Having driven the benefits of category management for a long time, year-on-year value improvement at Rolls-Royce had slowed. To achieve a further step change, the engineering company needed to engage with its supply chain in a new way. Through collaborating deeper, Rolls-Royce realised it could significantly increase the benefits to both itself and its suppliers.
Its bold ambitions to be the world’s leading technology company and improve its cash position by an extra £1 billion by 2020 necessitated a similarly bold approach to procurement. So, rather than being prescriptive with a “one-size-fits-all” approach, Rolls-Royce decided to empower both the Direct and Indirect procurement teams to develop what they saw as best for their specific areas and supply chains. It wasn’t just about cost reduction and improving supplier quality performance, but also about developing trust to enable both sides to invest in new technology and bring that technology to market, with the benefits shared.
Within Direct procurement the focus was on unifying the cross-functional and supply chain unit teams with a one-team approach involving 100 key suppliers representing some 75% (£2 billion) of Civil Aerospace spend. The plan was designed to challenge the usual processes, behaviour and culture, and to engage the “hearts and minds” of senior leaders and their teams. Procurement wanted to make Rolls-Royce the customer of choice for its suppliers.
Among the initiatives was a “collaborate, don’t tell” annual conference ensuring messages were shared collaboratively, accepting and acting on feedback and building trust. An integrated supplier scorecard was introduced and a supplier engagement plan co-created and co-owned by Rolls-Royce and the supplier to drive simplicity and pace. Ambiguity has been removed.
Within Indirect, a Premier Supplier Group (PSG), chaired and led by the suppliers, was established. The chair rotates between members every 12 months. Category PSGs have been introduced to share best practice, with the location rotating through suppliers’ key sites to allow for “go-look-sees” rather than PowerPoint presentations.
Competitors now often work together for the greater good. In Direct Civil Aerospace the approach has enabled the business to deliver savings of £153.2m, as well as helping to shape Rolls-Royce’s strategy in several areas. In Indirect the procurement team is now able to deliver at least 5% cost savings each year, with £91 million saved in 2018 alone. Overall there has been more than £250 million in annualised hard savings.
Judges’ comments: "The introduction of a structured focus on collaboration in the project has resulted in significant benefits and a step-change in performance for both Rolls-Royce and their suppliers. This innovative approach focused not only on savings, but improving end-to-end supply chains."