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Alan Peacock, Flight GSE John Nicholson, Aviation NZ GSB Supplycorp Thursday 11 November JOINT PROCUREMENT: SAVING COSTS, IMPROVING PRODUCTIVITY AND INCREASING.

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Presentation on theme: "Alan Peacock, Flight GSE John Nicholson, Aviation NZ GSB Supplycorp Thursday 11 November JOINT PROCUREMENT: SAVING COSTS, IMPROVING PRODUCTIVITY AND INCREASING."— Presentation transcript:

1 Alan Peacock, Flight GSE John Nicholson, Aviation NZ GSB Supplycorp Thursday 11 November JOINT PROCUREMENT: SAVING COSTS, IMPROVING PRODUCTIVITY AND INCREASING YIELDS

2 Recap on Honiara What has happened since then An easy win, GSB Supplycorp The way forward OVERVIEW

3 If you do what youve always done, youll get what youve always got The World is changing If you can't, you must. If you must, you can. Source: Anthony Robbins…… THE ALTERNATIVES

4 The South Pacific Aviation Market is growing The market is becoming increasingly competitive 100 aircraft, 15 different aircraft types operated Collective approach to development: How can we co-operate to achieve more? (Didier Tappero) RECAP ON HONIARA (1)

5 The concerns of airlines (Didier Tappero) Fleet optimisation Improving revenues Reducing costs RECAP ON HONIARA (2)

6 Can be 40% of total operating costs Long term trend is up Politically, what is being achieved? Commercial market is changing Is sovereignty important? Is a regional approach possible? FUEL: THE CONUNDRUM

7 Is security of supply the key Is competitiveness second in importance Hedging can be +ve or –ve At point of sale or point of purchase Costs under direct control are controlled Costs elsewhere in supply chain an issue If whole of supply chain, where do we start? FUEL: MORE QUESTIONS?


9 Some NZ companies are already providing part of your solution Oman Airport uses Cavotec Pop-up Pit System Holm Solutions supplies to some of the worlds hot spots Superstructure Group supplies safety and risk management systems to 110 customers covering 5000+ aircraft in 50 countries NZ Safety Management Systems has lots of expertise too FUEL: WHY CAN WE DO IT

10 And after a decade of crisis in which airlines lost $47 billion, the outlook is finally more positive. We expect airlines to deliver a profit of $2.5 billion. Thats only a 0.5% margin on revenues of $545 billion. But at least its a black number. Giovanni Bisignani, 25 th August 2010. Speech to the Australian National Aviation Press Club

11 The concept of an airline joint venture purchasing office mooted in May at Honiara. A logical step from the ad hoc co-operation already existing between the Engineering Departments of the ASPA Airlines. Primary function would be to aggregate purchasing requirements, combine purchasing functions and negotiate group or volume discounts by leveraging economies of scale. It would save airlines money. PURCHASING OFFICE REFRESHER

12 Primary function to save money for the airlines by: combining purchasing functions. developing preferred suppliers. negotiating discounts. leveraging the economies of scale that purchasing on behalf of a larger group will permit. creating a registry of equipment owned by airlines that could be rented out to other carriers in the group. FUNCTIONS OF A PURCHASING OFFICE

13 Aircraft Operating Costs Aircraft Spares ( group savings have already been offered for those a/c under 16 seats) Lubrication Fluids & Fuels Outside Engineering Services Repair of ULDs Establish On-Line Technical Team sharing knowledge among airlines, especially useful for engineering. WHERE SAVINGS MAY BE POSSIBLE (1)

14 Ground Services Equipment Costs Co-ordinate usage of infrequently used items– ie Twin Otter Wing Removal Stand thats been used once in five years. Bulk purchasing commonly used items such as baggage trolleys and maintenance stands. Standardisation of equipment makes and models will drive down purchase costs. Establish a central ownership register where the central office could purchase and lease back specialist items of equipment – ie bore scopes. Economies of scale will enable cost effective leasing arrangements for GSE and other plant. WHERE SAVINGS MAY BE POSSIBLE (2)

15 Back of Office Costs Combine advertising bookings in single markets to drive down costs – each airline would still create their own advertising but benefit from cheaper booking rate. Combine regularly used items such as copier paper, computer and printer equipment, uniforms, galley consumables. Negotiate direct to airline e-purchasing arrangements so all airlines gain a benefit ( ie GSB ). WHERE SAVINGS MAY BE POSSIBLE (3)

16 Training and Compliance Co-ordinate training courses for pilots, engineering and ground staff, and by increasing numbers of trainees at courses, drive down course costs Better utilise specialist advice from outside experts which can be shared between airlines - ie aero-medical, legal, technical, SMS, Risk and Safety Compliance. Combine issuing of Identify cards through one central office WHERE SAVINGS MAY BE POSSIBLE (4)

17 Staff Costs A group office, utilising internet communications between the different engineering offices, could combine many of the purchasing functions of the airlines, reducing the number of purchasing staff each airline needed, and enabling a worthwhile reduction in wage costs WHERE SAVINGS MAY BE POSSIBLE (5)

18 How would this office be funded, once established? Running costs come out of turnover Surplus profit over expenditure can then be: Reinvested into additional lease equipment to grow the company or Paid back to airlines by way of dividend. The aim – profits returned to the ASPA members FUNDING

19 Overcome duplication of equipment Economies of scale result in better purchasing Potential to become part of even larger purchasing blocs More economic orders introduce new leasing options Group purchasing helps you keep products and services up to date Encourages collaboration Integrate purchasing but retain sovereignty Really addresses cost consideration JUSTIFICATION

20 CEOs agree to progress concept of joint purchasing office CEOs agree reps from airlines who will progress and set up project team Existing ASPA purchasing work is absorbed into this project team Work team develop agreed areas of focus, operating procedures, structure, funding model and implementation process for presentation to ASPA 54 th session. We volunteer involvement. THE WAY FORWARD

21 Fuel is a crawl, walk run process but we need feedback Engineering procurement a real possibility GSB Supplycorp presents some easy wins We are keen to work with you CONCLUSION

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