Rolls Royce Power by Hour

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  • Topic: Turbine, Rolls-Royce, Gas compressor
  • Pages : 18 (4412 words )
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  • Published : October 16, 2011
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Rolls Royce – Power By the Hour

Project Report Prepared by PHANESH V. R. ATMURI

Rolls Royce – Power By the Hour

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Executive Summary
Today most Multi National Companies that are operating globally are realizing that they have to take complete control of After-Sales-Service, in order to compete effectively and synergize their operations with profitability. Earlier days, much of the service operations were handled by third parties. Companies have identified that after-salesservice is a significant source of revenue for the organization. With this paradigm shift and change in the culture, Rolls Royce pioneered and conceptualized ‘Power by the Hour’, an after-sales-service program that helps focus customer in their core business activities & offers peace of mind. In order to achieve this, Rolls Royce had to restructure and revamp its various operations including vertical integration of various divisions. The after-sales services provided by Roll-Royce helped its customers reduce maintenance costs and downtime. The service also enabled the company to improve its aero engine designs and build good relationships with customers. Moreover, the company gained a steady long-term revenue stream from the maintenance contracts. Analysts felt that the service strategy adopted by the company strengthened its position considerably in the highly volatile aerospace industry.

Date 29-07-2011

Rolls Royce – Power By the Hour

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Contents

....................... 1 Executive Summary ........................................................ 1 Contents ......................................................................... 2 1. Introduction ............................................................. 3 2. Rolls Royce Background ............................................. 5 3. Power By the Hour – Service Conceptualization ...... 6 4. Process Choices ........................................................ 7 5. Performance Metrics. .............................................. 15 6. Commercial Success ................................................ 16 7. Conclusion……………………………………………………………. 18 8. Reference …………………………………………………………… 19

Date 29-07-2011

Rolls Royce – Power By the Hour

3

1. Introduction
A concept that originated with a novel way of providing maintenance contracts for RollsRoyce engines has now evolved into a model for significant cost savings as well as a method for cost sharing between the client and the supplier as well as providing a performance incentive to the supplier. Performance based logistics or contracting can be basically defined as: you pay if it works and we mutually decide how long it works before maintenance or support is required.

This new approach is already reshaping customer-supplier relationships in defence and aerospace contracting under the name "Performance-based Logistics" (PBL). Customers and suppliers of mission-critical products, such as commercial aircraft and military weapon systems, are recognizing that the acquisition of world-class products is not sufficient, but rather it is necessary to provide superior, cost effective maintenance and support services throughout the after-sales phase of the customer-supplier relationship. A major focus of these efforts involves re-designing the contractual and implicit relationships between customers and suppliers in the service support supply chain. At the heart of PBL is the notion that risks and incentives should be more equitably aligned between suppliers and customers than has been possible under traditional "fixed-price" or "cost-plus" contracts. According to a recent paper by Wharton professors, performance-based contracting may also "improve product availability and reduce the cost of ownership by tying a supplier's compensation to the output value of the product generated by the customer." This new strategy is fast becoming an important component of the management of after-sales service supply chains, with...
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