Have you ever made a bad buying decision? Of course your have. You’re human. It’s frustrating, stressful and a waste of time, money and resources.
You might not even know you’re making mistakes. You think everything is working perfectly. But secretly, everything's a mess. You’ve created a “bad” habit and habits are hard to break.
Here’s a list of the mistakes and what you can do about them.
You focus all your attention on price rather than total value
As a buyer, price is important. It’s where every conversation starts. But, if you’re working with a good material partner, it’s not just about the direct price. It’s about what added value your partner brings to you and your company.
Let’s say vendor A has an aircraft component for $10,000. But, they’ve canceled in the past and are hard to get a hold of. Vendor B has the same unit for $10,500, yet they’re extremely reliable. With Vendor B you can also add 10 other expendables and consumables to the order--cutting processing and shipping costs--and they’re available 24/7. Who’s more valuable to you? Vendor B I hope.
As a buyer we focus so much attention on the direct price, but we have to be aggressive on total value. The value has a lot more cost savings than you think.
You don’t calculate or know your total cost of ownership
With every component you buy, do you know how much it’ll cost you until the consumption occurs? There are so many fees associated with a purchase that fall outside of your direct price. Having a foundational knowledge of your total cost of ownership is essential.
Here’s a short list of the contributing factors that affect your total cost:
PO processing costs: $50 - $200 per PO
Shipping costs: 1 - 5% of the direct costs
Holding costs: 20% per year of the direct costs
Issue resolution costs
It’s essential to know these costs and how your aircraft material partner can help you reduce your total cost of ownership.
An AOG comes in. You scramble, stumble, and panic. The 3 letters all buyers dread.
You feel the same way when your material planners and maintenance send you 100 items you need in 2 weeks.
So, you rush.
Sometimes rushing is unavoidable, but it’s during that time you’ll make the biggest mistakes. You’ll buy the wrong component, over ship, or make irrational decisions. The good news is: it’s completely normal.
When you begin to panic, take a deep breath and calm down. Lower your heart rate. Your operation needs you to think clearly. You can also rely on others to help you.
Here are some things you can do in that situation:
Send your 50 parts to a material partner who has a track recording of being able to support such a request. $ave by consolidating is a smart procurement strategy.
Work with a material partner who has 24/7 dedicated account management support.
Plan your requisitions. Answer the who, what, and why questions.
Not planning or predicting needs
Not planning your high consumption expendables and consumables is a problem. I’ve seen airlines go AOG for bolts when proper planning would have eliminated the issue.
It’s a really simple fix. Export your high consumption expendables into an excel sheet. Send it to your material partner and have them create a 12 month replenishment forecast for you. A vendor managed inventory is a great strategy for this.
You live in aviation so planning everything isn’t possible. That’s unrealistic. Start by analyzing your high usage items. It’s a big move in the right direction.
Not building a long term relationship with key partners
If you have suppliers, they’re a huge part of operating your business. Without them you wouldn’t have parts, solutions, or services that help you keep everything in order.
It’s important you help to build long term relationships with your suppliers. Get to know them, be friendly and practice effective communication. They should do this for you as well and not all suppliers are created equal. It’s not important to build a relationship with someone who never pulls through or just doesn’t seem to care about your operation. Remember, not all material partners are equal. Some bring a ton more value than others.
Learn from the mistakes and make your aircraft purchasing life easier and less stressful.