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Pricing Analytics for Rotable Spare Parts

Author

Listed:
  • Omar Besbes

    (Columbia Business School, New York, New York 10027)

  • Adam N. Elmachtoub

    (Department of Industrial Engineering and Operations Research, Columbia University, New York, New York 10027; Data Science Institute, Columbia University, New York, New York 10027)

  • Yunjie Sun

    (Department of Industrial Engineering and Operations Research, Columbia University, New York, New York 10027)

Abstract

In this paper, we describe a comprehensive approach to pricing analytics for reusable resources in the context of rotable spare parts, which are parts that can be repeatedly repaired and resold. Working in collaboration with a major aircraft manufacturer, we aim to instill a new pricing culture and develop a scalable new pricing methodology. Pricing rotable spare parts presents unique challenges ranging from complex inventory dynamics and minimal demand information to limited data availability. We develop a novel pricing analytics approach that tackles all of these challenges and that can be applied across all rotable spare parts. We then describe a large-scale implementation of our approach with our industrial partner, which led to an improvement in profits of over 3.9% over a 10-month period.

Suggested Citation

  • Omar Besbes & Adam N. Elmachtoub & Yunjie Sun, 2020. "Pricing Analytics for Rotable Spare Parts," Interfaces, INFORMS, vol. 50(5), pages 313-324, September.
    • Handle: RePEc:inm:orinte:v:50:y:2020:i:5:p:313-324
    DOI: 10.1287/inte.2020.1033
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    References listed on IDEAS

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