When purchasing aircraft material, value isn't about price.
It's a common mistake made when sourcing aircraft material. Unfortunately, some aircraft maintenance teams prioritize price in all their procurement decisions.
We've seen it thousands of times when working with new clients.
They cite price and delivery time (understandable) as the most critical factors in their decision-making, but what they say and do are often in conflict with one another.
Once we started to help them deliver specific outcomes, everything changed.
Value isn't about price; it's about impact.
The tricky part is that everybody perceives value differently.
Some people value cheap prices, while others prefer to pay a higher price for immediate, seamless, and effortless support.
As an operation, you have to determine what's most important for your success.
That's why you need to know the four levels of value of every aircraft material provider and how they'll impact your long-term success:
Level One: Commodities
A commodity is interchangeable with any similar product.
It's when vendors sell their rotable, expendable and consumable inventory at the lowest price possible for quicker inventory turnover.
Commodities aren't bad. There are many good reasons to buy a commodity, the most significant being price.
When vendors sell a commodity, the value is price and price only.
The good:
Companies provide the lowest price with little friction, and you as the client are relatively certain you're not paying any more than is necessary.
The bad:
Companies that provide a commodity do not disclose what you'll give up before signing a contract or sending a purchase order.
It's only later that decision-makers realize that their order comes with little service, late shipments, quality issues, and no reliable support.
Level Two: Scalable Commodities
Scalable commodities are still a commodity focused on price, but they provide a better customer experience.
Customer support, service, and deliverables will improve, and some of the frustrations you incur having to manage the relationship with these vendors will also improve.
The good:
These models create a greater level of value at a larger scale, and they often attract clients who can't just rely on price alone. Instead, they need a little support.
The bad:
The biggest problem you'll face is that your vendor finds issues (a common occurrence) challenging to resolve as their provider lacks the profit to solve problems quickly.
They tend to ignore issues.
A recent example:
A national airline was ordering a-check kits from a well-known billion-dollar distributer, but the kits often arrived incomplete, wasting time and money. This is the value received for the price paid.
Any client who needs a custom program, consultation, quick resolutions to problems, or high-touch support for specific outcomes will find this delivery model unacceptable.
Level Three: Solutions (Outcomes)
Solutions help solve a specific problem by providing tangible business results; outcomes.
The good:
A solution's most significant value is giving your operation a solution specific to your unique aircraft material needs and a relationship model that includes a person and/or team that works closely with you to ensure you produce the results you need.
The bad:
This model lacks longer-term strategic outcomes and comes with higher costs than a level four value provider (more on this in a moment).
This level helps solve some problems, but it does little to improve your broader problem-solving outcomes.
Level Four: Strategic Partners
A level four value creator delivers strategic value beyond tangible business results.
These companies have the ability and know-how to support you with their advice, recommendations, and commitment to their clients.
The good:
This model delivers the best results for strategic outcomes that are the most important to you as an operation.
The bad:
A higher investment price point.
To reach desired outcomes, it will come at a higher price point but with better total costs, high touch, high responsiveness, and high support.
An example:
A client came to Skylink as they needed a better way to manage their long-term rotable costs without committing to an expensive material management contract.
We identified that the core strategy would focus on the client's extensive unserviceable material inventory and created a long-term logistics and repair plan that manages repair throughput and costs.
The strategy included a 24/7/365 Director of Key Accounts who has the knowledge and advice to continue improving their material strategy, a Repair Portal where they have access to all their repair updates in real-time, a large credit limit, and a company that accepts problems and solves them.
The result is millions of dollars saved without the client having to hire more people.
Each level of value has its pros and cons.
So, what's the most important to your operation? We're happy to help if you seek a strategic partner.