lecture 9 (yield management) Flashcards

1
Q

Yield management

A

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)

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2
Q

What gap is yield management

A

Gap 3: Customer driven service designs and standards to service delivery

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3
Q

Example efteling Yield management

A

They have rollercoasters - shows - fairy tales - food

Children with (grand/parents) - couples - teens

Changes per season - week - day

So… Capacity adjustments, programming of shows, limits… How do we do this?

Have to make different decisions on what to have when, how many different things…

how can we use the capacity to the full potential

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4
Q

Determinants of Gap 3

A

Failure to smooth the peaks and valleys of demand

Overuse of capacity

Attracting inappropriate customer segments to build demand (if we have a restaurant from 4-11, there should be people interested at going at 4. IF they dont exist, theres no point…

Relying too much on price to smooth demand

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5
Q

Fluctuating demand for services:

A

Demand peaks and then goes back down and then peaks again. When it peaks demand exceeds capacity and business is lost, decrease in service quallity if staff is überfordert. If there is a valley, there is excess capacity (and youre wasting resources)

sometimes max capacity is also ideal capacity (e.g. soccer match)

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6
Q

Fluctuating demand (two problems)
+2 solutions

A

1) Off-peak too low –> overcapacity
2) Peak too high –> undercapacity

Two solutions:
1) shift peaks -> existing customers and services
Average utilization = constant
2) Fill up off peaks -> new customers and /or services, average utilization increases

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7
Q

Nature of demand-supply fit

A

Peak demand can usually be met without major delay & wide demand fluctuations over time: electricity, natural gas, telephone, police department

2: Peak demand can usually be met without major delay & narrow demand fluctuations over time: insurance, legal services, banking or dry cleaning

Peak demand regularly exceeds capacity &wide demand fluctuations over time: accounting and tax preparations, hotels, theatres

Peak demand regularly exceeds capacity & narrow demand fluctuations over time:
same as 2 with insufficient capacity for base demand level

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8
Q

Patterns and determinants of fluctuating demands:

A

1) predicable cycles:
going to work, its busy right before work starts for most people.
cycle duration? daily, weekly, monthly, annually or other…

2) determinants of cycle?
Employment, billing and tax cycles, wage and salary payment dates, seasonal changes in climate, holidays…

3) random change of level:
causes? -_> weather, health events, accidents, acts of god…

4) segmentable demand: Different use patterns, differences in profitability of transactions

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9
Q

single leg vs network yield management

A

single leg yield management: no dependance between (parts of ) service
e.g. airline that has a direct flight to your destination

Network yield management: a change in one part of the service system influences other parts of the service system:
e.g. airline that has several conneccting flights

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10
Q

Managing demand (partition demand9

A

segment the market makes life much easier.

E.g. train we have a lot of different people going to work, students, old people… if i can segment them somehow (train ticket off peak hours cheaper) then we can make the service better

Queuing on “first-come, first serve”
alternatives, e.g.
Urgency of service demand, duration of service transaction, importance of customer

e.g. ah has lines for only small baskets cause why wait so long…
macro has special parking lots for gold card members

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11
Q

Managing demand: Develop reservation systems

A

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)

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12
Q

Managing demand (promoting off peak demand)

A

E.g. fill up lecture rooms to watch movies during the hollidays

Communication based

Identify different motivations of demand or different segments

Communicate advantages of off peak (can be price based)

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13
Q

Managing demand (establishing price incentives)

A

Is service demand price elastic
Segments with different elasticities?

Dont want the customers that aready go a lot to start going when you charge less…

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14
Q

managing demand (develop complementary services)

A

service based:

Complementary anti-cyclic service to smooth
Ice-cream salon that sells rugs and carpets
Heading and air conditioning (its warm in winter, cool in summer and you can get ice cream)

NOT: complementary cyclic service to buffer

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15
Q

Managing supply: Increase customer participation

A

self service: advantages and disadvantages for provider and customer

Provider adv: increased speed, increased satisfaction, decreased costs, customization, no emotion personnel…
Disadvantages: lost of customer bond (ABN), increased possibility of failures in technology

Customer advantages: increased convenience (time), decreased costs (travel)
Disadvantages: No social experience, technology stress….

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16
Q

managing supply: schedule workshifts:

A

Daily, weekly, period workshifts

1)forecast demad

2) determine personnel requirements

3) Determine “shifts”

4) Assign personnel to shifts

E.g. phonecalls during the year (peak christmas and mothers day)

Phone calls during the day: strong strong increase from 9-10 start scheduling more then

17
Q

managing supply (use part time employees, cross-train personnel

A

3) When peaks are presistend and predictable (works best with standardized work)

4) multiple anti-cyclic services
single-service anti-cyclic processes:
Circus, bus driver become tour guide

Single-service multiple processes different priorities:
Supermarket stocker become cashier

18
Q

manaaging supply: Create adjustable capacity:

A

service scape:
in a plane you can easily shift from business to economy, you can make business larger etc.

in japan they have adjustable walls to make cabins for eating larger or smaller

Adjustable time: hairdresser will spend more time with you if there is less customers… restaurants do the same, you stay longer and hopefully drink more or something like that

19
Q

managing supply (share capacity)

A

own scope remains the same
Farmers share machines for example

Own scope narrows
e.g. hospitals that are trying to specialize
therefore try to cut costs and you have to go to specific hospitals for the service you want

20
Q

yield management (end of lecture)

A

use fixed capacity optimally in time to increase revenue

yield = actual revenue /potential revenue

Actual revenue = actual capacity used * average actual price

Potential revenue total capacity *maximum price

21
Q

Yield management continued

A

1) relative fixed capacity
2) opportunity to segment demand
3) supply is perishable
4) servie is purchased before consumption
5) demand fluctuates
6) low marginal cost per unit and high marginal cost per capacity extension
7) Producer-consumer interaction
8) service cannot be transported

22
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23
Q
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