Reference no: EM133982422

Assignment:

Case Incident

Boeing Dreamliner: Engineering Nightmare or Organizational Disaster?

As a flight of imagination, Boeing's 787 Dreamliner was an excellent idea: made of composite materials, the plane would be lightweight enough to significantly reduce fuel costs while maintaining a passenger load up to 290 seats. Airline carriers chose options from a long list of unprecedented luxuries to entice the flying public and placed their orders well ahead of the expected completion dates. And then the problems started.

An airplane like the 787 has a design about as complex as that of a nuclear power plant, and Boeing's equally complex offshore organizational structure didn't help the execution. Boeing outsources 67 percent of its manufacturing and many of its engineering functions. While the official assembly site is in Everett, Washington, parts were manufactured at 100 supplier sites in countries across the globe, and some of those suppliers subcontracted piecework to other firms. Because the outsourcing plan allowed vendors to develop their own blueprints, language barriers became a problem back in Washington as workers struggled to understand multilingual assembly instructions. When components didn't fit together properly, the fixes needed along the supply chain and with engineering were almost impossible to implement. The first aircraft left the runway on a test flight in 2009, but Boeing had to buy one of the suppliers a year later (cost: $1 billion) to help make the planes. The first customer delivery was still years away.

If Boeing and industry watchers thought its troubles were over when the first order was delivered to All Nippon Airways (ANA) in 2011, three years behind schedule and after at least seven manufacturing delays, they were wrong. Besides the continuing woes of remaining behind schedule (848 planes have been ordered but only 6 percent have been delivered), Boeing's Dreamliner has suffered numerous mechanical problems. After the plane's technologically advanced lithium-ion batteries started a fire on one aircraft and forced another into an emergency landing in January 2013, ANA and Japan Airlines grounded their fleets. The FAA followed suit, grounding all 787s in the United States. The remaining 50 flying Dreamliners worldwide were then confined to the tarmac until a solution could be found.

While Boeing's CEO Jim McNerney says he is "confident we'll identify the root cause," it's difficult to know what he thinks will fix the Dreamliner's operational problems, chief among them the battery crisis. On the one hand, McNerney is a proponent of Six Sigma and other statistics analytics tools used to streamline production to exacting standards, so it is conceivable that he will try to apply standardization throughout the complex supply chain. He may also decide, along with his engineering team, that the long list of features complicates orders too much and therefore simplify the manufacturing process by eliminating options.

On the other hand, McNerney may approach this as an organizational structure problem, both at corporate headquarters and abroad. While he has been meeting daily with his top executives, there have been so many management changes during the 787's history that it would be difficult for him to identify responsibility for errors in order to make changes in the team or the organizational structure. For the work done abroad, McNerney might be looking to restructure reporting relationships in favor of smaller spans of control to heighten management accountability and tie suppliers to the organizational structure of corporate Boeing. Or he might be considering "reshoring" to bring manufacturing physically close to the final assembly site and under Boeing's control while centralizing the organization structure. If he doesn't do this for all components, he may continue to allow local suppliers to manufacture for Boeing, or he may follow current thinking that key components (generally, the most complex parts) should not be outsourced.

No matter what Boeing and McNerney decide, it is clear that the company must produce reliable aircraft consistently before worldwide government agencies will allow the planes to fly, which may be long before the public will consider trusting the safety of the Dreamliner.

Questions: Answer Each Question Fully with Detail.

1.) Do you think this is a case of the difficulty of launching new technology (there are "bugs" in any system), or one of an unsuccessful launch?

2.) What type of executive management structure do you think would be most conductive to getting the Dreamliner past the battery problem and back in flight? Is this a different structure than you would suggest for fixing the ongoing manufacturing problems? Sketch out the potential design.

3.) What organizational structure would you suggest to effectively tie in Boeing's managers and suppliers abroad? Sketch your ideas. (Goals for managers might include facilitating teams, coordinating efforts, maintaining organizational transparency, and creating conversations.)

4.) What do you think McNerney should do as an overall scheme?