon of fuel per seat per 100 miles of travel, which represented a 20 percent
improvement relative to equivalent sized planes at that time. This was a huge attraction for airlines, which
were under pressure from environmental activists and government regulations to reduce fuel usage.
Furthermore, travelers had become more cost-focused, and thus the fuel efficiencies of the Dreamliner
would reduce pressures on margins from lower airfares that had become the norm in recent years. The
Dreamliner accomplished its fuel efficiency by being made of a single piece of carbon-fiber reinforced
plastic, rather than multiple aluminum sheets held together by fasteners. This composite material was
strong but lightweight, which allowed the plane to expend less fuel per mile. Additionally, the composite
material would not degrade as quickly as typical metal materials, leading to less maintenance costs and
downtime.
There were additional groundbreaking aspects of the 787. First, it would be the first mid-sized airplane
with long-haul potential, opening up the possibility of new non-stop routes. Second, its flight systems
would be primarily electronic, different from the typical pneumatic and hydraulic systems used in existing
aircraft. Finally, it was designed to provide a more enjoyable flying experience for passengers. It featured
wider aisles and seats relative to similarly sized planes. Because of the lighter materials, the cabin air
pressure and humidity would be more similar to ground level conditions.
Possibly the most innovative part of the 787s production process was the supply chain. Traditionally,
airplanes were made by building the complete aircraft from the ground up. Under this method of
manufacturing planes, Boeing would have been responsible for sourcing all of the raw materials and
components from suppliers and for assembling every part.
In the production of the 787, Boeing decided to outsource a large amount of the manufacturing and design
work to global partners. Under this approach, separate subassemblies and systems would be manufactured
by global subcontractors, and these various parts would then be assembled by Boeing in its Everett plant.
Boeing established approximately fifty tier 1 suppliers for the 787 project. These subcontractors were
handed complete control over the design and production of their particular part of the plane. These
partners shared initial investments in design and the risks of the 787 project with Boeing. Furthermore,
each tier 1 supplier was responsible for managing its own mini-supply chain.
Boeing hoped that, by sharing the control and investment in the design and production of the plane, it
could reduce the costs of developing the 787. For example, instead of interacting with each provider of
raw materials or small components, Boeing only had to interact with the tier 1 providers. Furthermore, the

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Boeing Dreamliner
development and production of the subassemblies could occur in parallel, which could reduce the
assembly time and maximize assembly capacity at the Everett plant.
Early sales underlined the interest in the fuel-efficient Dreamliner. When the 787 was officially launched
on April 26, 2004, All Nippon Airways placed a then-record breaking launch order of 50 airplanes. The
first 787 was shown to the public on July 8, 2007 in a massive celebration at the Boeing factory in
Everett, Washington. Boeing initially promised that the first flight would occur in September 2007, with
deliveries to customers beginning in 2008. At the time of its unveiling in July 2007, Boeing had received
orders for 677 airplanes from 47 different customers.
Problems Develop (2008-2014)
The Dreamliner, however, would not make its maiden voyage in 2007. Instead, its initial flight was
delayed multiple times over the following few years for a variety of major problems. The cumulative
effect of the initial delays led Boeing to take a $2.5 billion write-off in 2009. There were also many minor
glitches, such as excessive condensation inside the jets fuselage. In an interview with the Seattle Times, a
Boeing engineer, who spoke on the condition of anonymity, remarked that the extent of the problems with
the Dreamliner was unprecedented:
The purpose of flight tests is to find out what you did wrong. But the amount of stuff we are finding
is horrible. We shouldnt be dealing with this many issues this late in the program.
Deficiencies in the global supply chain were a primary source of the Dreamliners problems. In one
instance, Boeing found structural weaknesses where the wing (made by Mitsubishi) was joined to a part
of the fuselage (made by Fuji). This problem was likely driven by the fact that these two components
were designed and produced by separate contractors. Another example involved Boeing engineers
spending considerable amounts of time reworking horizontal tails that were poorly built by Alenia, an
Italian supplier. This issue led Boeing building additional tails at its plant in Auburn, WA.
Electronics were an interesting case study for the supply chain problems. Before the 787, electronics were
integrated across multiple suppliers by Boeing Commercial Electronics (BCE), a separate division within
Boeing that employed over 2,000 people and had operations in Everett and Texas. BCEs role was to
ensure that everything worked together properly. For the 787, Boeing outsourced the electronics
production and engineering work to suppliers, moved BCE engineers to other roles, and shut down its
Texas plant.
Electronic failures were a common problem for the 787. In late 2010, an electrical fire forced an
emergency landing on a test plane in Texas, leading to further delays. Problems with the Dreamliners
electronics did not stop once deliveries of the plane began. Most notable were the two instances of the
lithium batters overheating and causing fires. This particular incident resulted in a National
Transportation Safety Board (NTSB) hearing and ultimately led the entire fleet of 787s to be grounded in
2013 for fourteen weeks. The cost of fixing this problem ended up being approximately $465,000 per
plane for the airlines, and the lost revenue due to grounding the planes was far greater. For the battery
system in the 787, Boeing had selected Thales to be its tier 1 provider. Thales then subcontracted out
particular parts of the process to GS Yuasa and Securaplane. During the NTSB hearing, it was revealed
that data on the occurrence and testing of certain battery problems identified by the subcontractors were
only relayed to Boeing indirectly through Thales.
Any electrical failures were especially problematic for the Dreamliner, since its use of electrical systems
was far more extensive than in any other plane. Boeing engineers directly blamed the outsourcing
program for the electrical problems, claiming that the components produced without oversight by Boeing
management were of poor quality.

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Boeing Dreamliner
Other problems in the supply chain simply involved speed. Since there were many different subassembly
producers, delays by any one producer led to delays in the production overall. In November 2010, Boeing
was forced to stop planes from moving forward in the final assembly line in Everett because of delays by
some of the suppliers.
Overall, the mistakes and delays by supply chain partners led Boeing employees to complain that the
partners were not subject to sufficient oversight by Boeings management. One senior Boeing engineer
said that he believed that the companys delegation of outsourcing to multiple tiers of suppliers was the
root source of the jets production problems:
The supplier management organization (at Boeing) didnt have diddly-squat in terms of engineering
capability when they sourced all that work.
Today (2015-2016)
Today, over 300 Dreamliners are in use and it still holds the record for the fastest-selling wide body
plane. However, the ultimate effect of production delays, costly emergency fixes, and canceled orders
have taken their toll on the project. Furthermore, recent low fuel prices are allowing airlines to continue
flying older, less fuel-efficient planes, potentially dampening future demand. It is becoming increasingly
clear to analysts that the 787 will struggle to cover its substantial development costs. The Dreamliner
once expected to be a game-changing product for Boeing and for the airplane industry is now not even
guaranteed to turn a profit.
Sources
The Beginning
1. http://old.seattletimes.com/html/nationworld/2009373399_apusboeing787historyglance.html
2. http://www.seattletimes.com/business/boeing-unveils-787-dreamliner-in-worldwide-production/
Problems Develop
1. http://www.seattletimes.com/business/boeing-aerospace/boeing-again-delays-initial-787-dreamlinerflight/
2. http://www.seattletimes.com/business/boeing-aerospace/boeing-still-sure-delayed-787-will-beprofitable/
3. http://www.seattletimes.com/business/electrical-fire-forces-emergency-landing-of-787-test-plane/
4. http://www.seattletimes.com/business/dreamliners-woes-pile-up/
5. http://www.seattletimes.com/business/boeing-787rsquos-problems-blamed-on-outsourcing-lack-ofoversight/
6. http://www.seattletimes.com/business/electronics-outsourcing-weakened-boeingrsquos-control-over787rsquos-crucial-systems/
Today
1. http://www.seattletimes.com/business/boeing-aerospace/will-787-program-ever-show-an-overallprofit-analysts-grow-more-skeptical/
2. http://www.reuters.com/article/us-boeing-787-sales-analysis-idUSKCN0Y70E8
Other Resources
1. Boeing 787s Official Website: http://www.boeing.com/commercial/787/

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