The case discusses how UK-based aero engine manufacturer Rolls-Royce plc (Rolls-Royce) transformed itself from a product/technology company into a company offering aftermarket services. Rolls-Royce pioneered power-by-hour support in the aviation market. Under this concept, the customers paid a fixed maintenance fee for each aircraft flight hour (only for the time during which the aero engine was running). The company also offered different service packages for different customers. The after-sales services provided by Roll-Royce helped its customers reduce maintenance costs and downtime. They also enabled the company to improve its aero engine designs and build a good relationship with customers. Moreover, the company gained a steady long-term revenue stream from the maintenance contracts. Analysts felt that the service strategy adopted by the company strengthened its position considerably in the highly volatile aerospace industry. For the year 2017, Rolls-Royce’s services revenues of £4.2 billion accounted for 53 percent of its total revenues. While Rolls-Royce made more money out of its aftermarket services, it started facing problems in 2016 when some of its prominent customers complained that the turbine blades inside the engines installed by Rolls-Royce were corroding faster than expected...
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The case is structured to achieve the following teaching objectives:
Understand the dynamics of aftermarket supply.
Analyze Rolls-Royce’s focus on customer service and aftermarket service as a steady source of revenue and a source of differentiation.
Identify the advantages and challenges of being heavily dependent on aftermarket services to drive sales and earn additional revenues.
Supply chain integration; Total product systems ; Engine health monitoring; Aftermarket services; Engine maintenance program; Power by the hour; Engine repair and overhaul; Data analytics; Flight line maintenance; Predictive maintenance technologies; Mission Ready Management Solutions; Rolls-Royce