“AVIATION SPARE PART SUPPLY CHAIN MANAGEMENT OPTIMISATION AT CATHAY PASIFIC AIRWAYS LIMITED” CASE STUDY GLOBAL LOGISTIC COURSE ASSIGNMENT Prof. Hiroshi Hoshino
Umurbek Osorkhan 2EC12056R QBS 10th 5 November 2012
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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 2. Explain the financial impact of having higher inventory level of spare parts. It`s obvious successful supply chain management is focuses in an inventory and inventory control management. A common perception and experience is that supply chain management leads to cost savings, largely through minimizing inventory holding costs. As I mentioned before certain risks (delaying aircraft can lead huge cost) airline operators was needed to hold certain level of spare parts that could satisfy all possible demand of its aircraft. However, this was both financially and operationally impossible. Thus, managing balance between most effective inventory levels to hold onto relative to the responding service level is very important. According to the case study spare parts constituted a significant expense (total inventory value was $350 million in BS) in Cathay Pacific`s financial statement. Followings are several financial drawbacks of having higher inventory level of spare parts. It could increase the carrying inventory cost. High inventory increases the warehousing cost (facility, handling, etc.), the investment cost (borrowing and opportunity, etc.) and holding cost (insurance, tax, obsolescence, etc.) directly linked to the increase of inventory. It could also increase the labor cost. High inventory level
