The Cost of Saving Money!!!

How can saving money have a cost? There is a cost for everything. Eating, eating too much, and eating the wrong things… I could go on and on. Eventually your doctor will tell you what it has cost you. Even when something is presented as free there is a cost associated with it. It may not show up today, but it will rear its ugly head, eventually.

That being said, what is the cost of saving money? Cost can be categorized into many categories, I will use 3; direct, indirect and risk.

Direct cost is easy, so you think. Who pays for the windshield if it gets damaged? Does your vendor have enough insurance? Will the vendor pay or try and dispute it or go out of business and open a different company. Keep in mind longevity, training of crew, safety programs, insurance, quality of management and morals of the owner when evaluating a vendor.

Indirect costs get tricky. Who pays for the lost trip when the cheapest vendor does not perform? How do you evaluate the customer’s impressions when they step onto your aircraft and the interior looks subpar to what they expect? Who will they tell and will they rebook on your aircraft. More importantly, how will it affect your job and reputation?

One that is always ignored until it is to late is long term maintenance. It can also be thought of as the cost of properly maintaining an item and extending its service life versus the cost of replacing and item.  For example, the cost of washing turbine blades and increasing their life span versus replacing them due to corrosion. Or regularly waxing the paint on an aircraft and doubling the life span versus repainting. Reliability is also a major factor as well.

Risk is usually not factored in. It is another non quantifiable number that most do not consider. Risk is easy in my mind. I learned early in MBA School, “Risk should equal return.” We are all dealing with high value items and priceless lives. Every part of our operation significantly exposes our aircraft to danger. You saved $100 on a tire replacement but you did not know the mechanic does not use a torque wrench to tighten the bolts. Did he stretch the threads and risk a rim failure? Does the aircraft detailer know the ramifications of clogging a static port? There is a significant cost associated with using vendors that are not trained properly, use none aviation grade supplies, do not have sufficient insurance or just cut corners.  Even though some vendors provide relatively simple services they are still working on $20 million pieces of equipment.

Value. I suggest basing a decision on value. A quality product, quality customer service at competitive pricing is value. When the price seems too good to be true, it is! In my field, I know exactly what the cost of doing a job is. I know how long it should take and what the material costs and indirect costs are. When I see a competitor drastically underbid me I know they are cutting corners somewhere. I just do not always know where. Is it quality, labor, materials, safety, insurance. The scary part is you do not know where they are cutting corners. If a company is losing money they will not do it for long. They will go out of business, start cutting corners or raise their price. They have to. If it is your decision and saving money goes wrong, will it be your job or reputation? I have lowered pricing to maintain market share but will not do it for long. I have heard people say “they are making their money doing other things. This is bad business and does not make financial sense.

A stable well trained work force lead by a trained professional in aviation knowing and having operated in the environment and that will be there for you in an emergency, Friday night at 10pm when you really need them. That is value.

When you have a good vendor, supplier or manufacturer or are evaluating a new one, what are the risk factors you should consider to save a few dollars? I do not believe a few dollars are worth the peace of mind of having a quality vendor. You are risking many millions of dollars; it is not worth a few thousand!

Jerry Gemma

Pro Guard Air Craft Detailing.