Presentation is loading. Please wait.

Presentation is loading. Please wait.

©2004 Rolls-Royce plc The information in this document is the property of Rolls-Royce plc and may not be copied or communicated to a third party, or used.

Similar presentations


Presentation on theme: "©2004 Rolls-Royce plc The information in this document is the property of Rolls-Royce plc and may not be copied or communicated to a third party, or used."— Presentation transcript:

1 ©2004 Rolls-Royce plc The information in this document is the property of Rolls-Royce plc and may not be copied or communicated to a third party, or used for any purpose other than that for which it is supplied without the express written consent of Rolls-Royce plc. This information is given in good faith based upon the latest information available to Rolls-Royce plc, no warranty or representation is given concerning such information, which must not be taken as establishing any contractual or other commitment binding upon Rolls-Royce plc or any of its subsidiary or associated companies. Evolution of Parametric Analysis within Rolls-Royce Purchasing Martin Wakelin

2 Parametrics Position within Rolls-Royce Global Purchasing 800 suppliers worldwide £3 billion spend 2003 Value Improvement Define Value Improve Value Deliver Value Parametrics Develop and Implement price/cost models and solutions with the supply chain

3 PURCHASING PLANS Parametrics Should Costing LTA Negotiation CVP Supplier Cost Modelling Supplier Development Price Agreement Commodity Strategy Development Price Negotiation Scoping Meetings Continuous Improvement Cost Improvement Contract Review Board ECR £ Upfront Price reduction Year on year cost saving Q,C,D & R Improvements (Process & Engineering Change) £ Price Reduction £ Cost Tracking Strategic & Tactical Performance Improvement (incl.Inventory Management) CVP = Customer Value Process ECR = Engineering Cost Reduction Supplier Development not part of VI Total Acquisition Cost Value Improvement Strategy Flow

4 Parametrics in Rolls-Royce Purchasing Where: Methodology evolved from Boeing practice Rolls-Royce have evolved toolset beyond initial functionality What?: A commodity based benchmarking tool, focusing on the market prices of products and their suppliers: Identifies functional relationships between a commodity and its price to represent the value delivered to the customer Statistically represents todays market, to predict product pricing levels and identify opportunities Why?: The problem facing Purchasing: Product prices have to be competitive, but … How do we know we are getting a good deal?

5 Data within price analysis Data collection focuses on: Example data set relating to a range of second hand cars… Design data Performance data Technical data Commercial data Geometric data Manufacturing data

6 Data within price analysis Output is a graphical representation of market : Predicted price vs. actual price What are potential causes of variance? Range of Applications : Market simulation and commodity benchmarking Long Term Agreement negotiation support Commercial bid analysis

7 Application: Overall Strategy Cost Support Key Technical Attribute, e.g. length Unit Price (£) Initial Data Analysis Technical Relationship, e.g. length) + speed + (material) + constant Unit Price (£) Final Model Unit Price (£) Supplier A – current prices Supplier B – current prices Supplier C – current prices Market Analysis by Supplier Technical Relationship, e.g. length) + speed + (material) + constant Unit Price (£) Supplier A – current prices Supplier B – current prices Supplier C – current prices Best submitted prices Bid Analysis Technical Relationship, e.g. length) + speed + (material) + constant Unit Price (£) Supplier A – current prices Supplier B – current prices Supplier C – current prices Best submitted prices Should Cost Value for Money Analysis of Submitted Bids Technical Relationship, e.g. length) + speed + (material) + constant

8 Parametric Business Process Develop Model Collect data & Analyse Market Negotiate model to effect market Identify requirement

9 Evolution of Parametrics Parametrics is an evolving function within Rolls-Royce. New techniques and processes are being developed to suit needs of the broader business as it moves forward, these being : Matrix Pricing Model Hybrid Cost/Price Model Changing customer base What is Matrix Pricing A zero-error pricing mechanism for a particular commodity : Uses functional relationships between commodities and unit prices to produce actual prices used to source parts Contains agreed pricing levels, benchmarked to prove value for money Contractually agreed with supplier

10 Matrix Pricing Model: Why do we need it ? The problems facing Purchasing: Significant Purchasing administration and operational cost Removes the slow and costly three quote process Avoids any further component level price negotiation Control over pricing in supply chain restructuring and tiering Design builds-in cost early in development process Visibility of pricing drivers to identify focus for cost reduction initiatives Opportunities from concept stage through to design change

11 Hybrid Cost/Price Model: What?: An agreed cost model that combines the advantages of the matrix pricing structure with the detail of a cost model : Contains agreed times and all inclusive hourly rates that are benchmarked to prove they represent value for money Why?: The benefits over Matrix pricing: More able to deal with high complexity commodities Closer alligned to manufacturing culture Activity based pricing model supports/identifies continuous cost improvement Greater visibility for design, further opportunities from concept stage through to design change Offers mechanism to verify cost effects of design change

12 3400 transactions raised in 2002 all 3-quoted Operational efficiency is the driver Application: Matrix Pricing Rolls-Royce Fabricated tooling… 40% of all orders in 2002 were for < £0.5k 60% were < £1k 85% were < £2.5k

13 Application: Matrix Pricing

14 Impact: Matrix Pricing Responsiveness Sourcing Lead Times drastically reduced Reduced transactional workload Allows buyer and supplier to focus on managing supplier performance : Quality, Delivery and Responsiveness Cost Parametric Price Calculator delivers savings direct to end customers General Consistent, competitive, maintainable pricing Buyer up-skill - knowledge of product, price & value for money Sustainable improvement in partnership

15 Changing customer base: What?: Parametrics is diversifying and support is actively sought after at a senior level within the Engine Projects, Design and Engineering Utilises existing available models to support various customers Why?: The problem facing Engine Projects, Design and Engineering: 80% of cost is built into a design at the early stages Early cost optimisation of design Later engineering cost reduction Supports whole engine costing at initial design stages Parametrics can and does influence the design activity

16 Summary Parametrics is: Based upon technical and commercial product data About understanding price variance due to product specification Method of evaluation at a commodity level Method of providing decision support information An evolving tool: From: A support tool to the overall negotiation process, offering an overview of the market that Rolls-Royce is buying from To: The solution to drive sourcing, pricing and design optimisation


Download ppt "©2004 Rolls-Royce plc The information in this document is the property of Rolls-Royce plc and may not be copied or communicated to a third party, or used."

Similar presentations


Ads by Google