Pricing and Revenue Management in the Supply Chain

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Pricing and Revenue Management in the Supply Chain

The Council of Community Colleges of Jamaica
Turks and Caicos Community College

Supply Chain Management
MGMT 4801

Lecturer: Ms. M. Hosten

Due Date: October 9th, 2012

Name: Donnell Lightbourne

Table of Content

What is Revenue Management?…………………………………………………..pg. 3

Foundations for Strategic Management…………………………………………..pg. 3

Impact and Conditions of RM …………………………………………………..pg. 4

Segments of Revenue Management …………………………………………………..pg. 5-8

Practicing Revenue Management …………………………………………………..pg. 9

User of Revenue Management …………………………………………………...pg. 10

Bibliography ……………………………………………………………………pg. 11

What is revenue management?

Revenue management is the application of controlled analytics that anticipate consumer behavior at the micro-market level and optimize product availability and price to exploit revenue growth. It could also be defined as the use of differential pricing based on customer sector, time of use and product or capacity availability to increase supply chain surplus.

Revenue management is an order acceptance or refusal process that employ differential pricing strategy and stop sales tactic to modify capacity enhance delivery reliability and speed, and realize revenue from change order responsiveness in order to maximize revenue from pre-existing capacity. It is the use of pricing to amplify the profit generated from a limited supply of supply chain assets.

Foundations for Strategic Revenue Management
Technology
Technological advances in revenue management systems are assuming a crucial role as the regulation shifts from a tactical, to strategic one. There are systems on the market, that provide a whole host of functionalities, such as multiple channel management and competitor rate-shopping tools, that support the expanded dispatch of strategic approach to revenue management. Revenue management software provides:

(Continuous monitoring
(Consistency
(Information availability
(Performance tracking
(Special reports
People
Revenue management professional must adjust to meet the needs of a career that is evolving. This type of management must have someone that has the ability to think strategically, understand customer behavior and synergize with the sales and marketing team. They must be analytical and detail-orientated, but also have the communication skills to maintain relationships with the other departments, and be able to articulate decisions and information further up the line.

Impact on Supply Chain profitability and conditions in which revenue management has the greatest effect

▪ when the product is highly perishable or product wastage occurs

Example: fashion and high tech product.

▪ when the value of the product varies in different market segments

Example: airline seats and films

▪ the product is sold both in bulk and the spot market

Warehouse making the decision to lease the complete warehouse for long term contacts or saving portion for use in spot market

▪ demand has seasonal and other peaks

High demand for toys and electronics through November and December and textbook demand increase during August and January.

Revenue Management covers four basic segments

Multiple customer segments

Perishable Assets

`Seasonal Demand

Bulk and Spot Customers

Multiple Customer Segments

 There are two primary issues than must be handled to relate the concept of revenue management. First one must know how to distinguish between two segments and structure its pricing to make one segment pay more than the other. On the second hand, how to cope demand so that the lower price segment doesn’t utilize the entire available asset.     When differentiating between various segments,...
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