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MathematicalProgrammingFormulation
(FixedWorkforceModelWithoutOvertime)
O Data
O Di
O h
O b
O Sb
O I0
O C
O Variables
O Xi
O Si
O Ii
O Bi

Demand for ith period

Unit inventory holding cost period wise
Unit backorder cost period wise
Extra Unit cost for subcontracting
Beginning Inventory
Available Capacity
Regular Production in period i
Units subcontracted in period i
Inventory kept in period i
Units backordered in period i
23

MathematicalModelContd..
O Objective Function
O Minimization of total costs (Sum of Inventory

Holding Cost, Backorder Cost and Cost of

Subcontracting)
O Constraints
O Inventory Balance Constraints
O Capacity Constraints
O Non Negativity Constraints

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AggregatePlanningforServices
andYieldManagement
O Firms do not charge the same price from all of its

customers

O The allocation of scarce capacity decisions is taken

by keeping in mind, maximization of overall

profits
O Yield Management or revenue management is
the technique of aggregate planning to realize the
above objective
O The key issues in Yield Management include
managing peak demand, handling variability in
demand
O Examples include airlines revenue management
25

YieldmanagementMatrix
PRICE
Fixed

DURATION
OF USE

Predictable

Movies,
Stadiums etc.

Unpredictable

Restaurants,
Golf Courses,
Cyber Cafe

Variable

Airlines, Hotels,
Rental Cars Yield management

Hospitals

26

Source: S. Kimes and K. McGuire; Function Space Revenue Management; Cornell Hotel and Restaurant Administration Quarterly 42 (6); 2001; pp. 33-46