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Driving profitability through aftermarket parts pricing


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Driving Profitability

  • The aircraft design and manufacturing business challenges often keep many original equipment manufacturers’ (OEMs) attention mainly on production without much focus on the aftermarket part of the operations
  • This neglected area is typically the most profitable aspect of business and in this paper, Deloitte provides key lessons it learnt while helping some of the world’s leading aircraft and aircraft system manufacturers in their pursuit to transform their aftermarket parts business using more effective pricing strategies
  • These lessons are:
    • Recognise the potential of the aftermarket parts profits and verify the 5 conditions (suggested in this paper) necessary to be sure that the opportunity to make profit will exist
    • Manage the portfolios in segments
    • Accept that all customers and orders are not equal
    • Manage the change tactically
    • Identify pockets of market power
  • Transformation can take place through effective pricing and can improve the bottom line by up to 25% in 6 to 12 months
  • The other benefits are provision of a better understanding of one’s most valuable customers and parts as well as identifying opportunities to gracefully ‘exit’ unprofitable markets by setting rational prices
  • The stumbling block in getting this done is often the tens of thousands of parts to analyse, various markets and competitors to understand, new ways of thinking and working to incorporate into the business – this is where Deloitte Consulting can add value!

 

 

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