spare parts
HKU820
BENJAMIN YEN
AVIATION SPARE PARTS SUPPLY CHAIN
MANAGEMENT OPTIMISATION AT CATHAY
PACIFIC AIRWAYS LIMITED
We have 2½ billion Hong Kong dollars worth of spare parts on our shelves.
Managing these spare parts effectively is instrumental in ensuring the efficient operations of our airline. This presents a significant challenge to the engineering department.
- Robert Taylor, manager of inventory operations, Cathay Pacific1
A profitable and financially sound commercial airline, Cathay Pacific Airways Limited had every reason to be proud. It was voted “Airline of the Year” in the world’s largest passenger poll, conducted by Skytrax Research in 2005, and named “Airline of the Year” by Air
Transport World magazine in 2006.2 However, there was an operational pain that continued to bother Cathay Pacific. In March 2007, Robert Taylor, manager of inventory operations, and
Paul Barwell, manager of procurement of aircraft components and maintenance, were requested to head up a task force to optimise the supply chain management of spare parts operations at Cathay Pacific. Aviation spare parts constituted a significant expense in Cathay
Pacific’s financial statements. From the balance sheet perspective, as of December 2005, the total inventory value of all aviation spare parts amounted to over US$350 million. Dead and inactive stock accounted for 3% per annum and was an issue to manage with care due to obsolescence and unpredictable demand patterns. Supply chain management for aviation spare parts was complex because of the need to ensure timely service availability of a huge variety of stock and to comply with stringent quality and regulatory requirements.
1
2
Company interview on 25 July 2007.
For details, see Cathay Pacific’s website: http://www.cathaypacific.com.
Karen Lee and Jonathan Pelosi prepared this case under the supervision of Benjamin Yen for class discussion. This case is not intended to show effective or ineffective
BENJAMIN YEN
AVIATION SPARE PARTS SUPPLY CHAIN
MANAGEMENT OPTIMISATION AT CATHAY
PACIFIC AIRWAYS LIMITED
We have 2½ billion Hong Kong dollars worth of spare parts on our shelves.
Managing these spare parts effectively is instrumental in ensuring the efficient operations of our airline. This presents a significant challenge to the engineering department.
- Robert Taylor, manager of inventory operations, Cathay Pacific1
A profitable and financially sound commercial airline, Cathay Pacific Airways Limited had every reason to be proud. It was voted “Airline of the Year” in the world’s largest passenger poll, conducted by Skytrax Research in 2005, and named “Airline of the Year” by Air
Transport World magazine in 2006.2 However, there was an operational pain that continued to bother Cathay Pacific. In March 2007, Robert Taylor, manager of inventory operations, and
Paul Barwell, manager of procurement of aircraft components and maintenance, were requested to head up a task force to optimise the supply chain management of spare parts operations at Cathay Pacific. Aviation spare parts constituted a significant expense in Cathay
Pacific’s financial statements. From the balance sheet perspective, as of December 2005, the total inventory value of all aviation spare parts amounted to over US$350 million. Dead and inactive stock accounted for 3% per annum and was an issue to manage with care due to obsolescence and unpredictable demand patterns. Supply chain management for aviation spare parts was complex because of the need to ensure timely service availability of a huge variety of stock and to comply with stringent quality and regulatory requirements.
1
2
Company interview on 25 July 2007.
For details, see Cathay Pacific’s website: http://www.cathaypacific.com.
Karen Lee and Jonathan Pelosi prepared this case under the supervision of Benjamin Yen for class discussion. This case is not intended to show effective or ineffective