Rolls Royce Marketing Strategy in Singapore - Report Example

Research report Contents Contents 2 Introduction 4 Discussion 5 Factors driving the choice of Singapore as the manufacturing location for Rolls Royce5 Development of Singapore 5 Economic growth 5 Infrastructure 6 Aerospace industry in Singapore 6 MRO systems in Singapore 7 Development of the Seletar Aerospace Park 7 Supply chain and resources 8 The potential challenges and risks to be considered in improving Rolls‐Royce’s international supply chain performance 9 Risk related to operations 9 Risks related to suppliers 10 Uncertainty in the global supply chains 10 Risks related to inventory and distribution 11 External risks 11 Recommendations to handle the potential challenges/risks in Rolls‐Royce’s international supply chain 12 Recommendations for meeting operational risks 12 Recommendations related to supplier risks 13 Recommendations to meet uncertainty risks 13 Recommendations to reduce inventory and distribution risks 14 Recommendations to meet external challenges 15 Conclusion 15 References 16 Introduction Rolls Royce is a multinational company headquartered in London and a manufacturer and distributor of power systems. It was founded in 1906 by Henry Royce and Charles Rolls in Manchester. It has major business in manufacturing of aircraft engines, marine propulsion and energy sectors. Rolls Royce has manufactured several types of aero engines for several aircrafts of all sorts such as passenger jet, cargo jets, sea-planes, military jets etc. Under the government of Margaret Thatcher, Rolls Royce was privatized in 1987. In 1988, Rolls Royce acquired Northern Engineering Industries to form Rolls Royce Industrial Power Group. In 1990, BMW and Rolls Royce formed a joint venture and manufactured engines for corporate and private jets before BMW dropped out and Rolls Royce full took full ownership renaming it Rolls Royce Deutschland. Currently, Rolls Royce has businesses in Turbojets, Turbofans, Turboprops/Turbo shafts, Gas Turbines, Propellers, Submarines, Hydrodynamic Bearings, Stabilizers, Compressors and distributed generation systems. Rolls Royce is renowned for its high level of excellence in the engineering field and is one of the most powerful manufacturers of the aero engines used in the global civil, marine and defence aerospace industries. Rolls Royce is a global company in the true sense which has started to establish its operations in different locations to become one of the leading providers of engines and parts for aerospace companies. The company has focused extensively in expanding in the developing markets of aerospace like Asia which accounts for almost 29% of the global revenue of Rolls Royce and 34% of its order bookings. Rolls Royce had correctly identified Asia as a potential aerospace market which has been established by the increasing dominance of Singapore in the global aerospace market. Singapore has emerged as an important airlines hub and has extended facilities built to support the operations of different companies in the aerospace industry including Rolls Royce. Discussion Factors driving the choice of Singapore as the manufacturing location for Rolls Royce Development of Singapore Rolls Royce earmarked the Asia Pacific region as the most potential and fast developing region. The emergence of different nations in the Asia Pacific region as international powers and the establishment of a higher level of trade and transport in this region prompted Rolls Royce to invest in the area by opening up its offices and manufacturing facilities in the area. Rolls Royce is a visionary company which recognized the future prospects of the Asian countries like Singapore and China long back (Bozdogan, 2005, pp.190-205). The first entrance of Rolls Royce in this region was through the establishment of a representative office in Singapore in the early 1950s. Rolls Royce made huge investments in establishing its operations in Singapore which drove the exponential growth of the company in the foreign land. Economic growth Singapore is one of the most popular and prominent commercial hubs in the world. The country has strong economic features and boasts of maintain one of the busiest ports and the fourth largest financial centre in the world. The highly diversified and globalized economy makes it an important market for foreign multinationals to enter into. The high level of trade and manufacturing activities has given rise to a strong and potential economy having the third highest per capita income in the globe in terms of purchasing power parity (PPP). Infrastructure The global aerospace industry is expected to Singapore has emerged as a major hub for aviation. The location is supported by a high standard of infrastructure and other supports to encourage the foreign companies to set up their manufacturing facilities in Singapore. The aviation hub has state of the art facilities which include a giant Maintenance, Repair and Overhaul (MRO) industry which facilitate the operations of foreign businesses in the aerospace industry of Singapore. The aviation hub is focused to increase the functionalities of the aerospace industry by making various important facilities like training, manufacturing and MRO available in the region. The global aerospace industry has been slowed down by the financial downturn of 2008. But the industry is recovering fast and is expected to have an accelerated growth in the coming years. The aircraft fleet sizes in Asia ate forecasted to increase from 16,500 in 2012 to 28,000 in 2030 which indicates that the industry has high prospects for the future. The SIA group in Singapore has a revenue growth of more than 14% per year and reported a net profit of 540 million GBP in the financial year 2011-2012. The revenues from the Maintenance, Repair and Overhaul facilities in Singapore are projected to increase manifolds from its current value of 15 billion GBP. Aerospace industry in Singapore Singapore is one of the most developed international air hubs in the world. The Changi International Airport in Singapore airport is recognized as the best airport in the globe and has been the receiver of a number of awards. The aerospace industry in Singapore has been growing at an impressive arte of 14.3 % per year and had been established as the most comprehensive and functional MRO hub in the Asian region. The aerospace industry has expanded remarkably in the past few years and has also influenced the growth of the aerospace manufacturing industry. The increasing level of operations of the aviation sector existing in the Asia pacific region has fuelled the growth of the aerospace industry in Singapore. Also, the encouragement and support provided by the Singapore government to the foreign aerospace manufacturing companies to start their business in Singapore can be identified as one of the main reasons behind the choice of Rolls Royce in establishing its full-fledged manufacturing operations in the country (Rolls Royce Company Website, 2013, p.1). The choice of Singapore as a regional hub for establishing many manufacturing and operational activities of Rolls Royce was guided by the first class manufacturing facilities and business environment provided by the island country as well as the highly economic and beneficial partnership provided by the Singapore Economic Development Board. MRO systems in Singapore Singapore has emerged as a major centre for the aerospace in which the maintenance, repair and overhaul (MRO) systems are suitably equipped to cater to the increasing demands in the aviation service hub dedicated to the serve the aerospace industry in this region. The number of independent international companies operating in the MRO sector of Singapore is more than 100. This makes Singapore the most obvious choice for aerospace manufacturing companies like Rolls Royce, Prat and Whitney etc. to establish their manufacturing operations. Development of the Seletar Aerospace Park The development of the Seletar Aerospace Park is another major boost for the operations of Rolls Royce in the country. This Aerospace Park has been designed as an industrial park dedicated to serve the aerospace industries in Singapore and adjacent areas. Rolls Royce has established the Rolls Royce Seletar in 2008 in the Seletar Aerospace Park with an objective to combine advanced technologies, skilled labour resources and state of the art manufacturing techniques to manufacture the most advanced and developed engines for use in the aerospace industry. The Seletar Aerospace Park provides for unique opportunities in the aerospace manufacturing industry and has increased the attractiveness and capabilities of the aerospace sector existing in Singapore. Supply chain and resources The aerospace industry in Singapore is characterised by a high level of synergy and cooperation among the supply chain entities an activities making the industry a high performing and valuable industry. The robust supply chain systems and the infrastructural support have enables Rolls Royce to establish a successful operations and supply chain management in the region. Rolls Royce has established a varied range of operations in the value chain of the manufacturing business in Singapore including technical support, MRO, sales and marketing, procurement and Research and Development. Apart from the world class manufacturing facilities and infrastructure, there is cheap and abundant source of labour in the island nation. Aerospace industry outlook (Source: Deloitte Touché Consulting, 2013, p.14) The potential challenges and risks to be considered in improving Rolls‐Royce’s international supply chain performance Risk related to operations Rolls Royce is a major aerospace manufacturing multinational which operates in the major global markets for civil aerospace, marine, energy and defence aerospace. The supply chain and operations management of the company is of critical importance in driving the success and sustainability of the business in future. For succeeding in the global aerospace market, it is critical for Rolls Royce to maintaining operational excellence and ensuring that all the negative performance factors in the operations are removed. This can be achieved by the implementation of the principles of housekeeping, lean principles, six sigma, quality system, performance management, continuous improvement, visual management, fail proof processes, material handling, change control etc. (Womack, Jones and Roos, 1999, p.212) Risks related to suppliers The global aerospace industry is shifting towards more integrated supply chains and value chains (Ogunsanya, 2012, p.116). This has led to the development of risks associated with the management of relationships with the suppliers and the maintenance of effective processes in every step of the supply chain starting from procurement of the supplies. Rolls Royce is also facing challenges related to the procurement process and the selection of suppliers. These challenges include finding suppliers who satisfy the generic requirements of providing a competitive cost framework suitable for the emerging markets, involving in Long Term Agreements (LTA) and being financially stable. Other challenges faced in the international supply chain of Rolls Royce include maintaining transparency in the supply chain activities, implementing cost modelling, zero defect quality, world class delivery, continuous improvement and lean manufacturing (Fisher, 1997, p.78). Uncertainty in the global supply chains The increasing level of uncertainty in the international supply chains involved in both the defence and civil aerospace industries are the major challenges faced by Rolls Royce. The supply chain in Rolls Royce is a complex chain involving huge volumes of suppliers and partners. The company faces much difficulty in managing the supply chain partners with high variability ion the demand and supply and with extended lead time. The extended supply chains in Rolls Royce more popularly known as value chains are more difficult to manage due to the huge number and variations of suppliers, manufacturers, sub suppliers and partners. Rolls Royce manufactures 30% of its gas turbine production volume in house and the rest 70% is manufactured by the partners and suppliers. This creates a risk of coordination and management of the external suppliers and manufacturers. Though Rolls Royce has developed innovative concepts like the early supplier management program within their supply chain to mitigate risks, yet the involvement of many suppliers and logistic partners affect the supply chain causing increased lead tomes and quality problems which may be derogatory for the performance of the brand (Simchi-Levi and Kaminsky, 2000, p.214). Risks related to inventory and distribution Rolls Royce may also face the problems of inventory stockpiling, chaos in the process flows, delayed deliveries to the customer companies due to the increasing number of levels in the global supply chain (Killingsworth, 2008, p.442). The collection of inventory from different locations due to introduction of sub-assemblies may lead to longer procurement cycles which in turn would put the company behind the set manufacturing schedule. The chaos in the process flows in the supply chain may cause inefficiencies within the supply chain. Though the company implements suitable techniques like Just in Time (JIT) and Vendor Managed Inventory (VMI) in their supply chain, the increase in the lead time has been a major issue for the business. The procurement process of Rolls Royce involves the ABC analysis for inventory management to categorize the inventory on the basis of priority. But in the fast evolving trends in supply chain management in the aerospace industry, the company may need to introduce newer methods of inventory management and production planning. External risks Risks also arise from the different social, political and technological issues arising in different countries of operation of Rolls Royce. The lacks of ownership in the partnering organizations involved in the global supply chains create the challenges of effective management due to the lengthy and intertwined structure. In the background of the increasing concerns over environmental issues, Rolls Royce is facing urgency in building an environmentally sustainable supply chain in the business. The risks involved in the international supply chain process of Rolls Royce are arising with the changing perspectives of the global market. These risks are unpredictable and may times arise in the process of controlling other issues (Gostic, 2001, pp.44-48). Recommendations to handle the potential challenges/risks in Rolls‐Royce’s international supply chain Recommendations for meeting operational risks Rolls-Royce gives lot of importance to gain operational excellence over its competitors and have a competitive advantage in the global competitive market. The supply chain network is an integral part of its overall operational process to have a huge benefit. The company uses pull-strategy as it operates in an uncertain environment where the demand fluctuates at a regular interval and it can’t take mass production as an option for its production. To face the changing demand condition in the market the company needs to have a robust supply chain management network having access to new suppliers and also capacity without increasing the initial cost. This will help the company to have more suppliers which will enable them to have their just-in-time management for the inventory management and also for fast movement of the materials form the suppliers to the plant. This process will also help the company to remove the problem it faces because of the shortage of raw materials at the crunch moment which can stop the entire production process of the company. Recommendations related to supplier risks The company must look to have a good policy to evaluate its suppliers and have a good suppliers rating to know who the good suppliers are and who are not, and look to improve the suppliers by providing them training as well which will make the raw materials also of good quality and also increase the efficiency of the suppliers (Womack and Jones, 1996, pp. 45-49). The company must encourage the suppliers to take third party certification like ISO 14001 to build better practices and to increase efficiency. Rolls Royce can focus on reducing the risks involved with supplier performance by maintaining a strong network of suppliers. The exposure to risks in the supply chain can be limited by establishing more than one stable source of manufacturing supplies (Beason, 2005, p.45). This would help in creating a buffer for the company. In case one of the suppliers does not perform on a regular and strong basis, Rolls Royce would have the option of sourcing its supplies from other suppliers. Therefore, the pressure from the demand of the aerospace companies related to the presence of spare parts can be met with (Sterman, 2000, p.56). The dual sourcing process implemented in the global supply chains of the business would establish the quality requirements but may also increase the time of the sourcing process. To ensure that the dual sourcing strategy is implemented optimally, Rolls Royce should ensure exhaustive screening processes for the selection of the potential suppliers. Recommendations to meet uncertainty risks The company must look to conduct Quality Functional Deployment to know the exact requirement of the customers based on the design, specifications and also quality that the customers are expecting and need. Knowing the customers’ expectations and needs will help the company to make products based on those parameters as a result of which the sales volume will increase because customers will get the exact requirement that they need. This technique will help them to achieve the customer’s satisfaction in a better way. QFD (Quality Functional Deployment) can be done only by the information that the company gets from the customers in the form of the feedback and other suggestions (Brindley, 2004, pp. 78-82). This information does flows from the customers to the company through the supply chain network in the backward directions and helps a lot to the company to improve its process and also come up with more creative and quality products. Apart from QFD the supply chain must also help the company to gather information about the value that the products been offered to the customers provide to the end consumers in which ways. This will help the company to know the exact value that the product creates in for the customers and help them to achieve the best customer satisfaction in the long run. Recommendations to reduce inventory and distribution risks Rolls Royce should also involve the major strategic suppliers in the early stages of manufacturing like product design and development to ensure that more value is created through the value chain (Kearney, 2002, p.178). The business should focus on strategic collaborations with suitable suppliers and distributors. Also, an increased level of collaboration among the various entities in the whole supply chain management process would ensure better innovation and performance in all the stages of the supply chain. The collaborations with strategic partners would also help Rolls Royce to mitigate the risks by risk sharing and reducing the invested capital. The collaborations would enable Rolls Royce to decrease the cost of manufacturing and other operations as well as achieve the economies of scale which is critical for a business operating in a foreign location. Recommendations to meet external challenges Rolls Royce can establish integrated value chains in the business by adapting new technologies to maintain the growing complexity of the supply chains, controlling the costs, time and performances of each level of the supply chain, capitalizing on the core competencies of the supply chain and incorporating new component and technologically advanced equipment to ensure a better production process (Ridgway, 2008, p.15). Shifting from supply base management to supply chain development would be a beneficial strategy that can be implemented by Rolls Royce to create competitive advantage and sustainability for the business. Taking up the green supply chain would help the business to become environmentally sustainable and would help it to create competitive advantage in the global market. To build an environmentally sustainable supply chain Rolls Royce should incorporate effective processes of recycling, remanufacturing and waste management. Conclusion Rolls Royce has established itself as a successful business in the aerospace sector in Singapore. The company is responsible for more than 15% of the total output from the Aerospace industry of Singapore. Rolls Royce has implemented innovative strategies to establish a strong business in the industry. The joint ventures with alliancing companies in the industry like the Singapore Airlines Engineering Company have facilitated the operations of Rolls Royce to a high extent. It can be identified that Rolls Royce has achieved a competitive edge in the market through efficient internal capabilities in the operations and supply chain management. The company is highly renowned for the capability of its supplier network and the high level of collaboration and coordination displayed in managing the international supply chain for the business. However, due to the changing global trends in the aerospace and defence industries, it has become critical for Rolls Royce to implement suitable techniques and strategies in its supply chain to manage the complexity and discrepancies within its vast supply chain. Rolls Royce has already collaborated with the Lean Aerospace Initiative launched by MIT. This has helped the company to learn and implement new techniques, principles and practices in its supply chain process ensuring better competitiveness for the business. Rolls Royce has also incorporated its knowledge and expertise from the successful business in UK to devise business strategies in its operations in other countries. The business practices of the Rolls Royce are carefully designed to align them with the supply chain model, operational objectives and major business strategies and goals. These initiatives have been much beneficial in helping Rolls Royce to improve its performance and establish robust and world class supply chain and operational processes for the manufacturing business. References Beason, M. 2005. Lean Supply Chain Management Principles derive from Basic Lean Thinking. London: Routledge. Bozdogan, K. 2005. Aerospace Industry: an Industry of Industries. Policy and Industrial Development. Vol. 16(2), pp.190-205. Brindley, C. 2004. Supply Chain Risk. America: Ashgate. Deloitte Touché Consulting. 2013. A New Reality of the Aerospace Supply Chain. [Pdf]. Available at http://www.theoac.ca/Storage/29/2375_Deloitte_presentation_11-12-2013.pdf. [Accessed on 20 March 2014]. Fisher, M. 1997. What is the Right Supply Chain for Your Product? [Online]. 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