Supply Chain Management at Cathay Pacific Airways Limited

Case Study

Aviation Spare Parts Supply Chain Management Optimization at Cathay Pacific Airways Limited

March 22nd, 2011

Company Overview:

Cathay Pacific Airways is an airline company founded on September 24th, 1946 by Roy Farrell and Sydney de Kantzow. Starting with a very limited schedule service, the company grew larger through multiple product innovations, technological investments such as the computerized reservation system and successful acquisitions. In 1986, Cathay Pacific went public and further expanded in Europe, North America, and China. The company employed over 25000 people worldwide, serviced over 43 destinations throughout Asia, Europe and North America, and carried more than 16.7 million passengers in 2006. In terms of supply chain management, Cathay’s engineering commercial section is made of mainly three functions which are procurement, inventory operations (IOPs), and planning. Inventory operations focuses on the day-to-day operations while the procurement concerns the commercial responsibilities with suppliers. The company’s fleet consisted of over 117 planes of 11 models with an average age of 11 years; due to the diversity in the nature of parts and the fact that over 1 million parts are needed on a single plane, Cathay had to manage a very large inventory and do business with over 2300 suppliers to meet the demand of the company’s fleet. Since the aviation parts were handled and purchased directly by Cathay Pacific, the procurement process could be triggered by a normal replenishment occurring when stocks reached a certain reordering level, initial provision, and special provisioning which is triggered when spare parts were required for a non routine task. The spare parts at Cathay Pacific were classified according to both their function and criticality. The classification by function was divided into five primary classes which are rotable, repairable, expendable, consumable and expendable-repairable. These five classes could also be...