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loCatIon oF CapaCIty 143

example rolls-royce opens up in singapore 6

The Rolls-Royce Trent family of aircraft engines is an impressive and successful example of aero-
space engineering. The Trent 900 is used on the four-engine Airbus A380 ‘superjumbo’ and the
Trent 1000 powers Boeing’s 787 Dreamliner. And, by any standards, the technology is impres-
sive. ‘Do you know that one of these Trent engines is powerful enough to light up a town of 100,000
people; that the fan blades rotate at 1,200 mph, faster than the speed of sound; and that one of the
internal blades heats up to 200°C higher than its melting point but, thanks to our cooling system, still
does not melt? These engines are the most technically difficult things in the world to make. They keep
400,000 people up in the air, safely, at any hour of the day or night’, says Jonathan Asherson, the
South East Asia Director of Rolls-Royce.
It is this technical sophistication that limits where the engines can be made. Any location
must have the access to the skills and infrastructure to support technically complex manufac-
turing. This is why Rolls-Royce chose Seletar in Singapore to host its almost £400-million Asian
expansion. But the company is no stranger to the region; it already serviced Singapore Airlines’
engines at a special plant near Changi airport. Yet Rolls-Royce already has an established factory
at Derby in the UK, where all its engines were developed, so why not simply expand that plant
to cope with the increased demand? Partly it is because Asia is where the demand is. The world’s
fastest-growing airlines are in China, Singapore, Indonesia, India and in the Gulf. More than
half of new orders for Trent engines come from airlines in the region. ‘It’s good to be near the mar-
ket, [but] this is not about transplanting activity from one place to another’, says Asherson. By 2020
the company plans to double its output, with production split 50:50 between Singapore and
Derby. Also, the generous tax incentives offered by the Singaporean government played a part,
as did the construction of a road from Seletar to Changi airport so that engines can be loaded
on to the cargo planes that fly them to Rolls-Royce’s customers in Toulouse and Seattle. Yet, says
the company, although important, these incentives were not as important as the ‘soft’ factors
that make Singapore so attractive. In particular, the city state’s universities and colleges, which
produce the highly skilled scientists, engineers and staff who are vital to producing products
that cannot be allowed to fail. Says Jonathan Asherson:
‘We think that the focus in Asia, from an education and training perspective, will continue to be in
areas of technology and engineering. The talent pipeline that we need as an industry and company will
remain solid. That will influence the thinking around our investments. You need to develop technolo-
gies and business models that adapt to increasing pressure on costs, increasing pressure on reliability
and the environment. We’ve worked with government agencies around developing work skills, quali-
fications, and developing curricula for the polytechnics and universities, where we work with them to
predict the requirement and work on how that pipeline of talent can be built. Singapore is quite flexible
and nimble where they see the high multiplier effect of, for example, high-value-added manufacturing.’

The costs of physically moving the operation’s resources may be high, but the risks
involved may be even more important. Complex arrangements involving changes to
many parts of the operation’s resources invariably increase the risk of something going
wrong with the move. Delays can mean inconvenience to customers, interruption of sup-
ply and increased costs. All this adds inertia to the location decision. Once made, a loca-
tion decision is difficult to change, which is why few operations want to move frequently.
But organisations do move their location, and it is usually for one of two reasons. Either

1 there are changes in the demand for its goods and services; or
2 there are changes in the supply of its input resources to the operation.

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