For Manufactures Only
Coping With Price Pressures
By Richard Rowe
One manufacturer spoke with such feeling about the subject of price pressures that we let him have the column all to himself for this issue. Although we have retained the author's anonymity, we can say that he represents the U.S. arm of a well-known European and now U.S.-based manufacturer of 400 Hz ground power products. Whether readers scream "genius" or "idealist", I'm sure that many will share his hopes and frustrations. GSE Today looks forward to the response from both sides of the buyer/seller fence.
I believe the theme of this issue’s new For Manufacturers Only column provides an excellent opportunity to express some of our hopes and vent the frustrations involved in developing and offering quality GSE products that not only meet, but advance, the basic desires of the airline customer. Our goal is to move forward with the evolution and advancement of our products, yet remain competitive and keep within the company goals, image, and profit guidelines.
Too often, I have seen pricing pressures cause problems for both consumers and manufacturers--problems that could have been eliminated, or should never have been allowed to become a factor, if only the bidding processes practiced by many airlines were different. They are problems that were more detrimental over the long run to the airline customer than to the manufacturer.
It's an old cliché, but one can't expect the very best for the very least. If you do so as a customer, you're kidding yourself, and if you do as a manufacturer, then it will come back to haunt you. I have been directly involved in the sales of GSE products for the past 20 years. Prior to that, I was a military flier of multi engine jets for 20 years. It's possible that you will find my solutions to the pricing issue somewhat idealistic, but, if implemented, they would lead to a more equitable, realistic, and practical end result for all concerned.
The GSE industry supports a high-tech service that depends on safety and reliability for its success. However, it is an environment that can quickly become dangerous if manufacturers and airlines do not supply, demand, and utilize the safest and most advanced technology available to them. The fact is that GSE products are directly depended upon to support the extremely expensive key ingredient--the multi-million dollar aircraft. Let no one forget that GSE can make or break the ultimate outcome of the image, service, profit, and safety of an airline's operation.
I think, or rather hope, that today's sell price pressures exerted by buyer airlines is starting to change. Hopefully, there is now the realization that safety, quality, reliability, overall true cost of ownership, and the supplier's actual support capability is more important then just the lowest price (which normally is only a few percentage dollars difference between the GSE competitors).
In the past, the only consideration by an airline was based on the lowest price. Consequently, the evaluation process (if there was one) conducted by the airline's engineering group was disregarded. The final decision was made on price alone by a buyer who was normally unaware of the considerations of the airline's technical group or of what impact the lower cost product might have on the airline's overall operations and costs.
I can 't speak for all GSE product manufacturers. However, products that I have been associated with (400 Hz power and air systems), plus the various manufacturers' product capabilities, reliability, quality and support, differ as much as night and day. The cost-to-build price was not the real sell price determining factor. It was competition, because the sell price pressure would make the sell price differences minuscule. However, the real measurement factor is the manufacturer’s design and engineering capabilities, financial resources, experience, R&D budgets, corporate strategies, goals, principles, scruples and leadership, which all have a major impact on what kind of product they design, what is produced, and how it is priced and supported.
For Manufacturers Only Right to Reply By Richard Rowe June 2001 As expected, our April column looking at the theme of "Coping with Price Pressures" caused quite a stir. You may remember...