One of the most recent examples of issues stemming from such a lack of transparency is Sikorsky Aircraft, which has agreed to pay $3.5 million to settle allegations that the company, which makes Black Hawk helicopters, failed to disclose accurate and current prices for parts. This resulted in the government paying artificially high prices for helicopter repairs for more than 3.5 years.
Of course, as the new generation aircraft gradually replace the older ones spare parts represent an important profit area for OEMs. According to Accenture, it makes up approximately 10% of total sales and up to 50% of net income and the numbers are constantly growing. As a result, it is natural that during the early phase of new product introduction most competitors will follow the price set by the manufacturer. However, later on much of the cost is usually caused by the lack of competition and availability of alternate sources, as well as lack of relevant information on particular parts. “Therefore, currently the goal is to align thousands of parts with a price that meets the customers’ perception of value,” says the CEO of Locatory.com.
Since the OEMs have recently been increasingly relying on aftermarket support to offset their declining revenues from new product sales, it has resulted in significant year-on-year price increases for original spare parts, as well as in restrictions on use of PMA parts. Moreover, some have even tried to buy back used products in order to reduce the possible competition. However, the OEMs unwillingness to disclose relevant information on component prices often leads to suppliers simply being unable to set the prices adequately.
This is not the only reason why price-relates issues may arise. For instance, currently the increased availability of surplus parts has been having more impact in the spare parts market, accounting for $3 billion per year and growing at a rate that costs the overall aftermarket parts market 1% annually. While this certainly opens new opportunities for all the players of the aviation spare parts’ market, many suppliers are simply unaware of the real values of the parts they offer.
"Firstly, there are parts that are currently out of production and are simply circulating in the aftermarket. And then one has to keep in mind a large amount of different component modifications, which can be acquired through aircraft dismantling. If the supplier doesn’t have the data to evaluate a particular part, he might check its pricing in the market, but if it ranges from $5000 to $15 000 it is obvious the market cannot be trusted as well,” explains Zilvinas Sadauskas. "Therefore the industry must turn to appropriate ERP applications and other IT solutions, which would enable to store and manage all the relevant historical data. Various e-procurement platforms, offering the possibility to trace and provide such information to the potential buyers are also a viable option. In other words, ensuring traceability of all the component-related information is a top priority to all the industry players. Achieving that would contribute to a more balanced and beneficial market.”
Source: Locatory.com
-
Company DirectoryFreight RateExport RateAgency PartnershipCargo Leads