311_Session17

311_Session17 - Session17: PreviousClass Session17 2...

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  Operations management Session 17: Introduction to Revenue  Management and  Decision Trees 
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 Session 17 Operations Management 2 Previous Class
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 Session 17 Operations Management 3 Today’s Class Introduction to Revenue Management Decision-making under uncertainty Decision Trees Simulation Game Explanation
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Operations Management 4 RM: A Basic Business Need What are the basic ways to improve profits? Profits Profits $ Reducing Cost Increasing Revenue Revenue Management
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 Session 17 Operations Management 5 Revenue Management  forecasting capacity control overbooking optimization market segmentatio n pricing
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 Session 17 Operations Management 6 ‘Selling the right seats to the right customers at the right prices and the right time.’ (American Airlines 1987) Revenue Management  Definitions (Squeezing as many dollars as possible out of the customers) ‘Integrated control and management of price and capacity (availability) in a way that maximizes company profitability.’
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 Session 17 Operations Management 7 Revenue Management  History RM was ‘invented’ by major US carriers after airline deregulation  in the late 1970’s to compete with new low cost carriers Matching of low prices was not an alternative because of higher  cost structure American Airline’s ‘super saver fares’ (1975) have been first  capacity controlled discounted fares RM allowed the carriers to protect their high-yield sector while  simultaneously competing with new airlines in the low-yield sector From art to science: By now, there are sophisticated RM tools  and no airline can survive without some form of RM Other industries followed - hotel, car rental, cruise lines etc.
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 Session 17 Operations Management 8 Revenue Management How the optimization in Revenue Management  might differ from what we have already learned  (like linear programming)?
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 Session 17 Operations Management 9 Capacity Investment-1 New-Fashion buys dyed yarns and makes fashionable  dress. The company knows with certainty that red will  be the color of the year and the demand for a red  gown is 2,000 units per month for the next 5 months. The company can invest in a new production line with  advanced technology. The capacity of the new line is  2,000 units per month.    The cost of this line is $1,000,000.   The production cost per unit is $130.
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 Session 17 Operations Management 10 Capacity Investment-1 Alternative: The company can also convert an obsolete  line with traditional technology. The capacity of the  production line is also 2,000 units per month.
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This note was uploaded on 03/02/2010 for the course BUAD OPERATIONS taught by Professor Srinivasan during the Fall '08 term at USC.

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311_Session17 - Session17: PreviousClass Session17 2...

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