Pricing Analytics for Rotable Spare Parts
Forthcoming, INFORMS Journal on Applied Analytics
29 Pages Posted: 6 Nov 2019 Last revised: 29 May 2020
Date Written: October 28, 2019
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.
Keywords: price optimization, reusable resources, rotable spare parts, large-scale implementation, analytics
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