Rolls-Royce aims to grow its supply chain tremendously in Southeast Asia, with Thailand, where it has been doing business for 21 years, as a focus.
“We are going to be making large engines in Singapore and it makes absolute sense to have a supply chain in the region that can feed that facility. Thailand has demonstrated that it’s capable of doing that,” Ewen McDonald, managing director of Rolls-Royce Thailand, said recently in Bangkok.
While Rolls-Royce does not manufacture in Thailand, it wants to be seen as more than just a supplier, he said.
“We want to help the supply chain industry here. We want to be integrated into the country and to bring value by encouraging our suppliers to come here.”
To help build that supply chain, the company works closely with the Board of Investment (BoI) and has held two supply chain events. The aim of the events was to find suppliers for Rolls-Royce and to strengthen manufacturing within the Kingdom.
For many years Rolls-Royce has supplied aircraft engines to THAI, Bangkok Airways and PB Air, as well as equipment to the Thai Armed Forces and the energy sector. It has invested more than US$700 million (Bt22.7 billion) in the Rolls-Royce Seletar Campus in Singapore, with plans underway to open its “Facility of the Future” – a Trent aero engine testing and assembly facility and a new wide chord fan blade (WCFB) factory.
Thailand’s proximity to Singapore as a global business and manufacturing hub for Rolls-Royce presents significant opportunities for the local manufacturing industry.
The company wants to demonstrate its belief in the country.
“What we bring to Thailand is the Rolls-Royce name and that’s a very powerful thing and has itself attracted suppliers to the country. The fact that we are encouraging investment here really brings home that message,” McDonald said.
Aerospace manufacturer Primus International, which supplies Rolls-Royce with engine related products, will open a plant to produce composite/metallic propulsion and structural aircraft products at Amata City Industrial Estate, near Bangkok.
Jim Hoover, CEO of Primus International, a long-time supplier, said there was a range of reasons for coming to Thailand, but the four most important factors were close proximity to Rolls-Royce, a talent pool of skilled workers, competitive labour costs and incentives from the BoI. He embraced the invitation to join a new phase of their relationship in Asia.
“One of the reasons we picked Thailand is because the auto industry is here. We see people who have core skills. We can take them, give them additional training to reach a higher level of technology or quality.”
At their new plant, local staff will be taken either to the UK or US for training.
“They become a core of our company because they then become the trainers,” he said.
McDonald saw the current political situation as obviously unwelcome, but business continued.
“There is an underlying stability despite the political instability that is demonstrated by the likes of the BOI who are always there.”
Rolls-Royce likes to make it clear they are in Thailand for the long haul and will continue to look for new suppliers and partners with a proven track record and a strong balance sheet.
“During last year’s troubles we were in the middle of the process of deciding to come to Thailand, but ultimately it didn’t deter me or my board. We were not overly concerned.”
Rolls-Royce also works with Kasetsart University, looking to invest in young top graduates and provide lectures on the aerospace industry. It believes that by working with universities it can help develop expertise and show that there are potential careers at the company and in the wider world of aerospace, marine and energy industries.
The company is now opening up for those who want to join the supply chain.
“‘It all comes down to quality, cost and delivery. We have demanding customers and need our suppliers to have the ability to meet all of our requirements. The ability to deliver on time is a given.
“In the current climate, cost is becoming more and more important, but cost can’t be at the expense of quality. We will look at cost-leading areas of the world and make decisions as to whether it’s the right place to be, but we can never compromise on quality,” McDonald said.
Ajarin Pattanapancha, BOI deputy secretary-general, welcomed this move, for it means knowledge transfer that will improve local company skills. Despite the recent financial downturn, one of the great Thai manufacturing success stories can be found in the automobile industry. Toyota and GM have used local suppliers for many years and shared knowledge.
“We try to get companies to provide knowledge – soft skill knowledge is essential when it come to making good quality products,” Ajarin said.
Yet, according to McDonald, not all knowledge would be transferred. Anything considered core technology and unique to Rolls-Royce is kept strictly in-house and manufactured by the company. Rolls-Royce will just share ideas and information with suppliers, for the production of items that fit demanding standards.
Now, 7 per cent of Rolls-Royce purchases comes from Southeast Asia and is on the way up, compared to a little over 1 per cent in 2003. Its order book is now valued at over $90 billion and the size would be doubled over the next decade