The 787 project was first announced to the public in Jan 2003 and estimated to enter commercial service in 2008. The development costs were projected to be $5B. However, the use of composite materials instead of the traditional metals and innovative decisions of integration model (Boeing would partner with third party suppliers around the world in designing, manufacturing and supplying components for the aircraft) made the project become more complex than anticipated and had a difficult birth.
Results: More than 3 years late and many billions of dollars over budget, the 787 finally entered commercial service in Sep 2011. Boeing was forced to compensate customers due to the delivery delays. * Why did it fail? Boeing’s senior management failed to adequately take into consideration the risk of out-sourcing, so he underestimated the budget for additional costs (primarily the cost to coordinate all of the suppliers and integrate them into a single working whole).
Quality problems, communications problems and the challenge of making changes to components being made under contract rather than in-house, all added layers of cost. When the project didn’t meet the planned timeline and delayed more than 3 years, it also increased costs. * What should have been done differently to avoid the failure? It failed just simply as it didn’t meet the requirements of CHAOS success factors. This project has much better chance of succeeding if having a realistic approach: deliver projects against timelines but make sure the scope is reasonable.
Boeing executives need to understand the full cost implications of their out-sourcing strategy. Besides, financial management needs to be more focus. Base on project scope, the project plan? should have detailed expenses for each requirement to have well cost estimation. Buffering some additional costs is necessary for such a high-risk project. These costs? can be benchmarked against projects of similar size within and outside the organization. Last but not least, the role of experienced project manager is very important, he will help to lead the project successfully.