Rolls-Royce Deploys New Procurement Strategies to Foster Growth
Rolls-Royce says an agile supply chain is key to supporting its operations in aerospace and other sectors.
When a company’s customer base includes more than 400 airlines, 160 armed forces, 70 navies and more than 5,000 power and nuclear clients, having a strong supply chain is more than just a good business strategy — it is essential. Rolls-Royce Holdings plc has made sure not to rest on its laurels when it comes to its procurement capability.
The global power and propulsion systems company has shown the same level of innovation in its supply chain as it has serving the civil aerospace, power systems and defense sectors with technologies that provide safe, clean and competitive solutions. “Agility is absolutely the key,” Director of Procurement Gordon Tytler declares.
A 30-year veteran of Rolls-Royce, he took his current role at the company in 2016 and has operated as the strategic and functional leader for its procurement groups. Under his leadership, the company launched its Indirect Procurement Excellence (IPEX) program, focused on materials and services that do not go directly into its products.
As part of this initiative, Rolls-Royce implemented Source to Pay (S2P), a web-based digital content tool from Coupa Software Inc., that standardizes indirect purchasing processes and gives its associates a more direct view. Since then, “We’ve implemented it across our Group Business and our Civil and Defense businesses,” Tytler reports.
This has given Rolls-Royce end-to-end control across the entirety of these businesses and allowed it to enjoy efficiency improvements and savings. Previously, the company waited 10 to 14 days to obtain approvals.
“Now, we’re around 40 hours,” Tytler says, adding that Rolls-Royce also has enjoyed a 30 percent efficiency savings, increased annual cost reduction on the IPEX spend and moved further into the digital age with additional apps from Coupa Software.
These have given the company the benefit of digital analytics and built artificial intelligence into its procurement capability. One app is its Spend Analytics tool, “which gives us insights into and allows us to manage our spend more effectively,” Tytler describes.
Another app focuses on how Rolls-Royce conducts its contract management, while it also uses Coupa Software’s new Risk app, which constantly scans the risk environment. With this tool, “[We can] pick up any knowledge that could translate into any issues from an indirect supply chain risk perspective,” Tytler explains.
Best in Breed
Rolls-Royce now wants to duplicate its success in the indirect space with its Direct Procurement Excellence (DPEX) change program. The initiative, Tytler notes, will follow a similar ethos of simplification and standardization creating a stable platform on which to build a digital solution. “At the end of that, what we’ll have is a very fit-for-purpose digital procurement capability across both our direct and indirect spend,” he states.
David Fryer, an 11-year veteran of Rolls-Royce, is overseeing DPEX as its transformation leader. “It’s taking what we have in the direct procurement space and bringing us a best-in-breed digital solution that delivers significant business value,” he says.
In the next 18 months, Rolls-Royce will deploy Ivalua procurement software as an integral part of the change program to create a step change in its procurement capability. “As part of that deployment, we are digitizing our existing contract base, putting that into the Ivalua tool and using the various analytics options it gives us to drive near term value,” he describes.
These options range from contract management to spend and supplier performance analytics that will help the company evaluate data and create actionable insights. “As part of the approach, we’ll be looking at different data structures,” Fryer says, noting that this will give Rolls-Royce the ability to analyze contracts, supplier performance and risk data in real time.
He explains that the DPEX change program will allow Rolls-Royce to look at the capabilities of its teams and shape the skills they will need over the next three years. “It will change the way that we look at procurements role within the business,” Fryer says.
“It will give us insights and allow us to drive better overall value in terms of how we engage with our suppliers,” he adds, noting that this will also help improve workflows and efficiency in the organization.
For example, the system will enable Rolls-Royce to update its pricing more quickly and reduce the lead time to put a contract in place from many hours to only a few. The company will also gain actionable insights into supplier performance and will have the ability to better collaborate in real time with its suppliers.
“We will be able to better understand the value generation and performance of our suppliers,” Fryer says, noting that this will generate more time for its buyers to do the value-add activity that they really want to do.
Carrie McComb, the functional procurement and transformation lead for Rolls-Royce’s Civil Business, agrees. “We’ve got a fantastic procurement team and this investment is really going to help take us to the next level,” she says, adding that she appreciates how Rolls-Royce took a holistic approach to the initiative.
“We could have taken a more fragmented approach by focusing on our incumbent systems,” she says. “Instead, we’ve gone for a total approach focusing on a change management program, a best in breed tool, processes and analytics.”
She adds that “DPEX will help allow our Procurement teams to focus on value generation — this platform which will allow us to quickly update our pricing and contracts will give the teams more time to focus on value-added activity such as actionable insights and collaborating with suppliers to deliver increasing value.”
Rolls-Royce now also has the ability to see what the buyer of the future will be like, as it moves away from analog processes to a digital future. “It will be exciting to see how the profession evolves with the implementation of this program,” McComb says.
The New Vision
Rolls-Royce is on track to implement the Ivalua platform next year. “The first phase goes live in March through to July,” Fryer says, noting that the second phase will follow in the third quarter.
“The final phase is in the start of the following year,” he continues. “We’re currently in what we call the sprint phase to complete our phase one build.”
Tytler notes that the entire process has required a rapid deployment at Rolls-Royce, which is similar to the schedule it followed with IPEX. “We got approval in October 2018 and mobilized movement through this year,” he recalls.
When implemented, DPEX will have a global reach, with circa 500 users in seven countries. Tytler adds that he sees a strong future ahead for Rolls-Royce procurement, which has a clear 10-year vision.
“That vision is focused around our business drivers,” he notes. “We want to move from being viewed as purely procurement experts within Rolls-Royce, to establish ourselves as business leaders with a procurement expertise.”
Sidebar: Great Groups
Rolls-Royce Holdings plc has organized its business into three customer facing businesses, including Civil Aerospace. This portion manufactures aero engines for the large commercial aircraft, regional jet and business aviation markets.
“This business uses its engineering expertise, in-depth knowledge and capabilities to provide through-life support solutions to its customers,” Rolls-Royce says, noting that it has 13,000 engines in service around the world.
Its Defense business is the second largest provider of military aero-engine products and services globally, as well as a provider for maritime systems in the naval sector. In addition, the company is a technical authority for the nuclear steam raising plant that powers the United Kingdom’s submarine fleet.
Rolls-Royce’s Power Systems group also is a leader in high-speed reciprocating engines, complete propulsion systems, distributed energy solutions and safety-critical systems for nuclear plants worldwide. The group sells 20,000 reciprocating engines each year.
Sidebar: Integrating Sustainability
Sustainable initiatives have not passed Rolls-Royce by. “As we move to a low carbon global economy, our engines will become part of broader, hybrid-electrical systems with lower emissions and environmental impacts,” the company says.
In this role, the company says it will increasingly act as a systems integrator by combining its mechanical expertise with electrical technology. “To provide lifelong performance for our customers, we will use the huge power of digitization and create new insights using new technologies, including artificial intelligence,” it says.
“Global economic power and rising prosperity will increase demand for travel, trade and energy,” Rolls-Royce says, noting that air traffic is forecasted to achieve a compound annual growth rate of 4.5 percent in the next 20 years.