Operations

We continue to invest in operational capability to enable the long-term growth plans of the Group to be executed.

Our strong positions in growing markets, represented by a record order book, together with increasing services activity, place a demand on us to deliver world-class operational excellence from modern and efficient facilities.

There has been significant uncertainty in the economic environment during the last two years and our supply chain has performed well throughout this volatile period, with an increasing emphasis on productivity, flexibility and execution. The 2010 results reflect this performance through a marginal reduction in inventory and progress in productivity, reflected by an improvement in revenue per employee.

Our global operational network is a highly integrated activity including our own facilities, partners and other external suppliers feeding the gas turbine applications in all four businesses. In addition, we are managing substantial global supply chains to support our growing range of marine and nuclear activities.

Delivering excellence

During 2010, we have continued to focus on operational excellence with our programme of investments to improve current productivity and support the inevitable growth embedded in the order book.

We work in partnership with our external partners and suppliers to reduce waste, improve designs and introduce better manufacturing methods for new and existing products. Our achievements have helped offset inflationary pressures in 2010, however, there remains more to do. Creating simple, scalable processes and a culture of ‘right first time’ are key to operational excellence and will help achieve cost reductions in every aspect of our operations.

The ongoing drive to reduce inventory provided further benefits in 2010. We are establishing systematic changes that can transform working capital management and, in time, release cash.

Investing for growth

2009 proved to be a year of firsts with an unprecedented number of new programmes reaching first flight or launch. In 2010, the work to support these programmes progressed well. In June 2010, the first Trent XWB engine ran for the first time, in line with the plans we set out four years ago. Flight test work progressed on the new Trent 1000 for the Boeing 787 and the TP400 for the Airbus A400M transport aircraft. In marine, we introduced a new wave-piercing design of offshore support vessel, and in energy we launched the upgraded industrial RB211, the –H63.

Our success at winning business in the wide-bodied aircraft market means we expect to more than double the number of Trent engines being delivered by the middle of this decade. To manage this change in volume, investment in new facilities, tooling and capability continued during 2010. Building work has progressed as planned on the Crosspointe facility in Virginia, US, and at Seletar Aerospace Park in Singapore. With the external building work broadly complete, both are on target to be in operation by 2011 and 2012 respectively.

We opened the new Mechanical Test Operations Centre at Dahlewitz, Germany, and a new facility to support the F-35 LiftFan™ assembly in Indianapolis, US. We also expanded the civil aerospace repair and overhaul joint venture, Singapore Aero Engine Services Limited, increasing capacity to 250 large engines per year.

In the UK, the new disc manufacturing plant in Sunderland is progressing to plan and, in addition, we are supporting the development of four advanced manufacturing research centres. Two similar centres are being developed outside the UK. All of these will help improve manufacturing performance across the supply chain. Additional manufacturing capacity, for the submarines and civil nuclear businesses, is being added to our existing facilities in Derby.

People and capability

We are committed to investing in, and developing, our people to equip them with the skills required to meet the challenges and opportunities we face as the business grows. Through our ethics, health and safety programmes, we are helping our people to make the right decisions and ensuring that the safety of our people and products are at the forefront of our minds and actions. In 2010, we continued to invest heavily in information and technology across the Group. Investments in Product Lifecycle Management (PLM), Computer Aided Process Planning (CAPP) and Manufacturing Execution Systems (MES) are key to providing the tools to enable effectiveness and efficiency.

Future

Our journey to create a global, best-in-class, and fully integrated operations function is well underway. While economic uncertainty seems likely to continue, our priorities remain to improve the effectiveness of our delivery and ensure we are well placed to meet the operational demands of the future.