Documente Academic
Documente Profesional
Documente Cultură
Supply Chain
Management
David
Phil Simchi-Levi
Kaminsky
kaminsky@ieor.berkeley.edu
Philip Kaminsky
Edith Simchi-Levi
Outline
Customer Value
The Fundamentals of Pricing Strategies
Example:
– A cruise ship with C=400 identical cabins
– The Price-Quantity relationship
1000
No. seats
McGraw-Hill/Irwin © 2003 Simchi-Levi, Kaminsky, Simchi-Levi
Revenue Management
Example:
– A cruise ship with C=400 identical cabins
– The Price-Quantity relationship
What is the price that the company should
charge to maximize revenue?
Revenue=480,000
P0=1200
P0=1200
P2=1600
P1=1200
P2=1600
P1=1200
P1=1200
Sensitivity to Duration
Sensitivity to Flexibility
Low
Leisure No
Travelers Demand
No Business
Travelers
Offer
High Sensitivity
to
Price
High Low
McGraw-Hill/Irwin © 2003 Simchi-Levi, Kaminsky, Simchi-Levi
Revenue Management
Perishable inventory
Limited capacity
– early-bird booking
– over the weekend
Product sold in advance
Fluctuating demand
known
0.3
0.25
0.2
0.15
0.1
0.05
0
0 5 10 15 20 25 30
Demand for Business Class
known
Enough demand for the leisure class
Expected Revenue
10000
9500
9000
8500
8000
7500
0 5 10 15 20 25 30 35
Business Class
Expected Revenue
10000
9500
9000
8500
8000
7500
0 5 10 15 20 25 30 35
Business Class
300
250
200
150
100
50
0
0 5 10 15 20 25 30 35
300
250
200
150
Marginal Revenue Leisure
100
50
0
0 5 10 15 20 25 30 35
300
250
200
150
Marginal Revenue Leisure
100
50
0
0 5 10 15 20 25 30 35
Wholesale Price=$900
2000
Price
McGraw-Hill/Irwin © 2003 Simchi-Levi, Kaminsky, Simchi-Levi
Retailer Expected Profit
(No Rebate)
1,600,000
1,400,000
1,200,000
Retailer Expected Profit
1,000,000
800,000
600,000
400,000
200,000
0
500 1,000 1,500 2,000 2,500 3,000 3,500 3,654 4,110 4,567 4,547
Order
1,400,000
$1,370,096
1,200,000
Retailer Expected Profit
1,000,000
800,000
600,000
400,000
200,000
0
500 1,000 1,500 2,000 2,500 3,000 3,500 3,654 4,110 4,567 4,547
Order
5,000,000
Manufacturer Profit
4,000,000
3,000,000
2,000,000
1,000,000
0
0
00
00
00
10
61
74
14
28
55
50
50
00
50
65
56
54
78
20
44
0
8
1,
2,
2,
3,
3,
3,
4,
4,
4,
4,
5,
5,
6,
6,
7,
7,
7,
1,
Order
5,000,000
Manufacturer Profit
4,000,000
3,000,000
2,000,000 $1,750,000
1,000,000
0
0
00
00
00
10
61
74
14
28
55
50
50
00
50
65
56
54
78
20
44
0
8
1,
2,
2,
3,
3,
3,
4,
4,
4,
4,
5,
5,
6,
6,
7,
7,
7,
1,
Order
1,600,000
1,400,000
1,200,000
Retailer Expected Profit
1,000,000
800,000
600,000
400,000
200,000
0
1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,110 4,567 4,547 4,961
Order
McGraw-Hill/Irwin © 2003 Simchi-Levi, Kaminsky, Simchi-Levi
Retailer Expected Profit
($100 Rebate)
1,800,000
$1,644,115
1,600,000
1,400,000
1,200,000
Retailer Expected Profit
1,000,000
800,000
600,000
400,000
200,000
0
1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,110 4,567 4,547 4,961
Order
McGraw-Hill/Irwin © 2003 Simchi-Levi, Kaminsky, Simchi-Levi
Manufacturer Profit
($100 Rebate)
6,000,000
5,000,000
Manufacturer Profit
4,000,000
3,000,000
2,000,000
1,000,000
0
0
5
0
8
54
78
00
50
00
50
00
50
00
11
56
96
37
20
61
02
44
85
26
4,
4,
5,
7,
1,
1,
2,
2,
3,
3,
4,
4,
4,
5,
6,
6,
7,
7,
8,
Order
McGraw-Hill/Irwin © 2003 Simchi-Levi, Kaminsky, Simchi-Levi
Manufacturer Profit
($100 Rebate)
6,000,000
5,000,000
Manufacturer Profit
4,000,000
3,000,000
2,000,000 $1,810,392
1,000,000
0
0
5
0
8
54
78
00
50
00
50
00
50
00
11
56
96
37
20
61
02
44
85
26
4,
4,
5,
7,
1,
1,
2,
2,
3,
3,
4,
4,
4,
5,
6,
6,
7,
7,
8,
Order
McGraw-Hill/Irwin © 2003 Simchi-Levi, Kaminsky, Simchi-Levi
Retailer Expected Profit
(Reduced Wholesale Price $100 )
1,800,000
1,600,000
1,400,000
1,200,000
Retailer Expected Profit
1,000,000
800,000
600,000
400,000
200,000
0
500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,110 4,567 5,024
Order
1,400,000
1,200,000
Retailer Expected Profit
1,000,000
800,000
600,000
400,000
200,000
0
500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,110 4,567 5,024
Order
5,000,000
4,500,000
4,000,000
Manufacturer Profit
3,500,000
3,000,000
2,500,000
2,000,000
1,500,000
1,000,000
500,000
0
500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,110 4,567 5,024 4,961 5,374 5,788 6,201 6,614 7,028 7,441 7,855
Order
5,000,000
4,500,000
4,000,000
Manufacturer Profit
3,500,000
3,000,000
$1,800,000
2,500,000
2,000,000
1,500,000
1,000,000
500,000
0
500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,110 4,567 5,024 4,961 5,374 5,788 6,201 6,614 7,028 7,441 7,855
Order
Customized Pricing
– Revenue Management Techniques
Distinguish between customers according to their
price sensitivity
– Influence retailer pricing strategies
– Move supply chain partners toward global
optimization
Dynamic Pricing
– Changing prices over time without necessarily
distinguishing between different customers
– Find the optimal trade-off between high price
and low demand versus low price and high
demand
Limited Capacity
Demand Variability