Fachhochschule Wiener Neustadt für Wirtschaft und Technik GmbH

Develop a strategy for Alien and Stranger parts within Turbine Systems of Rolls Royce plc

Michael Rinner

Table of Contents

A. Introduction and motivation ... 10

A.1. Background of Rolls-Royce Plc (R-R) ... 10
A.1.1. Global overview ... 10
A.1.2. Field of business activity ... 11
A.2. Organisational structure of R-R ... 12
A.2.1. Customer Facing Businesses ... 13
A.2.2. Operations Businesses ... 14
A.2.2.1. Fan Systems ... 15
A.2.2.2. Compression Systems ... 15
A.2.2.3. Combustion Systems ... 16
A.2.2.4. Turbine Systems ... 16
A.2.2.5. Control Systems ... 17
A.2.2.6. Component Services ... 17
A.2.2.7. Indianapolis Operations ... 17
A.2.3. Enterprise resource planning (ERP) build-up ... 18
A.2.3.1. ERP architecture ... 18
A.2.3.2. Logistic relationship ... 20
A.2.3.2.1. Free issue material (FIM) ... 20
A.2.3.2.2. Bought out finished (BOF) ... 21
A.2.3.2.3. Build packages (BP’s) ... 22
A.3. Scope of this thesis ... 23
A.4. Intent of this thesis ... 24

B. Definition of an A&S ... 25

B.1. Frequency demand characteristic ... 25
B.2. Frequency demand vs. selling expectation ... 28
B.3. Causes of an A&S profile ... 30
B.3.1. A&S profile by reason of development ... 30
B.3.2. A&S profile by randomly distributed breakdowns ... 32
B.3.2.1. Actual unforeseen breakdown ... 33
B.3.2.2. Day-to-day wear and tear ... 35
B.3.3. A&S by route ... 37
B.3.4. A&S by process ... 39

C. Development of TS & CoSe complementary strategy ... 41

C.1. Analysis of TS characteristics ... 41
C.1.1. TS core competence ... 41
C.1.2. Turbine Systems manufacturing environment ... 42
C.2. Analysis of CoSe characteristics ... 43
C.2.1. CoSe core competence ... 43
C.2.2. CoSe manufacturing environment ... 44
C.3. Influence on complex supply chain issues ... 45
C.4. Plant part portfolio analysis ... 46
C.4.1. Analysis of TRBL part portfolio ... 46
C.4.1.1. Total part distribution of TRBL ... 47
C.4.1.2. Legacy parts controlled by TRBL ... 52
C.4.1.3. Legacy seals vendors in TRBL ... 53
C.4.1.4. Pareto Analysis of TRBL’s legacy seal suppliers ... 54
C.4.1.5. Types of part portfolios ... 58
C.4.1.5.1. Legacy only part portfolio ... 58
C.4.1.5.2. Diverse part portfolio ... 59
C.4.1.6. Part transfer options ... 61
C.4.1.6.1. Transfer of all parts: ... 61
C.4.1.6.2. Transfer of particular parts ... 61
C.4.1.6.3. Transfer of delivery accountability to CoSe ... 62
C.4.2. Consideration of frequency demand ... 62
C.4.2.1. Variability Analysis ... 62
C.4.2.1.1. Approach ... 63
C.4.2.1.2. Variability Analysis in practice ... 66
C.4.2.1.3. Calculation of frequency demand ... 67
C.4.2.2. Volume/frequency matrix ... 68
C.4.3. Additional considerations ... 70
C.4.3.1. Technical support expertise ... 70
C.4.3.2. Manufacturing routes ... 71
C.4.3.3. Global strategies ... 71
C.4.4.Concluding application ... 71

D. Pricing and inventory policy ... 72

D.1. Pricing of A&S ... 72
D.1.1. Life cycle costs (LCC) ... 72
D.1.1.1. Causes of cost increase in post production stage ... 74
D.1.1.1.1. Production disruption and efficiency loss ... 74
D.1.1.1.2. Re-learner processes ... 75
D.1.1.1.3. Additional labour and tooling costs ... 78
D.1.2. Cost example ... 79
D.1.3. Pricing policy ... 82
D.2. Effective batching inventory policy ... 84
D.2.1. Maintain a supply chain for future demands ... 84
D.2.2. Customer funded LOT buy ... 85
D.2.3. Engineering solution for A&S by process ... 85
D.2.4. R-R funded LOT batch ... 85
D.2.5. Frequent batch production ... 86
D.2.6. Usage of second hand material ... 87
D.2.7. Cost example ... 88

E. Application of risk management processes to A&S supply chains ... 94

E.1. Purpose of risk management ... 94
E.2. Scope of application ... 96
E.3. Risk management process ... 96
E.3.1. Preparative data acquisition ... 97
E.3.2. List preparation ... 97
E.3.3. Hold a risk assessment ... 98
E.3.4. Risk identification ... 98
E.3.5. Risk categorisation ... 99
E.3.5.1. Risk level 1 ... 99
E.3.5.2. Risk level 2 ... 99
E.3.5.3. Risk level 3 ... 100
E.3.6. Set actions ... 100
E.3.7. Control set actions ... 101
E.3.8. Illustrated risk management process ... 102
E.3.9. Advantages of risk management ... 103
E.3.10. Improvements to process ... 104
E.3.10.1. Automatic risk level categorisation ... 104
E.3.10.2. Time interval reduction ... 107

F. Résumé ... 108

G. Index of acronyms ... 110

H. Index of definitions ... 112

I. Table of figures ... 115

J. Table of tables ... 117

K. Table of equations ... 118

L. Table of literature ... 119

Appendix ... 121

A. Introduction and motivation

This introduction defines the background to and the intent of this thesis.

A.1. Background of Rolls-Royce Plc (R-R)

One essential part of this introduction is to explain and illustrate the complexity of a large international company like R-R, as it varies greatly from an average Austrian company.

A.1.1. Global overview

R-R is a global operating company (see figure 1) and employs about 40,000 people worldwide.

Figure 1: Worldwide operations overview of R-R (only available in download-version)

The UK facilities on their own have a range of 22 different sites as shown in figure 2.

Figure 2: Rolls-Royce – UK sites (only available in download-version)

The main UK site (parent company) is located in Derby, England (see figure 2, number 5) and is partly locally and partly organisationally divided into separate business units. The Derby site can be compared with an entire industry district, whereas all facilities are R-R facilities. R-R Derby employs about 10,000 people.

A.1.2. Field of business activity

R-R is a company with focus on four different main business areas.
They:

• Provide engines for the civil aerospace market,
• Power military aircrafts,
• Supply a wide range of energy power plants, and
• Manufacture engines for the marine business

in addition to activities in the area of financial services.

As people often associate the name ‘Rolls-Royce’ with luxury cars it should be stressed that the car division (Rolls-Royce Motor Cars Ltd) was split up in 1973 and is consequently not (!) a member of the R-R group.

A.2. Organisational structure of R-R

As already mentioned (see section A.1.1.), R-R is subdivided into separate businesses.
Figure 3 illustrates the four main business areas (Civil Aerospace, Defence, Marine, and Energy), the so-called Customer Facing Businesses (CFBU), as well as their appropriate Operations Business Units (OBU).

Figure 3: Company organisation chart (only available in download-version)

This structure, its inner relations, and its derivation will be explained in the following sections.

A.2.1. Customer Facing Businesses

The CFBU represent the interface between R-R and their external customers (e.g. airlines, like Airbus, Boeing, or Gulfstream) as well as the internal interface to the OBU’s.
Each OBU is responsible for delivering parts to the adequate business area(s) by fulfilling customer requirements, costs, and supply chain management needs.
Figure 4 demonstrates the CFBU’s supply chain map using the example of the Civil Aerospace business area.

Figure 4: Supply chain map on the example of the Airlines CFBU (only available in download-version)

The CFBU places part requests directly onto the OBU and triggers a certain demand. Consequently the CFBU is accountable for forecasting the customers demand to minimize the total replenishment lead-time (TRLT). After a certain lead-time (LT) the OBU fulfils this demand and supplies the CFBU with parts, allowing the CFBU to satisfy the customers request (in this example the request of an airline company) with the actual part delivery.

A.2.2. Operations Businesses

As figure 5 demonstrates, an engine can theoretically be divided into four different segments (Fan, Compressor, Combustion, Turbine). The four main OBU’s of R-R are therefore separated accordingly.

Figure 5: Sections of an engine (only available in download-version)

The remaining three OBU’s (Control Systems, Component Services (CoSe), and Indianapolis Operations) are not directly related to any segment of an engine.

The principal functions within each OBU are engineering, quality, logistics, finance, operations, and human resources.

As these operating functions are similar in each OBU, the author uses the engine related sections (A.2.2.1. – A.2.2.5.) to give a technical insight into the functionality of each engine segment, in addition to a summary of key components in all sections (A.2.2.1. – A.2.2.7.).

A.2.2.1. Fan Systems

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