Why Total Cost of Ownership is Your Secret Sauce to Aircraft Component Purchases

You’re always stuck on the purchase price. It’s the first and last thing you think about. It slaps you across the hand and says, look at me, I’m important. Sadly, you’re wrong. Money and time is lost by this way of thinking.

Total cost of ownership is a different story. It’s when buyers go beyond the initial price and develop a more holistic view of how much a certain asset will cost over time.

We can take this vary concept into our daily lives. Don’t be fooled when you bring a dog into your family. Whether you adopt ($0) or buy one for $2,500 you’ll spend way more over the course of it’s beautiful life. Or don't be fooled if you buy a car for $30,000 and think it’ll only cost you $30,000 over it’s useful life.

Aircraft component purchases must be treated the same way. Don’t be fooled spending $30,000 on an INU and think it’ll only cost you $30,000. What about freight costs, processing, holding costs and I’ll continue the list if you want me to. In fact, if they direct cost is fair market value (+/- 5-10%), then it’s the later you deserves more of your attention

The Total cost of ownership methodology will save you heartache and pain (yes, I just quoted this song). Acquisitions must be viewed in this way…always.

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Determine the overall lifecycle cost of your aircraft components and save money

Looking at the direct cost alone is fool heartedly. You’re procurement activities are global and there’s a myriad of costs that you must consider.

For an airline or MRO logistics and procurement activities are direct costs, freight, processing, labor, installation, holding costs, comm unication, problem resolution, warranty, training and productivity losses.

By looking at direct costs, indirect costs, transaction costs, and disposal costs, you as a purchasing professional get a more co mplete picture about a specific financial investment. I don’t care if it’s 1 part or 100. Looking beyond the initial cost will shock you into what you’re actually spending.

Here are some real world examples we’ve encountered:

• An airline needs 10 components (a mix of rotables and expendables) and focuses solely on direct costs. They decide to purchase all 10 components from 7 different suppliers. Some suppliers are reliable while others have failed them in the past. The airline will incur 7 different processing and freight costs. They’ll be forced to resolve any issues that arise and be hit with productivity losses. They overlook the cost advantages of streamlining.
• A large MRO buys expendables from all over the world and becomes AOG for such small items on a frequent basis. They overlook the importance of TCO and the cost reductions an on demand or JIT strategy will create.
• An airline buys millions of dollars in inventory. They overlook the long term expenses associated with holding inventory. It eats away at their cash flow and ties up millions of dollars of capital on the shelves.

You now understand why I said “fool heartedly.”

Buying based solely on direct cost is disastrous to your bottom line. Get a more holistic view of what you’re buying and save big.

Do you focus all your attention of direct costs? Are you losing money by the day? We can help as we help hundreds of airlines, MROs, lessors, and military’s every week.Fill out the contact form below and we’ll be in touch in no time.

Expendable Automation: 6 months, 500 parts, 0 delays

Do you ever wonder how you can make aircraft consumable and expendable consumption easier? Or even automated?

No matter the price, no matter the size, no matter how many you need, even a small expendable can cause you to have an Aircraft on Ground (AOG). 

These are 3 words every procurement professional never wants to hear. These words raise your blood pressure, make you sweat, and keep you up at night.

AOGs are costly occurrences that thousands of airlines experience due to consumable and expendable problems. It’s often caused by the component being out of stock, but it doesn’t stop there.

These little things can cause AOGs because of capital costs / obsolescence, logistics, or even from a failed purchasing plan. 

How often does one of these create issues for you? Think about it. Once, twice, twenty times a week?

Now think of all the time and money you spend fixing these problems.  It gets messy fast.

It doesn’t have to be all that bad and is incredibly simple if the right strategies are applied.

Automating your expendable and consumable consumption

I’m a huge advocate of automating certain aspects of my life.

From social media posts and blog creation, to business development and automated ERP processes, automation can be found everywhere.

And most importantly, automation is handled by people who have a greater knowledge of certain activities. Or the opportunity cost for them to do a certain task is far cheaper than what you can do it for.

A good example is the company who cleans your office. The opportunity cost is much cheaper for them to do it instead of you. Make sense?

The same goes for automating your consumable and expendable consumption.

It’s as simple as 1, 2, and 3.

1. Identify high usage components and / or components you use every year.
2. Send this list to your consumable management partner
3. They ship these items to you on a forecasted monthly consumption rate (JIT) or they keep them in stock for On-Demand delivery.

The benefit of automating is you get On-Demand component reliability through continuous replenishment. This significantly reduces your costs of AOGs, procurement, shipping, stocking components, and out of stock scenarios.

Through automation you get aircraft consumables and expendables when you need them, where you need them, and how you need them. Direct, automated shipments can be used for one maintenance hub or 15. It doesn't matter as the program automation is designed for your unique operation.

Think about it, how will automating reduce your costs and increase your reliability?

P.S. We  structure our consumable automation program around you. For more information on how we can support your needs through this program, simply fill out the contact form below!

6 Essentials For Every HAZMAT Shipment

What’s worse than an AOG? I’ll tell you what.

It’s dealing with an aircraft parts supplier who has no idea what to do. Even if they specialize in consumable distribution. Scary.

Yes, they might be certified (make sure they are) to ship HAZMAT, but are they competent enough to work with you?

This may sound a little harsh, but it’s true.

We’ve all dealt with our fair share of clowns. Ouch! [CLICK TO TWEET]

They cost you more time and money than you and I care to admit.

A few things to be aware of when purchasing aircraft HAZMAT consumables

Speaking of clown (the amazing, superstar kind), Colin our Skylink TV personality is going to share some tips with you.

These key essentials to every HAZMAT shipment could be the thing that causes your order to be delayed.

Or even hit the AOG status!

When you purchase HAZMAT material, make sure your partner knows a thing or two about shipping consumables.

As Colin said, the biggest thing to be aware of is who you're working with.

If you can’t reach your account manager 24/7 and they aren't there to resolve any problems that arise...move on.

Have you had problems with HAZMAT shipments? Are you in dire need of a HAZMAT logistical overhaul? Comment below.

How To Avoid HAZMAT Creating AOGs

How often do you lose sleep at night hearing the word AOG? I just lost an hour of sleep typing it out.

You want to cut this painfully costly occurrence as much as you can, but how?

There’s always something getting in your way of the peaceful non AOG operation.

Like HAZMAT.

Trucking HAZMAT to the Maldives...funny story

This brings me back to a recent shipment we had.

We had 8 hazardous material boxes that needed to arrive into the Maldives as a part of a kit we were supporting.

Our client’s freight forwarder contacted us (I love these guys by the way...sarcasm) to help arrange the shipment. They wanted these shipped to the Maldives as soon as possible but little did they know that the dangerous goods declarations had to be completed.

We asked them where the ultimate destination was and they proceeded to “educate” us that they were going to the Maldives. 4 boxes were cargo only shipments. The Maldives does not allow this as an air freight import.

So, we brutally tried explaining this to them.

They  told us to ship everything to Sri Lanka and they would “truck” the shipment to the Maldives.

Yes, truck it to the Maldives.

I began to cry when I heard this.

Truck? To the Maldives? Do trucks now have propellers and float?

The Maldives are islands so the only truck that's getting there is on a boat.

So, we finally arranged to have these goods shipped, via boat, to the Maldives from Sri Lanka.

Maybe you’ve encountered this as well.

The logistics of shipping hazardous material is daunting if not properly prepared for. [CLICK TO TWEET]

The nightmares of distribution

The biggest problem with HAZMAT shipping, besides dealing with silly freight forwarders is not knowing the logistics before shipment.

It’s like going to a salad bar with no plate.

Things get messy.

The first order of business is you must know who’s shipping the goods.

Is it your supplier? Is it a third party packer? Whoever it is, you need to know.

The next order of business is to know who stands in your way of delivery.

Are there any intermediaries? If so 2 dangerous goods declarations will have to be created. One from Skylink to the intermediary and one from the intermediary to you.

If you can avoid the intermediaries, I recommend it. As you’re well aware of, too many people touching the shipment increases the probability of errors.

It’s like the holidays, package for perfection

Have you ever sat through a HAZMAT course?

Brutal, I know.

It brought me back to my childhood days where I would sit in class falling asleep and...POW...hit the floor as I fell out of my chair.

Whether you’ve been through the class or not, you should know that each UN has a corresponding packing instructions.

These are all in the IATA Dangerous Goods Manual.

Whether you need to know the proper cardboard box, proper barrel packaging or the associated stickers, it’s very important to package the shipments properly.

If the packaging isn’t done properly the shipment will be sent back, possibly creating an AOG situation for you.

This is why competency is key and we can thank our team member Ronald Cathey for our HAZMAT shipments.

Controlled by countries and airlines

As you can see, shipping HAZMAT is a tedious process, which is why certain HAZMAT fees are associated with these shipments.

Another hurdle that you or your supplier will have to overcome is specific country or airline policies.

In the story at the beginning of the post you heard about the Maldives not accepting cargo only shipments.

These are things that you’ll need to know to avoid HAZMAT creating AOGs.

When your shipment is to an ultimate destination, ask yourself these three questions:

• Does the country allow cargo only shipments?
• Do they allow HAZMAT at all? If not, where can we divert the shipment too?
• What are the other restrictions for HAZMAT shipments?

These questions will help you get ready.

And remember all of this is in your IATA Dangerous Goods Study Guide.

If you thought the countries policies were tedious, we haven't even got to airline specific policies.

Some might not allow oxygen generators (almost all airlines), while others will allow you to ship more than a certain amount of a specific UN number. Some might have a requirement for specific classes to ship a certain distance away from one another in the belly of the aircraft.

These are all things to understand. If a cargo flight is full and your HAZMAT shipment needs a certain amount of distance away from each other than your shipment could get bumped. Not good.

This is why having a plan is imperative to avoiding AOGs.

Just as the country specific policies, the airline specific policies is all in the IATA manual.

Protect your yourself

The best way to avoid HAZMAT related AOGs is to know that you have a pending HAZMAT shipment and prepare.

It’s a great idea to have contingencies (your supplier should have these as well) to mitigate any issues that could occur.

Get yourself a copy of the IATA Dangerous Goods Manual and get trained in proper HAZMAT shipping protocol. This will help give you the advantage of knowing how dangerous good should be shipped.

It never hurts to know.

When you can, never give control to a third-party packer. They just don’t understand what an AOG is and they're usually slow. That's at least my experience.

They also charge a hefty fee as opposed to your supplier just doing it for you. 

Consumables shipments are by far the most common HAZMAT shipments we see.

If you’re looking for a partner who has both a positive consumable and HAZMAT shipping track record I urge you to click here.