Decision Making in the Aviation Industry: Deriving the Operational Factor Approach to Determine Critical Spare Parts Inventory: The Case of XYZ Cargo.

This thesis explores how critical spare parts inventory in the aviation industry should be built up in order to achieve a high Technical Dispatch Reliability. Literature provides many statistical forecasting methods for spare parts in the aviation industry. However, evidence suggests that most airlines do not use such sophisticated models but determine their critical spare parts stock based on operational experience, informal processes and intuition. The action research conducted in this study supports the findings from the literature. It suggests that the Recommended Spare Parts List is not a suitable instrument to determine the critical spare parts inventory. Further, it underlines a resistance towards statistical forecasting methods among decision makers. It also highlights the importance of intuition in decision making. A gap in the body of knowledge was identified during the literature review. No research was found trying to understand the underlying decision making processes of airlines not using mathematical models for spare parts stock allocations. This study provides a unique contribution to the body of knowledge. A new Operational Factor Approach is iteratively developed and successfully applied at XYZ Cargo. This study finds seven operational factors of high significance: flight schedule, type of cargo, minimum equipment list, safety and security, airport frequency, cost, and intuition. Applying these factors for the spare parts stock allocation significantly improved the airline’s Technical Dispatch Reliability outperforming the competition. In addition, the spare parts inventory met budget constraints. The importance of intuition in decision making is acknowledged. The research results provide confidence that the findings can be applied to other airlines, decision areas, and industries. Recommendations for further research and management practice are given. Limitations of this study are discussed