AOG Memorandum

Topics: Decision theory, The Delivery, Following Pages: 3 (762 words) Published: February 4, 2015
Cohort: Baltic Ocean
Team: Baltic Petrels (B2)
Team Members: Anesha Agarwal, Ana Avelar, Nicholas Baladis, Clifford Chow, Joseph McGovern, Rachit Parekh Memorandum – CML19 AOG
To: VP of Operations

As of January 13, 19:30h aircraft CML19 (Boeing 767) has been designated AOG due to a failure in the support assembly (part of the thrust reverser). As a result, flight SCL-MIA 067 scheduled for 21:55h will have to be canceled.

We have conducted a thorough analysis of all viable strategies, and have concluded that the best course of action is to engage ARCSolutions to provide us with a replacement of thrust reverser, and to deliver the part by air. This will ensure that the CML19 will be operational by Thursday January 15, in time for its scheduled departure to Miami at 21:55h. The expected monetary expense (“EMV”) for this decision is US-$ 1.41M.

We came to this recommendation based on minimizing the loss of revenue and customer goodwill by bringing the aircraft back into operation as quickly as possible.

Our analysis considered the following rectifying options:

1. Use spare support assembly / thrust reverser in existing inventory: Not feasible as the part is not available in our or our competitors’ inventory.

2. Buying a new thrust reverser: A new thrust reverser could be bought and re-sold. However, re-selling the part could take up to 10 years, and even using the least conservative possibility of re-selling the part immediately, this option would not be the most ideal. We estimate the EMV of this option is minimum of US-$ 1.75 M.

3. Use exchange supplier:

a) Bennett Cargo Sales (“BCS”): Exchanging the support assembly with BCS implies a risk of 50-65% that the spare part will not fit. If the part does not fit, another course of action will have to be pursued (e.g. engage another supplier), and at least one other flight would be missed. Assuming the best-case scenario, the EMV for engaging BCS is US-$ 1.45M. b) ARCSolutions (Land...
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