Supply Chain Planning and Management at Rolls Royce
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Supply Chain Planning and Management at Rolls Royce
Introduction of supply chain management and planning
Supply chain management is commonly described as: activities are designed, planned, operated, controlled and monitored in the supply chain to achieve creating values, building a competitive infrastructure, synchronizing supply with demand and so on. Planning, as part of SCM, indicates activities aimed at allocating, deploying or consuming resources to meet projected or actual demand over a long time period; for hierarchical operations planning, four parts starting from macro business planning and ending in micro order scheduling contribute to supply chain planning (DICTIONARY, 2018).
Introduction of Rolls Royce’s Trent 1000
Trent 1000 is a three-shaft high bypass ration turbofan engine with bladeless design manufactured by Rolls-Royce which first ran in 2006, mainly serving for Boeing 787 Dreamliner. It provides up to 3% better fuel burn than competitors and still keeps the record of the quietest engine ever in the world. A Trent 1000 engine consists of around 18,000 individual components (Rolls-royce.com, 2018). There are variants certified by the EASA (European Aviation Safety Agency) of all series Trent 1000 including Trent 1000-E, Trent 1000-H, Trent 1000- A, Trent 1000-G, and so on. (EASA, 2016). The latest Trent 1000 engine is Trent 1000 TEN which takes centre stage, completed the first flight in 2016 and continued powering for the Boeing 787 Dreamliner family of aircraft. Advanced technologies such as soluble core high-pressure turbine blades as well as smart design like the 3D aero design compressor ensure the engine be efficient and reliable (AGENCY, 2016).
Disclaimer: – The Logo of the company is used only to illustrate the topic in pictorial form.
Main engine modules
Compressor, Combustors and Turbine are three main sub-assemblies that contribute to Trent 1000. The compressor is made up with the fan, the alternating stages of rotating blades and static vanes; more specifically, Fan system is constituted by 20 blades and rotates at 2,700rpm, generating 85% engine’s thrust. Like the compressor, the turbine comprises of a rotating disc with blades and static vanes, called nozzle guide vanes. Both compressor and turbine have three types pressure level (low pressure, intermediate pressure and high pressure) (OJHA & RAGHAVA, 2013).
From purchasing raw materials to manufacturing components to assembling for getting a finished product, in order to run an efficient inbound network, Rolls-Royce selects its partners involved in each phase in strict accordance with global sourcing process which assesses the ability to deliver to Rolls-Royce standards. Its partners as logistics nodes in the whole process varying from suppliers to manufacturers, home and abroad collaborate each other smoothly.
In the joint international production program of Trent 1000, a large number of raw materials suppliers supply different materials to produce components, then deliver to assemble. For instance, Rolls-Royce purchases titanium materials from a Russian company VSMPO- AVISMA. The company provides the titanium mill products and semi-products including disk forgings and rings made of various titanium alloys (SALDA, 2015). Also, a Chinese company Baosteel Special Material Co. Ltd. supplies special steel to produce the disk and blade of the low-pressure rotor of the Trent 1000. Then, those raw materials and small parts will be sent to Japan and UK to manufacture more complex components. Kawasaki Heavy Industries takes responsibility to produce and assemble the intermediate pressure compressor module in the engine core. The IPC module consists of approximately 2,000 components (KAWASAKI, 2004).
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Meanwhile, the UK company GKN Aerospace takes charge of providing the rear fan case and outer guide vane mount ring for Trent 1000. Manufacture those parts takes place at the company’s sites in Newington, Connecticut, El Cajon, California and Mexicali, Mexico and the initial development units have already been delivered there (GKN AEROSPACE, 2015). After all the components being delivered to Singapore where is the only place to manufacture hollow titanium wide-chord fan blade outside the UK, Rolls-Royce Singapore Pte Ltd will assemble Trent 1000 engine at Seletar, and the final test for Trent 1000 also takes place there (ROYCE, n.d.)
Strategies used by the company in its Supply Chain Management (Digital platform & Central lead structure)
On the one hand, RR has already established the supplier code of conduct to set out the behaviors of global suppliers based on the criterions, policies and code conduct of RR. All suppliers contractually committed to or agreed to adhere to the standard. (suppliers, Rolls-royce.com, 2018).
Rolls Royce uses the lean process to simplify its inbound flow and to take out unnecessary process. For instance, in 2016, it removed 90% of the steps for sourcing and rewriting documents in a more intuitive format. Moreover, to focus on RR’s core products, it also outsources sub-system to simplify its production chain.
Human resource management
The company invests a lot in training and recruitment of employees to improve their skill, acknowledges and encourages them to participate in Professional organizations (e.g., Chartered Institute of Logistic and Transport). Plus, it also trains team members for separate level from a capability to leadership parts. Rolls Royce also focuses on the culture and behaviour of the employees that can lead the entire company to operate stably.
Roll-Royce use “Global Supplier Portal” to improve their communication channel. Besides it also adopts Strategic Scouring Toolset (ARIBA-Synthesis) to manage supplier during sourcing. Also, 3D print technology also is used for a higher production line. Meanwhile, source to pay digital platform was used for sourcing and management.
Future Procurement and Production
In order to make the procurement process more efficient and automatic, Rolls-Royce introduces technology system Coupa’s S2P. It gives the company opportunities to hook more closely into vendors. In the past, Rolls-Royce could only force suppliers to keep their systems updated in order to be compatible with the data sets and software that is used. With the flexibility of the cloud, Rolls-Royce can pull data from suppliers whose systems are not compatible directly with its platforms. This technology allows Rolls-Royce to be more collaborative with its suppliers around the world.
Fig. 1.4: – ASSEMBLY OF TRENT 1000
As Rolls-Royce aircraft engine products rank the leading international level with its outstanding product performance and competent service, the demand for its engine keeps increasing. With the digital revolution gradually eliminating the limits between the physical products and services, the engine product of Rolls-Royce in the future would be connected, contextually aware and comprehending and the design, test, and even customer service could all be done by digital technology. 3D printing technology is one of the best examples. This technology enables Rolls-Royce to break the boundaries of finding the certain shapes of tools to manufacture spares (ROYCE, 2018). The company decides to use 3D printing technology to manufacture the spares in the jet engine such as Trent 1000 to speed up the production rate and produce more light components.
Analysis of Supply Chain of Trent 1000（SWOT）
Strength: After exploring the inbound network of Trent 1000, efficient supplier management is the key for developing an advanced supply chain of Trent 1000 in Rolls Royce. Some details about how Rolls Royce to make its supplier management efficiently are listed as below.
First, Rolls Royce uses an accessible web-based “Global Supplier Portal” to facilitate two-way interaction with their suppliers, enabling them to conduct business transactions and communicate information (ROYCE, 2018). Several suppliers provide different materials to support the production of Trent 1000, such as VSMPO-AVISMA provides titanium material to Rolls Royce to use it as the base material of Trent 1000. The supplier management is complicated in the inbound network of Trent 1000 because all of the supplies of Rolls Royce come from different companies and counties, and they need to communicate with Rolls Royce in different ways, languages and times without a professional system. Thanks for the GSP, as Rolls Royce can interact with its suppliers efficiently and effectively to cooperate in the business.
Also, Rolls Royce implements an online system called Strategic Scouring Toolset (ARIBA- Synthesis) to facilitate supplier strategies and the creation of merchandise, contract creation and negotiation, analysis of supply chain spend and management of supplier performance. For example, in the production period of Trent 1000, Rolls Royce use Strategic Sourcing Toolset to arrange bulk buys, which can save engineering resource and increase material availability, and to alternate suppliers, share material, and purchase excess material so that the company can reduce material costs and increase the material availability (O’CONNOR, 2018).
Weakness: One of the essential disadvantages of the supply chain of Trent 1000 in Rolls Royce is that it does not set up a unified quality inspection and control system to supervise its quality of the products.
From suppliers to its customers, the whole working process of Trent 1000 are involved in different countries, like its manufacturing and assembling processes generally done in some developing countries such as Malaysia and Singapore. In such a situation, it is important for setting up a unified quality inspection and control system to supervise its quality of the products that produced in different countries because different countries have different standards of production and quality. If all of the worldwide partners of Trent 1000 follow their standards of production and quality, it will be a problem of the quality of the final product of Trent 1000.
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The well-published problem with the Trent 1000 engine, which grounded the Boeing 787’s of operators, is a typical case of product quality problem of Trent 1000 (ROYCE, 2018). This issue cases Roll-Royce a significant loss in its revenue, with its cash hits from this problem at the peak of 340 million pounds in 2018 and it also costs Roll-Royce the extra inspections that covered by cutting discretionary spending elsewhere (MR. EAST, 2018). Therefore, in order to make sure the whole quality of the products, it is necessary for Roll-Royce to implement a unified quality inspection and control system to supervise its quality of the products that produced in different countries.
Strength: Lean process made operations of RR turns to more explicit, direct and easy to control. By finding the bottleneck, the company produces what is needed, when it is needed and no more very precisely. Hence there is no redundant materials or product at stock because it will lead to high maintaining cost.
Weakness: low inventory lead to out of stocking of rare materials during the high demand season. And because of the cost of stock out is high and can generate poor relationship between customers and suppliers, much of the improvement need to be done in inventory control field.
Standardization and central lead strategy
Code of conduct mechanism makes suppliers management more effective and time-saving. Because Roll-Royce need not explain or guidance the transaction process during procurement, which will waste much time. As a result, RR can ensure pay suppliers on time. Furthermore, time of procurement cycle was deduced by the efficient information and economic chain. For instance, RR can monitor resources in accordance with the risk profile of suppliers. In addition to this, centrally led but locally deployed procurement strategy let procurement more flexible due to that all procurement sector are different, equipped with locally procurement deploy provide agility.
Weakness: may lose the opportunity with some suppliers who don’t want to follow the code of conduct.
Human resource management
Strength: After 30 years of procurement works the biggest challenge for Rolls Royce is not the technology or speed of delivery but the professionalism of the people is working. Professional procure teams are the core competitive advantages for a company. Specialized people lead to purchasing more efficient and accurate. Moreover, they also have a market sense to guide successful decision making. Also, a company with a good firm culture is more likely to run a harmonious and orderly way.
Weakness: the cycle of training talents is relatively long, and RR have to invest a lot to the cultivating program.
Strength: The technology helps Rolls Royce achieve direct management of suppliers and the procurement process. In terms of information sharing, through these digital platform directors gain more complete messages from each part. Therefore, they can easily know about when and where the raw materials or the products are needed, which maximize eliminate waste of repeated production and procurement. And by aligning with all company’s accounts payable and procurement operations the consistence interface S2P allows better visibility into its data thus greatly avoid procurement repetition or information error and easier to establish benchmark.
Weakness: investment in this high-tech is huge, meanwhile it shares the same human and economic resources with core tech. so the competitive of core tech in engine may decrease due to the lack of resource.
Introduction to Production vs Outsourcing of Rolls Royce
A Trent 1000 engine is made up of approximately 18000 individual components (ROYCE, 2016). Some of its modules are produced by Rolls-Royce itself, while most is outsourced. For instance, around the world, less than 50 companies can produce high-temperature alloy for aerospace. Rolls-Royce is one of them and has developed its technology of producing directional solidification and single crystal alloy for years which enables Rolls-Royce to have access to self-produce high-pressure turbine blade domestically (OJHA & RAGHAVA, 2013). By contrast, rear fan case for Trent 1000 is outsourced to GKN Aerospace and manufactured in the United States of America and Mexico (GKN AEROSPACE, 2015). Both raw materials delivering to manufacture site and finished product delivering to assembling site would take much longer time than in-house manufacture. Also, outsource increases risk. For example, the probability of manufacturers delivering modules in poor quality will influence the whole manufacturing process and result in the final assemble delay. On the other hand, outsourcing enables Rolls-Royce to avoid large investment in equipment, technology, and other aspects, thus reducing the cost of labor, and avoiding waste in equipment parts procurement and production (KAWASAKI, 2004).
Rolls-Royce: Make vs Buy
Rolls-Royce being a company manufacturing a huge but a very critical product that is the airplane engine; of course, it is not possible to manufacture every part in-house, but the company faced many technological issues in outsourcing the product. Rolls-Royce initiated the outsourcing of its IT management system back in 1996. Only the core IT competencies were kept in-house. The decision was taken keeping into account at least 10% reduction in the cost, but there were some flaws in the decision due to which the IT outsourcing simply for procurement did not seem to capture the true strategic discussion in Rolls-Royce ( Gottschalk & Solli‐Sæther, 2005).
The company has shifted through from the make towards buy in the last two decades. It now designs only around 70% of the components. The purchase was made by means of competitive tender from the suppliers, but the company found that this was not working especially where the suppliers did the design of the components.
The major problems that were faced were of non-meeting the specifications and quality compliance required by Rolls-Royce. Later in 1991, the company developed a separate task force to manage the procurement of the engine parts that were designed internally but manufactured by the suppliers. The company has now narrowed down the supplier list for different parts worldwide and then collaborate with the suppliers for specific order only after the supplier meets the company compliance (ROY & STEPHEN, 1996).
Future order (opportunity)
With the increasing demand of the aircraft, the future order for Trent 1000 engines will continue to grow. Trent 1000 engine, as the main engine to power the Boeing 787 Dreamliner family of aircraft, pays an essential role in the development of worldwide airlines. In the past few months, there was a well-published problem with the Trent 1000 engine, which grounded the Boeing 787’s of operators, and it made Rolls Royce focusing on improve and redesign Trent 1000 engines (ROYCE, 2018). After the date of the issue, Rolls Royce took some measures to solve the problem and improve the quality of Trent 1000.
Now, the Trend 1000 is protected by Total Care®, a flagship engine service of Rolls-Royce that improves the reliability of the engine increases time on wing, and maximizes the engine contribution to business performance. Moreover, the good news is that the company won an order of $1.7 billion, which from Airlines of Singapore, for powering 19 Boeing 787 Dreamliner aircraft by the use of Trent 1000 engines (ROYCE, 2018). It is a good and new starting point for Trent 1000 and Rolls-Royce after the issue of the Boeing 787 of operators because it is based on a strong and long-term relationship between Rolls-Royce and Airlines of Singapore.
In the future, the performance bar of Trent 1000 will be set as higher as the engine’s Ten and improve the performance of the Trent 1000 so that it can maintain its deserved reputation for reliability and bringing even further advantages to customers regarding efficiency (Media, Rolls-royce.com, 2018). Also, in order to minimize the impact of unexpected wear issues on cash flow, Roll-Royce will offer airlines maintenance credits that limit direct compensation for grounding Boeing Co.787 planes (KARTZ, 2018).
Threats and Risks
Shortage of Resources: Exotic and advanced materials are needed for Rolls-Royce to create distinguished engine –Trent 1000. However, these kinds of materials (e.g., high-strength nickel-based alloys) are in short order. Therefore, if one has issues, it can disrupt the whole supply chain throughout the entire global network.
To alleviate the disruption and make the supply chain more resilient, this company developed an extensive risk management mechanism from following steps: first forecasting customer’s demand; second identify the single or susceptible resources; third find a replaced resource chain. So, no matter which one of this resource chains broken or have some issues the procurement teams can still adopt the alternative resource chain immediately to complete the procurement.
Limits of Technical Capability risk:
As for some cutting-edge complex sub-systems, Rolls Royce may not have enough economic supports to develop such high-cost program. Therefore, the company is facing a risk of replacement by other competitors in the production of technical components field.
To deal with this, Rolls Royce also purchases sub-system from suppliers. Through this process, Rolls Royce not only can save energy for developing but also built a long-term partnership with suppliers through risk and revenue sharing arrangements.
By taking into consideration all the collaborative measures taken by the company we can say that Rolls Royce is looking forward to having smooth and healthy relations with the suppliers. Over the years of development and all the problems faced company has now standardised the HRM, Procurement technology, Manufacturing process, and all the conducts to make a fully functional Trent 1000. Though the company faced many critics due to the problems occurred in the Trent 1000 the company did not stop the development process which gave confidence to the customers. The company’s strategy for manufacturing the airplane engine, it uses the direct procurement technique for different parts required in the engine. Majorly the company focuses on designing part of the engine and its parts and asks its supplier to manufacture and supply as per order.
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