Check Ignition, Engines On

Rolls Royce is one of the leading producers of engines for both civil aviation and defense, and you recently signed with UMW to produce fan cases for your aircraft engines in Malaysia. How did this partnership come into being and what is your vision for this project?

Let me begin by setting some context. Our aerospace business has an order book of over £67 billion in 2015, which is more than 80% of our total order book. Of this, over 50% of our orders come from the Middle East and Asia. We built the Seletar Campus to increase our manufacturing capacity so we can deliver on our order book, and we wanted to be closer to our globally located customers. The Campus is our first facility outside the UK to assemble and test the Trent aero engine and manufacture our crown jewel technology, the Wide Chord Fan Blade. It opened in February 2012 at an investment of over £350 million. At both our Derby and Seletar Campus sites we have the capability of assembling and testing several types of Trent engines. At the Seletar Campus, we assemble the Trent 900 engines that go onto the Airbus A380 aircraft, and the Trent 1000 that go onto the Boeing 787 Dreamliner aircraft. Soon, we will also be assembling the Trent 7000, which will go onto the new Airbus A330neo, the latest aircraft from Airbus. This is a complex business; each engine has around 18,000 components with 35,000 parts. We work with over 8,000 companies in 70 countries, each of them playing their part in producing our products. It’s like conducting the world’s largest orchestra. So, you can imagine what kind of supply chain and logistics are required to make an engine. We have three key strategic principles for our global production process. The first is to have operational excellence in our supply chain, embedding a lean approach across all of our sites. Second, we want engineering excellence, and third we want to capture after-market value through customer satisfaction. So considering this context and in a bid to improve efficiencies, we are building a supply chain ecosystem to support our Seletar Campus. Some of our global suppliers have chosen to be closer to the Campus by establishing their own sites in Southeast Asia, for example in Senior Aerospace in Thailand. In step, we are also on the look out to form new partnerships to build up our supply chain. UMW is our first tier-one supplier in Malaysia, and so far our partnership with UMW is a success story. It was chosen after an extensive bidding process. UMW proved to be ambitious, able, and willing to manufacture and assemble titanium fan cases for our engines. We found them to be the right partner for us. This project also has the support from the Malaysian government, and with that we hope to extend the partnership beyond fan cases for the Trent 1000 and Trent 7000 engines. We are confident that this will lay a strong foundation for engine component hard metal manufacturing in Malaysia. This will be a major cornerstone for the Malaysian Aerospace Blueprint. We hope this will inspire innovation in manufacturing and in end-components in Malaysia in the longer term as well. This is our vision to work together with UMW and the Malaysian government, and to build on this success to further the interests of the Malaysian Aerospace Blueprint.

What were the company’s ideas when it helped found the Aerospace Malaysia Innovation Centre (AMIC) in 2011, and how would you assess its main achievements to date?

A center like AMIC is the cornerstone for any country that wants to gain innovation in aerospace. AMIC was created very purposefully and with the support of the Malaysian government. We decided to participate together with quite a number of other Malaysian and foreign companies. It is a major pioneering initiative and it is still in its infancy. It usually takes a long time to bring an institution like this to a mature level; still, AMIC has already achieved some key breakthroughs. AMIC has helped local and international aerospace industry players; it has signed numerous MoUs and agreements with players in the industry, and it works with both local and foreign universities. We are confident that with the continued stewardship by the current sponsors and the opportunities created by the new industrial investments in Malaysia, AMIC can become an integral part of the aerospace sector.

In 2016, the new National Aerospace Blueprint 2015-2030 was launched. How do you think Rolls-Royce ties into this Blueprint?

Firstly, we are proud to be making a major contribution to the Blueprint’s success. We hope that our partnership with UMW will be a catalyst for growth in Malaysia’s aerospace industry over the next 15 years. We hope that our 25-year agreement with UMW, which more than covers the blueprint period, will also create opportunities for more similar initiatives in Malaysia. The previous blueprint has already created high-income jobs and the aerospace industry contributes MYR11 billion to Malaysia’s GDP; it is projected to reach MYR55 billion by 2030. Hence, we need all players, big and small, to join this effort to support the Blueprint for its success.

Does Rolls-Royce have a strategic regional vision about how to use the characteristics of different countries in the region to develop your business?

We tend to be very global and deliberate in our business decisions, which are influenced by market nuances. For example, we recognize that Malaysia is quite advanced in composite materials, and that Thailand is already good at making metal components. But we are very aware that these type of capabilities can be replicated elsewhere. We know that there are players in Indonesia, the Philippines, and Vietnam who are willing and eager to step into this sphere of the economy. What’s important to us is to find the best and most reliable suppliers not just in the region, but also the world; for example, there could be suppliers in Italy, Korea, and Mexico to consider. In the future I am sure there will be more and more from China as well. Of course for us, it’s important to keep in mind the locations of our key manufacturing sites around the world.

The low commodity prices have impacted many oil-supplying nations across the world. How does it affect your strategy?

There are two sides to this. If you look at the opportunities for players like us, we cannot escape the impact of commodity price changes whether up or down. It gives us an opportunity to look at how we do things and make changes to enhance efficiency. We are sensitive to commodity price changes and we are adapting our strategy accordingly. For example, we are trying to procure components closer to Singapore as this reduces transport and sourcing costs. The other side of the coin is, with falling oil prices, air travel becomes cheaper, but then some countries are exposed to currency fluctuations. Overall, it still results in more demand for seats and this must be good for the major airlines and, by consequence, the aerospace industry. You can already see Airbus and Boeing pulling in orders, so engine suppliers like us are benefiting from this demand.