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 $