Rolls-Royce s Aerospace challenge

Transcription

1 Rolls-Royce s Aerospace challenge Samuel Maggs Programme Exec (Logistics Strategy) 9 th September Rolls-Royce plc The information in this document is the property of Rolls-Royce plc and may not be copied or communicated to a third party, or used for any purpose other than that for which it is supplied without the express written consent of Rolls-Royce plc. This information is given in good faith based upon the latest information available to Rolls-Royce plc, no warranty or representation is given concerning such information, which must not be taken as establishing any contractual or other commitment binding upon Rolls-Royce plc or any of its subsidiary or associated companies. Trusted to deliver excellence

2 What do Rolls-Royce do? Power systems for Air, Land & Sea operating as two strategic divisions Rolls-Royce Motors separated in 1973 and owned by BWM since 2003

3 Tonight s topics 1) How important is the supply chain to the business? 2) How do we decide between Make and Buy? 3) How do we optimise the value stream? 4) How do we manage a truly global network? 5) How do we become more efficient?

4 How important is the supply chain to the business? Some brief numbers for context: - 10 years of growth & 63bn order book, but share price 44% since bn of inventory at a stock turn of 3.9, when GE s is Return on sales is 14%, when GE s is 20% - Great product, but we must our improve cash and cost Organisational designs are a compromise between various competing factors Rolls-Royce Aerospace Supply Chain Customer Sectors Suppliers Compressors Installations Rotatives Structs. & Trans. Turbines Civil Large Engines Civil Small & Medium Engines Defence Customers

5 How do we decide between Make and Buy? Vs Our Aerospace Supply Chain Units (SCUs) each focus on a core commodity One organisational unit is responsible for managing both the internal and external sources of supply for that commodity Make/Buy decisions are therefore made with full knowledge of both options, and responsibility for operating that source after the decision Generally, Rolls-Royce s internal manufacturing is expensive, so we will typically choose to make components when: - We have a capability advantage (i.e. better technology or method) - We do not want to share key design elements (i.e. key intellectual property)

6 How do we optimise the value stream? The supply chain for an aerospace component frequently involves multiple stages and many separate companies, which are challenging to co-ordinate Reacting to demand changes is also difficult in these multi-company value streams and this inflexibility drives additional inventory and cost for all parties Our Aerospace SCUs have design responsibility for their commodity and have invested in Producibility workshops to improve key components by bringing together the multiple companies in its value stream These factors frequently pull Rolls-Royce into relationships with 2 nd or 3 rd tier suppliers, where contractual relationships are indirect and can be complex

7 How do we manage a truly global network? Rolls-Royce would like to see itself as a global company Our supply chain and customers operate in every continent However, we are based at our historic hubs - Derby (Civil Large Engines) - Berlin (Civil Small & Medium Engines) - Indianapolis (Defence) There is an inevitable trade-off between the alignment benefits of a global commodity-based structure and the responsiveness of a regional structure

8 How do we become more efficient? Capital investment drives efficiency in Aerospace, by giving new capabilities in design, manufacturing, logistics, administration and in-service monitoring Focus on what we do best, and find good partners - Large investments in design and manufacture of core commodities - Joint ventures with strategic partners (ITP, Techjet, Safran, Leibherr) - Risk/Revenue partners share inventory costs (KHI, MHI, ITP, Safran) Challenge existing assets and decide which activities are genuinely core - Do we want to be world class in logistics? - How valuable is order administration?

9 Discussion Please ask questions and share your own experiences