Description Kyle Martin Oct 10 10:27am Reply from Kyle Martin This week’s discussion focused on ...
Description Kyle Martin Oct 10 10:27am Reply from Kyle Martin This week’s discussion focused on pricing and revenue management within the supply chain, which is the main content for Chapter 16 in the Chopra, (2018) text. Understanding the roles that pricing and revenue management have within the organization, differential pricing context, how dynamic pricing works, the optimal discounting and peak season pricing structures, and creating a portfolio are all part of the main learning objectives and course content for the week. With information from Chopra, (2018) as well as support from other scholarly literature, the discussion questions are listed and answered below. In what ways can a retailer such as Nordstrom take advantage of revenue management opportunities? For retailers like Nordstrom, they can take advantage of revenue management opportunities by exploiting the opportunities to change prices based on numerous factors, such as the availability of the product, the seasonal demand, and peak and off-peak pricing strategies that allow the retailer to generate more revenue and have higher profits than a competitor in the retail industry who utilizes a fixed pricing structure and executes a fixed pricing strategy rather than optimizing their pricing strategy (Chopra, 2018). What revenue management opportunities are available to a manufacturer? How can it take advantage of these opportunities? The opportunities available to manufacturers fall within their ability to offer different versions of products at different price points to meet market demand in different segments, as well as the opportunity to extend service warranties for the same product that cover different price points and time periods. These opportunities can be taken advantage of by creating different variations of the same product that meet consumer demands. For example, automotive manufacturers make baseline, mid, and high-level versions of the same vehicle, allowing consumers to purchase the same product with variations that meet their desired price point (Chopra, 2018). Additionally, in the car wash industry, touchless automatic equipment can be manufactured in a similar fashion, offering three different versions of the same conceptualized machine that fit into different market segments. Lastly, they can take advantage of these opportunities by creating different warranty options for the same product. For example, “contact lens manufacturers sell the same lens with a one-week, one-month, and six-month warranty” (Chopra, 2018, p. 473). What revenue management opportunities are available to a trucking firm? How can it take advantage of these opportunities? The opportunities available to a trucking firm through revenue management present as giving them the ability to charge different prices during different time periods, price based on segment, demand forecasting, and savings (Chopra, 2018). The way in which they can take advantage of these opportunities “owners of transportation assets in the supply chain must offer some scheduled services as a mechanism for separating the higher-price and lower-price segments” (Chopra, 2018, p. 473). What revenue management opportunities are available to the owner of a warehouse? How can it take advantage of them? The opportunities available to the owner of a warehouse come from their ability to determine their strategy regarding long-term leasing or spot market leasing. While a long-term lease locked in by a warehouse owner may create stability from a revenue perspective, the opportunity to evaluate spot leasing is available through revenue management opportunities (Chopra, 2018). Spot leasing, while less stable than the long-term lease, can be taken advantage of by warehouse owners because the spot market may generate higher revenue, and “revenue management increases profits by finding the right portfolio of long-term and spot-market customers” (Chopra, 2018, p. 466). Explain the use of outlet stores by retailers such as Saks Fifth Avenue in the context of revenue management. How does the presence of outlet stores help Saks? How does it help its more valuable customer, who is willing to pay full price? Retailers like Saks Fifth Avenue and other retailers utilize outlet stores as a way to create dynamic pricing strategy for the organization. Outlet stores will help generate revenue from the market segment that is more price sensitive and values the product less. This also allows the retailer to sell their products at a higher price early on, and only those willing to pay the price will have the product, and then over time as the product trends towards being outdated or last season in the case of the textile industry, they can move the remaining product to an outlet store. This structure does help the more valuable customer who is willing to pay full price as well, because “effective differential pricing over time generally increases the level of product availability for the consumer willing to pay full price” (Chopra, 2018, p. 474). Demand for hairdressers is much higher over the weekend, when people are not at work. What revenue management techniques can be used by such a business? Demand pricing revenue management techniques would be the first technique that a hairdresser business can utilize from a revenue management standpoint. By offering lower prices throughout the week, the organization may be able to drive a percentage of their weekend customers to scheduling a weekday appointment. Additionally, by charging higher prices on the weekends, they will be able to generate more revenue from their existing weekend clientele. There will be consumers who typically visit on the weekends that will reschedule to weekdays so that they can pay a lower price due to their price sensitivity, but there will also be many consumers willing to still pay a higher price to keep their weekend appointments. Additionally, from a revenue management standpoint, a hairdresser can utilize advanced bookings to control the load on both the weekday and the weekend, allowing them to staff appropriately and maximize revenue (Rusmevichientong et al., 2023). How can a golf course use revenue management to improve financial performance? A golf course can utilize revenue management to improve financial performance through offering peak and off-peak pricing. Many golfers can only golf on the weekends, thus creaking a peak demand during the weekend. Similar to the hairdresser example from the previous question, many consumers are only available to golf on the weekend, so they will be willing to pay the higher prices during peak hours because that is their only available option. Alternatively, those who are available to golf during the week through the off-peak hours will choose to play golf during the week instead of on the weekend so they can pay a lower price for the same greens and cart. Additionally, this would allow the golf course to forecast demand at different time periods and maximize the revenue generated (Cleophas & Schuetze, 2024). References: Chopra, S. (2018). Supply chain management (7th ed.). Pearson Education (US). https://libertyonline.vitalsource.com/books/9780134732459Links to an external site. Cleophas, C., & Schüetze, C. (2024). Decision biases in revenue management revisited: Dynamic decision?making under stationary and nonstationary demand. Decision Sciences, 55(2), 159-175. https://doi.org/10.1111/deci.12573Links to an external site. Rusmevichientong, P., Sumida, M., Topaloglu, H., & Bai, Y. (2023). Revenue management with heterogeneous resources: Unit resource capacities, advance bookings, and itineraries over time intervals. Operations Research, 71(6), 2196-2216. https://doi.org/10.1287/opre.2022.2427
