Transcript Evolution of Parametric Analysis within Rolls

Evolution of Parametric Analysis
within Rolls-Royce Purchasing
Martin Wakelin
©2004 Rolls-Royce plc
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any of its subsidiary or associated companies.
Parametrics Position
within Rolls-Royce
Parametrics
Develop and Implement price/cost
models and solutions with the
supply chain
Value Improvement
Define Value
Improve Value
Deliver Value
Global Purchasing
800 suppliers worldwide
£3 billion spend 2003
Value Improvement Strategy Flow
Commodity Strategy Development
Price Negotiation
Continuous Improvement
Cost Improvement
Contract Review
Board
Strategic
&
Tactical
Parametrics
PURCHASING
PLANS
Should
Costing
LTA
CVP
ECR
Performance
Improvement
(incl.Inventory
Management)
Supplier
Development
Negotiation
Supplier Cost Modelling
£
Upfront Price
reduction
Scoping Meetings
£
Cost Tracking
Year on year
cost saving
CVP = Customer Value Process
ECR = Engineering Cost Reduction
Supplier Development not part of VI
£
Price
Reduction
Price
Agreement
Q,C,D & R
Improvements
(Process &
Engineering
Change)
Total
Acquisition
Cost
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 today’s 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?
•
•
Data within price analysis
Data collection focuses on:



Commercial data
Geometric data
Manufacturing data



Design data
Performance data
Technical data
Example data set relating to a range of second hand cars…
Cas e
C o n d it io n
C o n d it io n
(e x t e rn a l)
(in t e rn a l)
4411 2 5 0 R e d
G ood
A ve ra g e
3795
1996
3377 9 5 0 G re e n
A ve ra g e
A ve ra g e
4445
4
1995
6622 3 0 0 B lu e
P oor
A ve ra g e
3745
P
4
1996
4444 5 0 0 M e t R e d
P oor
P oor
8045
1700
D
5
1997
3333 7 5 0 B lu e
S / ro o m
G ood
4595
V a u x h a ll V e c t ra
2000
D
5
1998
3311 7 0 0 R e d
A ve ra g e
A ve ra g e
6595
7
V a u x h a ll C a va lie r
1600
P
4
1994
5577 5 0 0 G re e n
P oor
P oor
2495
8
V a u x h a ll O m e g a
2000
P
4
1997
4477 6 0 0 M e t R e d
G ood
G ood
7595
9
VW
G o lf
1600
P
3
1996
3377 8 5 0 S ilve r
G ood
G ood
10
VW
S c iro c c o
2000
P
5
1997
5500 5 0 0 M e t G re e nG o o d
A ve ra g e
11
VW
P as s at
1800
P
4
1997
2299 5 0 0 M e t B lu e S / ro o m
G ood
9795
12
F ia t
P unto
1200
P
3
1998
2222 7 5 0 Y e llo w
A ve ra g e
A ve ra g e
5695
13
F ia t
B ra vo
1400
P
3
1997
3355 7 0 0 G re e n
G ood
A ve ra g e
4645
14
To y o t a
C o rro la
1600
P
3
1997
2299 9 5 0 S ilve r
S / ro o m
G ood
6145
15
To y o t a
C a rin a
2000
D
4
1994
7711 5 0 0 B lu e
G ood
A ve ra g e
2745
16
N is s a n
P rim e ra
1600
P
5
1994
6611 5 0 0 R e d
A ve ra g e
A ve ra g e
2945
17
N is s a n
M ic ra
1300
P
5
1998
1155 2 0 0 R e d
G ood
G ood
18
P o rs c h e 9 6 8
3000
P
2
1994
4477 5 0 0 S ilve r
G ood
A ve ra g e
19
R o ve r
200
1800
P
5
1997
3311 5 0 0 R e d
A ve ra g e
P oor
5745
20
R o ve r
400
1800
D
4
1995
5577 8 0 0 B lu e
P oor
A ve ra g e
2995
No.
M ak e
M odel
E nnggin
inee ss iz
iz ee P e t ro l/ D ie s e l N o . D o o rs A g e
E
1
F o rd
E s c o rt
1800
D
4
1997
2
F o rd
F ie s t a
1200
P
5
3
F o rd
M ondeo
2000
P
4
F o rd
S c o rp io
2300
5
V a u x h a ll A s t ra
6
M ile a g e C o lo u r
P ric e (£ )
5145
10695
5395
19595
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
•
•
•
Price  f ( mileage )Price
 f (agef ()mileage)
 f ( engine
cc )  constant
Application: Overall Strategy Cost Support
Unit Price (£)
Unit Price (£)
Unit Price (£)
Unit Price (£)
Unit Price (£)
Initial Data Analysis
Final Model
Market Analysis by Supplier
Bid Analysis
Value
for
Money
Analysis
Supplier A – current
pricesof Submitted Bids
Supplier
SupplierAB– –current
currentprices
prices
Supplier
A
–
current
prices
Supplier
B
–
current
prices
Supplier C – current prices
Supplier
SupplierBC– –current
currentprices
prices
Supplier
C
–
current
prices
Best submitted prices
Best submitted prices
Should Cost
Key Technical Attribute, e.g. length
Technical Relationship, e.g. l(length) + y(speed ) + d(material) + constant
Technical Relationship, e.g. l(length) + y(speed ) + d(material) + constant
Technical Relationship, e.g. l(length) + y(speed ) + d(material) + constant
Technical Relationship, e.g. l(length) + y(speed ) + d(material) + constant
Parametric Business Process
Negotiate model to
effect market
Develop
Model
Identify
requirement
Collect data &
Analyse Market
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
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
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
Application: Matrix Pricing
Rolls-Royce Fabricated tooling…
 40% of all orders in
2002 were for < £0.5k
T o ta l # o r d e r s b y s p e n d
40%
41%
>1000
7 5 0 -1 0 0 0
5 0 0 -7 5 0
 60% were < £1k
<500
11%
8%
 85% were < £2.5k
3400 transactions raised in 2002 all 3-quoted
Operational efficiency is the driver
Application: Matrix Pricing
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’
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
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