Cathay Pacific
AVIATION SPARE PARTS SUPPLY
CHAIN MANAGEMENT OPTIMISATION
AT CATHAY PACIFIC AIRWAYS LIMITED
GROUP - 1
INTRODUCTION
• Founded in Hong Kong on 24 Sep 1946
• Swipe Group acquired it in 1948
• Voted airline of the year in 2005 and 2006 by different magazines • 25000 staffs worldwide
• In the next 5 years 46 new planes with 3 new models to be delivered.
Spare Parts Classification
Spares are divided into 5 classes in terms of function 1. Rotable (Repairable with longer life span)
2. Repairable (Repairable with long life span)
3. Expendables
4. Consumables
5. Expandable-repairables
Key Data
• Total inventory value - $350 million as on Dec.
2005
• Dead and inactive stock – 3% per annum
• Cost of an engine - $12 million
• Cost of runway usage - $60 per minute
• Repair orders – over 80000 per year
• Suppliers – over 2300
• Parts on database – 380000 as on Feb. 2007
Advantages of 3PL
• They have expertise and resources to provide logistics services
• Economies of scope and Economies of scale(by synchronizing the operations with other deliveries and other customers) can be easily achieved.
• Reduction in capital investment, as CP will able to save on warehouse facilities and transfer facilities of necessary spare parts in case of demand.
• CP can concentrate on its core competencies and customer service to give better customer experience and other parts of repairs are handled by 3PL
• Reduction and Sharing of risks. Cost savings, better cash flows and better access to resources.
Disadvantages of 3PL
• CP will have less or no control over its own activities
• Risk of discontinuation of services by 3PL
• Difference in the perceptions:
3PL may look at the repair management and spare parts logistics process in different angle than CP
Lack of coordination to ensure dispute free operation
• If one of the partner faces a grave problem then the other will have a huge negative impact as it will have to manage all the activities suddenly at short notice
• The information
CHAIN MANAGEMENT OPTIMISATION
AT CATHAY PACIFIC AIRWAYS LIMITED
GROUP - 1
INTRODUCTION
• Founded in Hong Kong on 24 Sep 1946
• Swipe Group acquired it in 1948
• Voted airline of the year in 2005 and 2006 by different magazines • 25000 staffs worldwide
• In the next 5 years 46 new planes with 3 new models to be delivered.
Spare Parts Classification
Spares are divided into 5 classes in terms of function 1. Rotable (Repairable with longer life span)
2. Repairable (Repairable with long life span)
3. Expendables
4. Consumables
5. Expandable-repairables
Key Data
• Total inventory value - $350 million as on Dec.
2005
• Dead and inactive stock – 3% per annum
• Cost of an engine - $12 million
• Cost of runway usage - $60 per minute
• Repair orders – over 80000 per year
• Suppliers – over 2300
• Parts on database – 380000 as on Feb. 2007
Advantages of 3PL
• They have expertise and resources to provide logistics services
• Economies of scope and Economies of scale(by synchronizing the operations with other deliveries and other customers) can be easily achieved.
• Reduction in capital investment, as CP will able to save on warehouse facilities and transfer facilities of necessary spare parts in case of demand.
• CP can concentrate on its core competencies and customer service to give better customer experience and other parts of repairs are handled by 3PL
• Reduction and Sharing of risks. Cost savings, better cash flows and better access to resources.
Disadvantages of 3PL
• CP will have less or no control over its own activities
• Risk of discontinuation of services by 3PL
• Difference in the perceptions:
3PL may look at the repair management and spare parts logistics process in different angle than CP
Lack of coordination to ensure dispute free operation
• If one of the partner faces a grave problem then the other will have a huge negative impact as it will have to manage all the activities suddenly at short notice
• The information