Cathay Pacific Airline Limited, which was established in 1946, is a profitable airline that has its operations globally. The company has received many awards due to its efficiency in its operations. Nonetheless, the airline has experienced some challenges in its supply chain, particularly in maintenance, services as well as repairs. Therefore, to permit firm’s maintenance, it needs a sophisticated spare parts management process in its supply chain management (Chopra & Meindl, 2013).
- What are some particular supply chain management issues for spare parts operations that Robert (manager of inventory operations) and Paul (manager of procurement of aircraft components and maintenance) need to consider in their recommendation proposal?
The aviation spare parts are costly; Paul and Robert should, therefore, fix these challenges in their supply chain management. In terms of the critical parts, they need to put into consideration outsourcing the maintenance of the rotatable parts or they have the option of getting back service packs where the original equipment manufacturer or supplier offers the alternative of overhauling. In addition, in the case of non-critical spare parts, they must think about reducing the number of suppliers because they have more than 2300 suppliers (Chopra & Meindl, 2013). The airline has embraced an IT system in their spare parts management; however, they have not embraced collaborative IT system that is geared towards promoting communication between the airline and suppliers. Because of this, the company should adopt this new green technology to increase efficiency. They must lower their carbon footprint to lower environmental taxes and likewise save millions of money spent on fuel costs. In addition, they should determine the point at which some spare parts are required to make them accessible according to the demand, thus reducing transportation costs as well as time. This means that when the spare parts are near to the demand, it assists to lower transport costs as well as emissions; nonetheless, at increased inventory costs. The airline has the option of cutting down the number of suppliers and choose those suppliers that are spread globally. This will lower the existing links in the supply chain, thus reducing the length of the journey.
- What is Cathay Pacific purchasing power in aviation spare parts procurement? What are the possible alternatives for improvements in the procurement process?
There exist two groups of spare parts in the airline: the non-critical and critical parts. In terms of purchasing power, critical parts that include the aircraft engine, the airline have very low purchasing power. This is because of their strict air authority and also because the manufacturers of these parts hold a specialist in their parts. As non-critical parts are concerned, Cathay has high purchasing power since there are several suppliers. The airline must consider switching costs from one supplier to the other. The best option for the airline is to form an alliance for aircraft spare parts procurement. The airline has formed an alliance, but if all the airline firms come together and attempt to unify parts procurement, it will result to high purchasing power. In addition, there is a need to decrease the number of suppliers and adopt global outsourcing practice. There need also to adopt collaborative IT system in their procurement process.
- How does Cathay Pacific handle shortage management? What are the problems with each option?
- Which type of aviation spare parts is suitable for procurement outsourcing? Why? What are the criteria for spare parts outsourcing?
In the airline industry, the usage of spare parts is greatly unpredictable and, therefore, future demand is one of the tricky tasks for the company. There are two types of aviation spare parts in Cathay: critical and non-critical spare parts. Critical parts are majorly dominated by the OEM suppliers. Since there are several suppliers in the case of non-critical spare parts, the switching alternative is much easier. Thus, for all the critical parts, the airline should consider the alternative of outsourcing the maintenance of rotatable or the option of getting service packs where the OEM offers the alternative of overhauling. They also need to outsource unserviceable spare parts to companies globally. This is based on the fact that the critical parts have few number of suppliers as compared to non-critical parts (Chopra & Meindl, 2013).
- What are the advantages and disadvantages for Cathay Pacific to use 3PL partners for its repair management and logistics management? What are the criteria for Cathay Pacific to choose its 3PL partners for repair management and logistics management?
Third party logistics play a vital role in promoting logistic activities and a significant factor in the supply management process. Cathay can depend on the expertise provided by 3PL. 3PL have the necessary resources as well as expertise to offer logistic services. The resources include transportation facilities, warehouses, and excellent IT systems to collaborate and track other subcontractors (Chopra & Meindl, 2013). This will enable firms to attain economies of scale and scope. Cathay may outsource their spare parts inventory management to 3PL providers. Therefore, Cathay will be in a position to save transport and warehouse of vital spare parts when the demand is high. This will lower capital investment. This will also reduce and share risks, especially financial risks. There are some disadvantages of outsourcing logistics. Cathay will not have direct control of the processes in the supply chain. In the case where the 3PL goes bankrupt, it will mean that Cathay will incur great losses because they will be needed to act suddenly.
References
Chopra, S., & Meindl, P. (2013). Supply chain management: Strategy, planning, and operation. Boston: Pearson.
Yeoman, I., & McMahon-Beattie, U. (2010). Revenue management: A practical pricing perspective. Basingstoke: Palgrave Macmillan.
