Have you ever bought a cheap aircraft part and regretted it? Of course you have. Cheap prices are attractive. They look good, smell like savings and sound like a “deal."
The lower you drive individual costs the better off you’ll be, right?
Not quite...
Cheap Aircraft Parts vs. Total Value Creation
Our supply chain team felt the pain of this just recently. They were huddling to bring in a new component to replenish a specific pooling product line. We’ve had trouble in the past with this supplier but since they met our QA standards we figured we would give them another try.
We sent the $3,000 PO to the supplier. They replied and said the unit is SV not OH, despite the email string saying otherwise. We told him that’s not we agreed upon and he replied:
“I’ll have to pass on this one…” Wait, what! He’ll have to pass?
We replied and demanded him to honor his quote and he stated “This is aviation bro, it happens.”
Yes, the term “bro” was used. I can’t make this stuff up. Can you believe it, this is aviation? Not Skylink’s type of aviation (Never Forget Your Wings).
This was our fault. We decided to procure based on price instead of total value. We’re still searching for this item and will have to absorb a NE unit at 4x the cost. We would have made other decisions from the beginning if we didn’t rely on this “cheap” price. Our mistake and we now pay.
Driving down cost is a smart decision but anything less than fair market value get’s you into sticky situations.
What you can expect from “cheap” aircraft parts
The definition of cheap is "costing very little; relatively low in price; inexpensive; low-cost in comparison to market."
Now, I’m sure you knew this but with low and cheap pricing you bargain with opportunity costs. You’re giving up something else in return for cheap pricing.
From experience, these are common things you gamble with:
Reliability
Quality
Service
If cheap pricing is the way you want to go then you may see a higher occurrence of vendor problems. This means more cancellations, delays and poor customer service.
Sometimes it’s worth the gamble, but most often it’s not.
What total value is and isn't
The definition of value is "relative worth, merit, or importance."
Total value isn’t you spending 2x the market price on a particular aircraft part or using a specific supply chain partner. Total value is the return you get in addition to the price you pay for a specific product. This is calculated in many different ways but a great example is when your aircraft is undergoing a maintenance check.
When your aircraft is undergoing a maintenance check, you need to get parts to the MRO at a designated time otherwise you’ll be penalized, or worse, the aircraft will be delayed. Let’s say with every delay you’re charged $500. You could buy a cheap component for $2,500 or a fair market component for $3,500.
You risk cancellation and delays with the cheap component.
You’ll then have to resolve the problem and expedite shipping, spending more of your precious time. When it’s all over with the “cheap” aircraft parts cost will add up well over $3,500 when you consider your time and expedited shipping and even late delivery penalization costs.
Most of the time, it’s not worth the headache alone. When you go with total value upfront, you save yourself the headache after.
Remember, this doesn’t mean I recommend you buy expensive inflated components. What this means is look at everything, not just the “cheap” cost itself.
Look at reliability and service as the core benchmark to determine appropriate actions.
It's like babysitting a child that doesn't listen.
