Design, implementation and evaluation of dynamic equipment exchange for the airline industry

Abstract

Many airlines carry unused in-flight equipment between airports due to the need of balancing the number of equipments at the terminating airports. This operating procedure is termed inventory deadheading or equal equipment exchange. Although simple by nature and guaranteeing a high service level, this policy wastes fuel and precious space onboard. The objective of this project is to design and introduce a robust Dynamic Equipment Exchange (DEE) policy that would optimize the amount of in-flight inventory in order go achieve cost savings, operational efficiency as well as maintaining the same service levels. In the first part, related topics are first evaluated and an improved DEE algorithm model that pegs the amount of equipment carried to an adjusted forecasted passenger load is explained. In the second part, the DEE algorithm was coded, tested and validated using Excel software simulations on a sample flight route. Next, a feasibility study on SIA’s flight network was carried out to ascertain type of flight routes suitable for DEE implementation. These routes are typically characterized by large variability in weekly demands for the specific flight routes and the presence of buffer inventories at the overseas stations. Lastly, the implementation methodology on how to execute this policy is explained. The existing operations and processes involved were first studied. Subsequently, operational changes that need to be effected in various departments of SIA and its in-flight caterers were discussed, together with the various stages of implementation that would minimize the disturbances introduced into the airline’s existing operations. A set of performance indicators for the policy’s effectiveness over the existing system in terms of cost savings, operational efficiency and service levels is also provided to evaluate the success of the implementation. Simulation results for a selected SIA flight route show that this new policy is able to substantially reduce the amount of in-flight equipment by up to 50%, which translates to annual savings of SGD113,000 from direct fuel costs. In addition, up to 70% of SIA’s total flight routes were found to be suitable for DEE implementation, which would contribute to tremendous potential savings if DEE is implemented across the entire airline.