chapter 9 Flashcards
yield management
Guides the decision of how to allocate undifferentiated units of capacity to available demand (segments) in such way as to maximize profit or revenue (price)
Gap 3
Customer-driven service designs and standards
Determinants of gap 3
Failure to smooth the peaks and valleys of demand
overuse of capacity
attracting inappropriate customer segments to build demand
Relying too much on price to smooth demand
Fluctuating demand for service explained in picture
Time cycle 1 and 2 are curved spikes
Capacity is exceeded in these moments
Optimum capacity is only achieved shortly when increasing to over max capacity and decreasing to excess capacity (where you are wasting resources)
Two problems of fluctuating demand
1) Off-peak too low –> overcapacity
2) Peak too high –> Undercapacity
Two solutions to fluctuating demand
1) Shift peaks –> existing customer and services
Average utilization = Constant
2) Fill up off-peaks –> new customers and/or services,
Average utilization increases
(Nature of demand supply fit matrix)
Wide demand fluctuations over time & peak demand can usually be met without major dela
Electricity, natural gas, telephone, police department
(Nature of demand supply fit matrix)
Narrow demand fluctuations over time & peak demand can usually be met without major delay
Insurance, legal services, banking and dry cleaning
(Nature of demand supply fit matrix)
Peak demand regularly exceeds capacity & wide demand fluctuations over time
Accounting and tax preparation, hotels, theaters, tel. helpdesk
(Nature of demand supply fit matrix)
Narrow demand fluctuations over time & Peak demand regularly exceeds capacity
Same as narrow demand fluctuations over time & peak demand can usually be met without major delay BUT with insufficient capacity for base demand level
Patterns and determinants of fluctuating demand
1) Predictable cycle (cycle duration? Daily, weekly, annual, other)
2) Determinants of cycle (employment, billing and tax cycles, wage and salary payment dates, seasonal changes in climate, holidays, other
3) Random change of level? (causes? weather, health events, accidents, acts of god, criminal activity
4) Segmentable demand (different use patterns, differences in profitability of transactions)
Single leg yield management
No dependance between (parts of) services (airline)
Network yield management
A change in one part of the service system influences other parts of the service system (hotel, airline)
Partition demand (managing demand)
Customer segments
Queuing on fist come first serve
Alternatives e.g. Urgency of service demand, duration of service transaction, importance of customer
Develop reservation system (managing demand)
Reservations:
1) Smooth demand in time
2) Smooth demand in location
3) Reduce waiting and guarantee service
Problem: reservation = mutual promise
no shows (fine) vs. Overbooking
(Downgrading of products)
