Exam 16: Pricing and Revenue Management in a Supply Chain

Scenario 16.1 - The Stone Lion The Stone Lion,a bed and breakfast located in a sleepy town,caters to two groups of customers,young couples interested in something marginally more exotic than a staycation,and corporate clients interested in doing some team-building at a location with no cellular service.Corporations know they can get rooms with minimal notice,but young couples on tight budgets tend to plan well in advance of their planned stay at the property.The corporate rate for rooms is $250 per person and the demand pattern is normal with a mean of 20 and a standard deviation of 10.The proprietor of the Stone Lion takes pity on the young couples and charges them only $150 for identical accommodations. -If the corporate demand and standard deviation both decrease by 50%,how many rooms should be reserved for corporate clients?

Revenue management is

To differentiate between the various market segments,the firm must either eliminate barriers that identify product or service attributes the segments value differently.

Scenario 16.3 - AITP's Revenge The student chapter of the Association of Information Technology Professionals (AITP)notices the success that the APICS student chapter has with their traditional barbecue sauce fundraiser.Blinded by their jealousy,the club officers decide to sell a competing product,clocks made out of junk computer parts that the club sponsor whips up in his garage.Club officers set up a card table in the atrium of the business building and take turns staffing it for the duration of the computer clock season,which is four months.Twenty-five years of experience have revealed that demand varies depending on the month of the season.Customer demand in the first month can be described as 20-p1,in the second month as 20-1.4p2,in the third month 20-1.8p3,and in the fourth month 20-2.2p4. -The components needed to produce a computer clock cost twenty-five cents.How many clocks should the AITP club produce?

Scenario 16.7 - Commencement Every year at commencement,the president hands out diploma covers to joyous students that cross the front of the auditorium to accept the cover and a hearty handshake.Commencement exercises have averaged 850 students with a standard deviation of 70 the last several years.The bookstore can provide a box of 144 diploma covers for $2,000 but is unwilling to break bulk.Any additional diploma covers must be purchased on the black market at $15 each. -Use Scenario 16.7 to answer the following.What would the cost of a gross of diploma covers have to fall to in order for an optimal order to equal the mean?

The use of differential pricing should

Scenario 16.2 - Card Table Vendor The traditional fundraiser for the student chapter of APICS is pint mason jars filled with a tangy barbecue sauce that the club sponsor whips up in his kitchen.The sponsor is independently wealthy,so he donates his time and materials to the fundraising effort.Club officers set up a card table in the atrium of the business building and take turns staffing it for the duration of the barbecue season,which is four months.Eighteen sad years of experience have revealed that demand varies depending on the month of the season.Customer demand in the first month can be described as 400-p1,in the second month as 400-1.4p2,in the third month 400-1.8p3,and in the fourth month 400-2.2p4.The club sponsor has only 400 spare mason jars this year after a busy summer collecting specimens. -What should the price be in period 1?

The basic trade-off to be considered by the supplier with production capacity is between

Scenario 16.5 - Sanitary Landfill The sanitary landfill charges companies $150 per load and individuals $40 per load.On average,80 companies tip their trucks each day at the landfill with a standard deviation of 15.There is time only for 110 deliveries in any combination of companies and individuals throughout the course of an eight-hour day.Company dump trucks enter through Gate A and individuals enter through Gate B.Individual demand is plentiful - often there are individuals turned away due to lack of capacity. -Refer to Scenario 16.5.It costs the landfill $10 to process a company dump truck and $5 to process an individual load.How many individuals should be admitted each day?

Explain how differential pricing can benefit a firm.

Scenario 16.2 - Card Table Vendor The traditional fundraiser for the student chapter of APICS is pint mason jars filled with a tangy barbecue sauce that the club sponsor whips up in his kitchen.The sponsor is independently wealthy,so he donates his time and materials to the fundraising effort.Club officers set up a card table in the atrium of the business building and take turns staffing it for the duration of the barbecue season,which is four months.Eighteen sad years of experience have revealed that demand varies depending on the month of the season.Customer demand in the first month can be described as 400-p1,in the second month as 400-1.4p2,in the third month 400-1.8p3,and in the fourth month 400-2.2p4.The club sponsor has only 400 spare mason jars this year after a busy summer collecting specimens. -What is the expected revenue if the student APICS chapter uses dynamic pricing?

In order to achieve the greatest value,

Uber's use of surge pricing serves to

The cost of wasted capacity is

The amount of the asset reserved for the higher price segment is such that the expected marginal revenue from the higher priced segment is less than the price to the lower price segment.

Spoilage occurs when the capacity reserved for higher price buyers is wasted because demand from the higher price segment does not materialize.

Revenue management has a significant impact on supply chain profitability if

The amount of the asset reserved for the higher price segment is such that

Which of these combinations of goods is currently offered as a means of revenue management?

Revenue management may also be defined as the use of differential pricing based on customer segment,time of use,and product or capacity availability to increase supply chain surplus.