The CFBU: Capturing and Cascading Customer Requirements

After analysing the results of the interviews, the questionnaires and other research done within Rolls-Royce, there were some common themes identified as issues for the CFBU.

6.2.1 Communication of Requirements

Firstly it seems that there is a lack of clarity in what is communicated from the CFBUs to the SCUs. One interviewee conceded that often CFBU often places the demand at the lead time (as per that set in SAP) and wait for the part to arrive, only expediting it when it is late. This causes additional problems in that once parts are late; much time is then

spent by the CFBU tracking each component. For example in the Marine business there are teams of people that sit on link calls on a daily basis tracking the delivery of critical late parts. Currently the Marine business is tracking about twenty critical parts in this way. The feeling was that if more effort was focussed on the sourcing of these parts then the manpower requirement in the CFBUs for tracking and monitoring these parts would be much lower.

In researching this idea of requirements cascade further the author found that for new engine projects being launched, the CFBU issues a Supply Chain Requirement Document (SCRD) to the SCUs detailing exactly what is required of the supply chain for that engine. This is used as a guide and a reference by the SCU when they are making supplier selection decisions. For the legacy engines this is not something that is done, the implication perhaps being that the SCRD was communicated when the engine was originally launched. This seems to be a fairly specific issue for Rolls-Royce as it does not match with any of the themes identified in the literature. The one area where a link could be made is that of aligning objectives between departments and this will be covered in a later section.

6.2.2 Forecasting

Forecasting was identified both in the interviews and in the questionnaire responses as a contributor to late delivery of legacy and low volume components. The view from the CFBU interviews was that often, they have to over forecast to cover delivery issues in the supply chain or to meet the requirement for life-of-type-buys4 _{and minimum order} quantities. All of which drives up the inventory levels and leaves obsolete parts and money tied up in working capital. There was the admission that the signal forecasted to the supply chain often moves around which can cause uncertainty in the supply chain. From the SCU point of view, it was stated by many buyers in response to the questionnaire that there is a need for increased accuracy of forecasting aftermarket requirements and that customers need to give longer term visibility of requirements so the most appropriate sourcing decisions can be made when these parts are required. While the problems with forecasting are understood, it has to be noted that scheduling is difficult for legacy and low volume parts, for example, engines in the Marine business may come in after 30 years of being in service and be stripped down for overhaul. The parts used on engines of this age will most likely be old modification standards, in some

4

_{Agreeing to buy a finite quantity from a supplier to cover all future demands, therefore}

cases newer versions can be used as replacements but in other cases these older standard parts are still required. This difficulty with forecasting aftermarket legacy and low volume parts was noted in the literature review as a common problem for these types of parts. One solution discussed in the case study section was to have a separate system to forecast legacy and low volume components because a different approach will yield more accurate results. This is something that should be considered as part of a framework on managing legacy and low volume components.

6.2.3 Strategy

When asked specifically about the strategy for legacy and low volume parts, responses were mixed but included one view that operationally, the PILM process asks questions at the point of an engine coming to the end of production (gate 4.2). However there was also the view that, while the PILM works once you get to that point in engine lifecycle, more work is needed in advance of the engine getting to this point to map out the plan for the engine at the earlier lifecycle stage for what will happen when it reaches the later stages. This view that changes are needed was supported with an example that, one programme, the 19DD, went through the 4.2 PILM gate and even after a major delivery failure investigation, there are still parts on that programme that are un-sourced and that are late to the requirement. It was noted that improvements have been made since this instance and for example PPES are looking at a parts retirement policy, which will be further discussed later in this section.

From the customer point of view the thought was that the CFBU strategy is not clear on what the specific requirements are and what will be supported and until when. An explanation given for this was that when Rolls-Royce strips an engine that has come in for analysis on a time and materials basis, the customer will be informed as to how much roughly it will cost them to repair. In some cases they may decide to stop work on the repairs, as the cost may be too much. What happens often then is that Rolls-Royce may then negotiate with the customer and reduce the price as it is felt that a profit can still be made, albeit eroded due to the lower price deal. The question has to be asked as to whether the full costs of securing a deal are understood, and if this is done with an understanding of the true full costs of sourcing the components required to fix the engine.

The strategy stated for the services business is to continue to encourage customers to purchase the ‘power by the hour’ type service contracts where they pay a set fee per month for example and all maintenance is included in this fee (Rolls-Royce, 2011b). This

kind of contract is usually aimed at the newest engines like the Trent 1000, the Trent 900 and the Trent XWB for example. For legacy engines, these kinds of agreements are less common because TotalCare agreements are with the airline not the aircraft/engine therefore they are not necessarily aimed at supporting the whole life of the engine, more the life of the engine while the operator with the deal has the engine. Often operators that buy new will often sell off their aircraft after a certain amount of years and at the point the engine is acquired by someone else, they will have to get their own agreements. When the engine is older it may not be as cost effective for the new owner to take out total care, they may have to go time and materials.

6.2.4 Use of Partners

Aside from problems identified, there were some other points of interest to note. Namely that in the literature review it was discussed that some companies use a third party to look after their legacy and low volume components or their aftermarket requirements. In researching this further within Rolls-Royce, it appears that some partners are used in certain parts of the business.

In the Helicopters section of the civil aerospace business, Rolls-Royce does make use of service providers to support aftermarket requirements. Aviall is the partner used for M250 engines and they support all aftermarket requirements for these engines. AAR is the partner used for the RR300 engine “AAR provides supply chain management functions for RR300 spare parts”. Finally, API supports CTS800 engine spares (Rolls- Royce, 2011c).

Within the Civil large engines part of the business, Aviall are also now a partner for the RB211-524 engine. Rolls-Royce sold their RB211-524 inventory to Aviall and they now manage these components for the company. It was noted in one of the interviews that Aviall already cover the aftermarket requirements for the main aircraft that this engine fits on, the Boeing 747, therefore this is a good fit for them and makes sense for Rolls- Royce.

Aviall as part of the deal will be responsible for “forecasting, ordering, and delivering all Original Equipment Manufacturer (OEM) genuine replacement parts that are unique to RB211-524 engines and will assume responsibility for documentation management, worldwide inventory deployment, warehousing, and product distribution.” (Flight Global, 2010).

This use of partners in a few small areas is interesting as it could indicate that this is the direction the company may wish to proceed in the future. The deal with Aviall for the RB211-524 was only signed in mid 2010 and so this is a fairly recent development for the large engines part of the business.