2 Learning ObjectivesDescribe the strategies for matching capacity and demand for services.Recommend an overbooking strategy.Use Linear Programming to prepare a weekly workshift schedule.Prepare a work schedule for part-time employees.Use yield management.
3 Strategies for Matching Supply and Demand for Services PartitioningdemandIncreasingcustomerparticipationDevelopingcomplementaryservicesSharingcapacityEstablishingpriceincentivesSchedulingwork shiftsCross-trainingemployeesDevelopingreservationsystemsCreatingadjustablecapacityPromotingoff-peakdemandUsingpart-timeemployeesYieldmanagement
4 Segmenting Demand at a Health Clinic Smoothing Demand by AppointmentSchedulingDay AppointmentsMondayTuesdayWednesdayThursdayFriday
5 Discriminatory Pricing for Camping Experience No. of Dailytype Days and weeks of camping season days feeSaturdays and Sundays of weeks 10 to 15, plus $6.00Dominion Day and civic holidaysSaturdays and Sundays of weeks 3 to 9 and 15 to 19,plus Victoria DayFridays of weeks 3 to 15, plus all other days of weeks9 to 15 that are not in experience type 1 or 2Rest of camping season freeEXISTING REVENUE VS PROJECTED REVENUE FROM DISCRIMINATORY PRICINGExisting flat fee of $ Discriminatory feeExperience Campsites Campsitestype occupied Revenue occupied (est.) Revenue$14, , $30,000, , , ,250, , ,, , … ….Total , $ 64, , $59,000
6 Hotel Overbooking Loss Table Number of Reservations OverbookedNo Prob-shows abilityExpected loss, $
7 Daily Scheduling of Telephone Operator Workshifts Topline profileScheduler program assigns tours so that the number of operators present each half hour adds up to the number requiredTour
8 LP Model for Weekly Workshift Schedule with Two Days-off Constraint Schedule matrix, x = day offOperator Su M Tu W Th F Sax x … … … … … x x … … … …… x x … … …… x x … … …… … … … x x …… … … … x x …… … … … x x …x … … … … … xTotalRequiredExcess
9 Scheduling Part-time Bank Tellers Decreasing part-time teller demand histogramTellers required544Tellers required33221Two Full-time Tellers1152Fri Mon Wed Thurs Tues.Mon. Tues Wed. Thurs. Fri.DAILY PART-TIME WORK SCHEDULE, X=workdayTeller Mon Tues Wed Thurs Fri.x … x … xx … … x x3, x … … … x… … x … x
10 Ideal Characteristics for Yield Management Relatively Fixed CapacityAbility to Segment MarketsPerishable InventoryProduct Sold in AdvanceFluctuating DemandLow Marginal Sales Cost and High Capacity Change Cost
11 Seasonal Allocation of Rooms by Service Class for Resort Hotel First classStandardBudget20%20%20%30%50%30%50%60%Percentage of capacity allocatedto different service classes50%30%30%10%Peak Shoulder Off-peak Shoulder(30%) (20%) (40%) (10%)Summer Fall Winter SpringPercentage of capacity allocated to different seasons
12 Demand Control Chart for a Hotel Expected Reservation Accumulation2 standard deviation control limits
13 Yield Management Using the Critical Fractile Model Where x = seats reserved for full-fare passengersd = demand for full-fare ticketsp = proportion of economizing (discount) passengersCu = lost revenue associated with reserving one too few seatsat full fare (underestimating demand). The lost opportunity is thedifference between the fares (F-D) assuming a passenger, willingto pay full-fare (F), purchased a seat at the discount (D) price.Co = cost of reserving one to many seats for sale at full-fare(overestimating demand). Assume the empty full-fare seat wouldhave been sold at the discount price. However, Co takes on twovalues, depending on the buying behavior of the passenger whowould have purchased the seat if not reserved for full-fare.if an economizing passengerif a full fare passenger (marginal gain)Expected value of Co = pD-(1-p)(F-D) = pF - (F-D)
14 Topics for DiscussionWhat organizational problems can arise from the use of part-time employees?How can computer-based reservation systems increase service capacity utilization?What possible dangers are associated with developing complementary services?Will the widespread use of yield management eventually erode the concept of fixed prices?What possible negative effects can yield management have on customer relations?
15 Interactive ExerciseWatch the PowerPoint presentation concerning the overbooking experience at the Doubletree Hotel in Houston, Texas. How could this situation been handled differently?