Explain how revenue management is beneficial

Question

What will be an ideal response?

Answer 1

Answer: Revenue management adjusts the pricing and available supply of assets to maximize profits. Revenue management has a significant impact on supply chain profitability when one or more of the following four conditions exist:
1. The value of the product varies in different market segments.
2. The product is highly perishable or product wastage occurs.
3. Demand has seasonal and other peaks.
4. The product is sold both in bulk and the spot market.

Revenue management can be a powerful tool for every owner of assets in a supply chain. Owners of any form of capacity (production, transportation, or storage) can use revenue management if there is seasonal demand or if there are segments that are willing to pay different prices for different lead times to use the capacity. Revenue management can be effective if there is a segment that wants to use capacity at the last minute and is willing to pay for it, and there is another segment that wants a lower price and is willing to commit far in advance. Revenue management is essential for owners of any perishable inventory. Most successful examples of the use of revenue management are from the travel and hospitality industry and include airlines, car rentals, and hotels. Revenue management can have a similar impact on all stages of a supply chain that satisfy one or more of these four conditions.