Coping With Price Pressures

For Manufactures Only Coping With Price Pressures By Richard Rowe April 2001 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 airline should specify the results they want, but not how the manufacturer should achieve them. New technology and special features evolve every day. Applying restrictions is counter productive and the airline most likely would be ignoring things they may want to consider or have their equipment provide. Also, don't discount or discriminate against a manufacturer based on country of origin. There are many superior products on the market that are designed and produced in different countries around the world, yet offer high quality, excellent support, and very competitive prices.

Thirdly, when the airline has a requirement they should request each of the product manufacturers to provide then with an honest specification of what they have to offer, accompanied by an explanation of why they have designed it that way. Get them to include their recommendations, suggestions, and optional features.

The airline should then assemble a knowledgeable evaluation team consisting of the airline operators, the A&E and their own engineers, and chaired by the airline’s GSE manager. They can then digest all the information to get a clear understanding of exactly what each vendor has to offer. Then, invite those manufacturers which meet the overall company stability qualifications, and have these potential suppliers explain their technology in detail.

The technical evaluation group would then select what they believe to be the best or most technically desired products and ask for a realistic price for the quantity of product which the airline is considering (project or blanket requirement).

Then, it’s up to the customer's technical committee to determine, purely on a technical basis, which product they need or want to support their operations and aircraft and, based on the budgetary price, see if it falls within their general budget constraints or allocations.

Once they have decided on which product they want technically, the airline’s purchasing group, with the technical group present, calls in the technical first choice and they negotiate with the manufacturer for an equitable price for the particular quantity and level of support. If the product and manufacturer meets all of the customer's criteria--company stability, technical superiority, product support requirements and price--they place an order.

They don't call in the second choice and pit one against the other to get the lowest price, because there are still very big differences between the various products. The engineering group chose a product for a reason. Naturally, if they can not come to an agreed price with the favored product manufacturer, then the decision should go back to the technical committee for their evaluation and determination of whether the first choice's price is worth it or not. If not, they select a second choice and so on.

The main objective is not to have the final decision based on price alone and just forget about the technical needs. If products are chosen in this way, then both parties know exactly what is expected and what they are getting. A purchase order/contract can be drawn up and signed--one where the manufacturer's feet are held to the fire to perform according to their claims, and one where the customer does not make additional demands or expect more than what was agreed to for the price offered.

It takes a little time and effort but eliminates many, if not all problems. Not least, it ensures that the airline gets what it pays for.

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