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How can the complex supply chain for an aero engine respond to a request for quotation from an airline in just a week? This is the presentation that accompanied our ICE 2006 conference paper on aero industry virtual enterprises, legal issues and the "seven day proposal". Uses the ‘Da Vinci’ theme from Keynote Theme Park (mostly because the conference took place in Milan, where we went to see Da Vinci’s L'Ultima Cena in the Convent of Santa Maria delle Grazie).
Citation preview
Streamlining the Formation of VirtualEnterprises in the Aerospace Industry
Richard Farr, David Buxton, Bart MacCarthy
University of Nottingham
Catarina BovikVolvo Aero Corporation
Contents
VIVACERICHARD FARR
•An introduction to VIVACE
•Aims of this work
•Aerospace issues
•The virtual enterprise
•Functional requirements
• In search of trust
•Concurrent engineering...?
•Conclusions
•Value Improvement through a Virtual Aeronautical Collaborative Enterprise
•Funded under the European Commission’s sixth framework scheme
•Project aims:• Halve the time to market for new
products• Increase integration in the supply
chain• Maintain a steady fall in the cost of
travel
VIVACERICHARD FARR
AirframeEngine
Information technologyExtended Jet engine enterprise
Life Cycle ModellingWhole Engine Development
European Cycle ProgramSupply Chain
Workflow Simulation
VIVACERICHARD FARR
•Define and develop the process to produce a customised value proposal from an extended enterprise in seven days
•Develop a functional requirement specification for the seven day proposal
•Evaluate solutions to the seven day proposal, including knowledge-based engineering support, costing models and information management
Aims of this work
VIVACERICHARD FARR
•Very complex products
•High initial investments
•Very long product life-cycle
•Very complex business models
•National interest
VIVACERICHARD FARR
•The shift from product-centric to holistic ‘functional product’ offerings
•New competitors
•New markets
•Environmental issues
•Fuel price increasesVIVACERICHARD FARR
The Virtual Enterprise...
•Deploys expertise where it is needed
•Spreads the development cost
•Shares risks among the partners
•Allows a customer-specific response
•Virtual enterprises take time to form! VIVACERICHARD FARR
The Seven-day Proposal•Not a whole new product!
•The same engine, but a customised solution, addressing the airline’s requirements.
•Response to the request for proposal (RFP) within seven days.
•Ambitious targets show commitment!
VIVACERICHARD FARR
The Aero Engine Product and Service Mix
•Ownership? Leasing? Power-by-the-hour?
•Maintenance, repair and overhaul
•Spare parts, spare engines
•Financial services
•Guarantees
•...etc.
VIVACERICHARD FARR
UNIVERSITY OF NOTTINGHAMRICHARD FARR
It’s amazing what you can achieve in seven days!The Creation of Adam, fresco painting by Michelangelo
Functional requirements of a seven-day proposal•An investigation of the working
procedure for collaborative programmes
•Industrial partners: Volvo Aero Corporation and Rolls-Royce
•Identification of “who does what, when”
•Configuration of a support system
•Process organised into seven ‘silos’...
VIVACERICHARD FARR
Seven ‘Silos’...
VIVACERICHARD FARR
•Company Internal
•Partners
•Suppliers
•Customer
•Customer solution
•Business case
•Legal
•Information: data sharing and control
•Virtual Enterprise Business Model
•Trust
Trust is the key!
•There is no unit of measure for trust
•Cultural differences can affect perception
•Years to build; moments to ruin
•What about trustworthiness when things aren’t going to plan?
•Is protection under law a substitute for trust?
VIVACERICHARD FARR
Legal issues•The virtual enterprise has no legal
identity(ie no collective responsibility)
•Where does the virtual enterprise reside, for tax purposes?
•The law assumes an adversarial relationship
•Getting approval for legal documents can increase cost and lead time
•Legal mechanisms that protect the parties may delay virtual enterprise formation, and inhibit creativity
VIVACERICHARD FARR
Tools to support the seven-day proposal•Capturing and reusing
knowledge
•Modelling the business environment
•Simulating the flow of cash within the proposed value chain
•Simulating the delivery of services
•Improving the interfaces between partners, and between functions
RICHARD FARR VIVACE
Concurrent Engineering has
been seen to reduce time-to-
market..
VIVACE
Can we apply similar principles
to the development of the enterprise?
RICHARD FARR
Concurrent Engineering
•Merge functions to reduce the number of components
•Focus upon quality and continuous improvement
•Modular system architecture
•The re-use of proven elements
•Adoption of standard interfaces
•Why consider only the product?
VIVACERICHARD FARR
Concurrent Engineering•Fewer partners, but more
significant contributions
•Focus upon quality and continuous improvement
•Modular approach to partner selection
•Repeat business
•Standardised communications and logistics, where possible
Why consider only the product?
VIVACERICHARD FARR
Conclusions•Improved responsiveness in enterprise
formation is a powerful basis for competition
•Trust remains the key; the law does not yet support the virtual enterprise adequately
•Business models work best where success is positively correlated across the whole partnership
VIVACERICHARD FARR
VIVACERICHARD FARR
Further articlesfrom Richard Farr at:
http://capacify.wordpress.com
Associated conference paper:
Farr R, Buxton D, Bovik C and MacCarthy B (2006) “Streamliningthe Formation of Virtual Enterprises in the Aerospace Industry”,Proceedings of the 12th International Conference on ConcurrentEnterprising (ICE 2006), 26–28 June 2006, Milan, Italy
Supporting slides follow.
Simulation approach
•Anylogic; a Java-based simulation language
•Accommodates discrete event,system dynamicsand agent-based approachesin a single environment
VIVACERICHARD FARR
Simulation approach
•Demand; the business environment for new aero engines
•Airlines, andengine usagepatterns
•The productand servicevalue chain
VIVACERICHARD FARR
Market for aero engines
VIVACERICHARD FARR
(Engine usage pattern)
VIVACERICHARD FARR
Results from simulation...
VIVACERICHARD FARR
•TotalCare sales
•Balance $