Question

Describe trade-offs that must be considered when making revenue management decisions.

Answer 1

Increasing the profit generated from a limited supply of supply chain assets by the use of pricing is called Revenue management

When making revenue management decisions certain trade-offs must be considered like;

Revenue Management for Bulk and Spot Customers: The fundamental trade-off is between wasting a portion of the low-cost bulk contract and paying more for the asset on the spot market.

Revenue Management for Perishable Assets: The level of overbooking is based on the trade-off between the cost of wasting the asset if too many cancellations lead to unused assets and the cost of arranging a backup if too few cancellations lead to committed orders being larger than the available capacity