© 2008 Rolls-Royce plcThe 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 orassociated companies.
Harnessing Global Growth
Addressing four global markets
A global 20 year market opportunity for products and services worth around US$2 trillion
DefenceAerospace(US$480 billion)
Energy
(US$120 billion)
Marine
(US$350 billion)
Civil Aerospace(US$1,250 billion)
Investing in technology and capability and infrastructure£11 billion over 10 years
£0.88bn£0.93bn
£1.05bn
£1.30bn
£1.45bn
2003 2004 2005 2006 2007
Gross R&D11% of turnover in 2007
A Global Company
Turnover
R&T
Employees
New Programmes
70%
30%85%
15%
100%
100%
93% 60%
50%50%
40%
1987 2007
UK Rest of World
68%
32%
Rolls-Royce is privatised
Bergen Diesels
F136 for JSF
AE 2100
LiftFan for JJF
Trent 500
AE 3007
TP400
Trent 900
MT30
Tay 611C Trent 1000
AE 1107C
Trent XWB
RB282
RR300
1987
2007
Broadening our portfolio
Trent 700
Trent 800
BR710
Industrial Trent
BR715
1998 2007 1998 2007 1998 2007
£5.0bn
£12.7bn
£4.7bn
£12.9bn
£2.9bn
£20.3bn
Americas Asia and Middle EastEurope
Growing our market share and installed base globally
12% Compound
growth
Americas
11%Compound
growth
Europe
24%Compound
growth
Asia and Middle East
Compound growth of order book 15% and increased global reach
CHENGDU●
●●●
●XIAMEN
GUANGZHOUKUNMING
ACI: 13 x Boeing 757
CYH: 3 x Boeing 767
CSN: 20 x Boeing 757
CXA: 5 x Boeing 757
Improved Market Access- Rolls-Royce Powered Aircraft in China - 1997
Total: 41 Aircraft
● URUMQI
CHENGDU●
BEIJING●
●●
●●●
●SHANGHAI
NANJING
XIAMEN
GUANGZHOU
KUNMING
WUHAN
CXJ: 13 x Boeing 757
CAA: 13 x Boeing 757
CYH: 3 x Boeing 767 –
CSN: 16 x Boeing 757CSN: 24 x A330 CSN: 6 x Emb 145
CXA: 9 x Boeing 757
CKK: 2 x Tu204
CES: 10 x Emb 145
CKK: 3 x Tu204CAA: 14 x A330
CES: 5 X A340-600
CSN: 5 x A380
CSC: 5 x Emb 145
CHH: 7 x A330
CES: 20 x A330
●XIAN
TIANJIN ●CHH: 50 x Emb 145
CAA: 15 x Boeing 787
Total: 504 Aircraft
CAA: 6 x A330
CAA: 13 x A320
CSN: 127 x A320
CSC: 40 x A320
CSN: 13 x MD90
CES: 9 x MD90
Rolls-Royce Powered Aircraft in China - 2010
CHH(HK): 20 x A330
CHH: 3 X A340-600
●CHONGQING
CGQ: 3 x A320
CES: 30 x A320
CHH: 20 x A319
Balanced business portfolio
Civil: 19%Marine: 13%
Defence: 10%
Energy: 3%
Aftermarket services: 55%(£4.3 bn)
Original equipment: 45%(£3.5bn)
Total sales: £7.8bn
0
0
10
20
30
40
50
2002 2003 2004 2005 2006 2007Europe Americas Asia and Middle East
A global order book*- More than doubled in less than 3 years
£bn
*Firm and announced
Orders totaling £6bn announced in 2008 to date
Meeting the challenges
Delivering on our customer commitments
− Demands improved performance
Leadership collaboration for environmental solutions
External headwinds pressure
− Material costs and USD
Volatile market and new levels of competition
Powering
a better world
Environmental report 2007
Facilities & Services Management
REVISED 22-02-08
TRAINING AREA750m 2
ATC OFFICE505 m 2
STREETAREA
OPEN PLANDINE AREA550 m 2
ATC MANUFACTURING
AND LABORATORIES
1000 m 2
ENERGYSTOREQUIET rm
FUEL STORE 500m2
FUEL PUMPS
STACK HORIZONTAL
FAN CASE
DESPATCH
FAN
05 MODULE
03 MODULE
MACHINE SHOP
04 MODULE
O2 MODULE FOOT PRINT
O8 MODULE FOOT PRINT
COMPLETED ENGINE STORE &
GSE
TEST BED No.1
TEST BED No.2
GANGWAY
GANGWAY
GANGWAY
GANGWAY
B EVERAGE AREA
GRO UN D FLOOR 25m2
TECHNICAL LIBRARY &
CERT. OFFICE
BEVERAGE AR EA
G RO UN D FLOOR 25m2
CONTROL ROOM
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RT
OFF
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(98
SEA
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TR AININ G AREA75 0 m2
A T C OF F ICE50 5 m2
S T RE E TA RE A
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DI NE A RE A5 50 m 2
A T C M A NUF A CT URING
A ND L A B ORA T ORIE S
1 0 0 0 m 2
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FUEL PUMPS
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(98
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BEVERAGE AR EA
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SECURE DOCUMENT STORAGE
BAS
EMEN
T
Globalisation- Facilities of the future
Commonwealth of Virginia and Singapore assembly facilities –enabling future growth and “dollarisation”
Seletar Park,
Singapore (concept)
Ground Breaking (19th February) Seletar Park, Singapore
Crosspointe campus,
Virginia (concept)
© 2008 Rolls-Royce plcThe 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 orassociated companies.
Rolls-Royce data-strictly privateNot for internal or external distribution
The Purchasing
Journey to World Class
Visi
on
Stra
tegy
2008
BPD
world class global purchasing
organisation
peopleprocess
total coststrategic sourcing
relationshipscustomer satisfaction
enablers – relentlessly drive to deliver projects that will change our future
outputs – excellence in executing commitments and delivering business results
Mission
Best performing supply chain delivering m
utual competitive
advantage to Rolls-Royce, its customers and suppliers
A global team with a common vision
The Challenges Ahead
Unprecedented growth with new customers in new
markets
Growing customer expectations
Challenging economic conditions
Strong competition
Poor operational performance of the supply chain
Financial market crisis and access to capital
© 2008 Rolls-Royce plcThe 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 orassociated companies.
The Purchasing Mission, Vision and Strategy
We know our mission…“Best performing supply chain delivering mutual competitive advantage to Rolls-Royce, its customers and its suppliers”
..and we know our vision“World-class global purchasing organisation”
Stabilise the Supply Chain 2006 - 2008
Drive for World-Class
2007 - 2012
Meeting our Business
commitments
Transformational programmes
Immediate actions
Inputs Output
People CustomerSatisfaction
RelationshipsStrategicSourcing
TotalCost
Process
Transforming our business – six strategic themes
Visi
on
Stra
tegy
2008
BPD
world class global purchasing
organisation
peopleprocess
total coststrategic sourcing
relationshipscustomer satisfaction
enablers – relentlessly drive to deliver projects that will change our future
outputs – excellence in executing commitments and delivering business results
A global team with a common vision
Best performing supply chain delivering m
utual competitive
advantage to Rolls-Royce, its customers and suppliers
Mission
Our Vision, Mission, Strategy and BPD
© 2008 Rolls-Royce plcThe 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 orassociated companies.
Where we are today
Significant challenges Huge opportunitiesPurchasing’s significance is increasing Purchasing is becoming increasingly global
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
0 0 0 0 0 0 0 0 0Year
£M B U
YM
A K
E
66% Buy 72% Buy
Whilst the significance of Purchasing continues to grow
With transition to Global Supply Chains
Americas:
2003 11.5%
2009 29.7%
(incl Mexico)
UK & Europe:
2003 87.1% (UK 64%)
2009 63 0% (UK 41.2%)
Asia:
2003 1.4%
2009 7.1%Movement of Spend
As Purchasing globalises, we will realign our supply chain management organisation to reflect the distribution of spend
SCS is a key enabler to this realignment of our supply chain
The drive to World Class demands a global footprint and a Rolls-Royce network in prime regions around the globe
© 2008 Rolls-Royce plcThe 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 orassociated companies.
Where we need to get to World Class
Efficiency
Effec
tive
nes
s
Purchasing.
Booz l Allen l Hamilton and Hackett findings
Upper Quartile
Upper Quartile
World
Class
The Drive to World Class demands both Efficiency and Effectiveness Global Key Performance Indicators
2004 2008 World Class
Delivery Below 50% Below 50% 100%
QualityInbound defects at
1000 ppmInbound defects at
700 ppmZero inbound defects
Material Cost Price reduction Annual inflationOngoing annual cost improvements and
avoidance
High staff to spend ratio
Improving staff to spend ratio
Lean staff to spend ratio
World-class aero: 30 FTEs / $b spend
(Peer: 60-80 FTEs / $b spend)
Effectiveness
Operational Cost
Efficiency
Functional ExcellenceSupporting our drive for efficiency
Functional Excellence focuses on improving efficiency and eliminating waste intelligently and sustainably through:− Industry and internal benchmarking− Functional workstreams that look at standardising
and simplifying, such as:− Global role standardisation − Better understanding work drivers− Shared services− Addressing spans and layers
Efficiency
Effec
tive
nes
s
Purchasing.
Booz l Allen l Hamilton and Hackett findings
Upper Quartile
Upper Quartile
World
Class
Changing to become World Class
2007 201270%
60%Core Non-Core
30%
40%
Oper
atio
nal
Str
ateg
ic
Enablers
40%
80%Core Non-Core
Oper
atio
nal
Str
ateg
ic
60%
Finance
HROperational & TransactionalSupplier Development
Business Development
Process DevelopmentCommodity Management
New Product Introduction
Legacy
Production
NPI
2007
Legacy
Production
NPI
2012
Current Future
Business Development
Process DevelopmentCommodity Management
New Product Introduction
Finance
HROperational & TransactionalSupplier Development
Strategic Supplier Development Strategic Supplier Development
© 2008 Rolls-Royce plcThe 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 orassociated companies.
How we get there
Fix the basicsStrengthen and standardise global functionTransform the Business and Deliver the business planStrengthen supplier relationshipsGlobalize
The Improvement Journey – FIX the Basics
Maturity
3. Process FlowEfficient Processes that flowIdentifying and eliminating waste to reduce lead-time and cost
Perf
orm
ance
1. Process BasicsDefine the process and be compliantProcess basics must be the first stepIn early stages of maturity, basics give the greatest improvement in performance
2. Process ControlCapable Processes in control in a stable environmentProcess Control embeds the basics so a standard is established and performance is sustained
4. Process CapabilityMeasuring and eliminating variation increases process reliability and predictability
Processes achieving zero defects
Processes
Visual Management provides clear visibility of overall Supplier performance Customer Satisfaction
Ongoing and robust delivery and quality visual management process – across all regions and sectors
Monitoring the way we work together allowing for targeted improvement activity
Finance Finance
Human Resources Human Resources
Quality Quality
Global Supply Chain Organisation
Commodity Purchasing
Operational Purchasing
Manufacturing Eng
Supply ChainPlanning & Control
Engineering Engineering
Operations
Gen
era
l M
ach
inin
g
Co
ntr
ols
Inst
allati
on
s
Tra
nsm
issi
on
s S
tru
ctu
res
& D
rives
Co
mb
ust
ion
& C
asi
ng
s
Ro
tati
ves
Fan
s
Co
mp
ress
ors
Tu
rbin
es
Co
mp
on
en
t S
erv
ices
Ris
k &
Reven
ue S
hari
ng
(C
ivil A
ero
)
Invest
men
ts &
Serv
ices
En
erg
y
Mari
ne
Ind
ian
ap
olis
Op
era
tio
ns
Cross-functional global organization to strengthen and standardize roles, processes, and measurements
Transforming our business with Pace
Wo r l d
Cl ass
2006 2007 2008 2009 2010 2011 2012
Strategic Transformation
Tactical Change
ConsolidationBasic Standards & Processes
Critical Supplier Support
Supply Chain Simplification
Organisational Strength & Capability
Supplier Collaboration
Commodity & Supply Chain globalisation
Total Cost Management System and e.Business
Lean Enterprise
Trent 1000
75 Suppliers Total
Future engine vision
25 first tier suppliers
40 suppliers total
Strengthen and develop strategic relationships
0
100
200
300
400
500
600
1970s 1990s 2002 2006 2008 2012
Sup
plie
r cou
nt p
er e
ngin
e
Strategic Sourcing
We expect…Flawless DeliveryZero defect QualityClass leading Cost
Enabled by…Lean Manufacturing Effective supply chain managementContinuous improvement
Customer Satisfaction
Our expectations of Rolls-Royce suppliers:
The Shift to Globalisation Strategic Sourcing
Capability, Structure, Dollarization
JapanChina
(Singapore)
Russia
India+2423 (+71%)
+128 (+60%)
-3708 (-10%)
-159(-24%)
+1285
+31
Rolls-Royce Plants
Supply Chain Offices (SCO’s)Future Plants
In Summary, We must meet our commitments through Relentless Execution and…….Drive for World ClassWe are…
Redefining and restructuring our supply chain to address globalization and dollarizationDeploying our global purchasing strategy through our business planDriving robust processes to manage and control our supply chainResponding to and planning for the future market conditions