Professional Documents
Culture Documents
Learning Objectives
Describe 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.
Strategies for Matching Supply
and Demand for Services
DEMAND
STRATEGIES
Partitioning
demand
Developing
complementary
services
Establishing
price
incentives
Developing
reservation
systems
Promoting
off-peak
demand
Yield
management
SUPPLY
STRATEGIES
Cross-
training
employees
Increasing
customer
participation
Sharing
capacity
Scheduling
work shifts
Creating
adjustable
capacity
Using
part-time
employees
Segmenting Demand at a Health Clinic
60
70
80
90
100
110
120
130
140
1 2 3 4 5
Day of week
P
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n
t
a
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o
f
a
v
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r
a
g
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d
a
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l
y
p
h
y
s
i
c
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a
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v
i
s
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t
s
Smoothing Demand by Appointment
Scheduling
Day Appointments
Monday 84
Tuesday 89
Wednesday 124
Thursday 129
Friday 114
Discriminatory Pricing for Camping
Experience No. of Daily
type Days and weeks of camping season days fee
1 Saturdays and Sundays of weeks 10 to 15, plus 14 $6.00
Dominion Day and civic holidays
2 Saturdays and Sundays of weeks 3 to 9 and 15 to 19, 23 2.50
plus Victoria Day
3 Fridays of weeks 3 to 15, plus all other days of weeks 43 0.50
9 to 15 that are not in experience type 1 or 2
4 Rest of camping season 78 free
EXISTING REVENUE VS PROJECTED REVENUE FROM DISCRIMINATORY PRICING
Existing flat fee of $2.50 Discriminatory fee
Experience Campsites Campsites
type occupied Revenue occupied (est.) Revenue
1 5.891 $14,727 5,000 $30,000
2 8,978 22,445 8,500 21,250
3 6,129 15,322 15,500 7.750
4 4,979 12,447 . .
Total 25,977 $ 64,941 29,000 $59,000
Hotel Overbooking Loss Table
Number of Reservations Overbooked
No- Prob-
shows ability 0 1 2 3 4 5 6 7 8 9
0 .07 0 100 200 300 400 500 600 700 800 900
1 .19 40 0 100 200 300 400 500 600 700 800
2 .22 80 40 0 100 200 300 400 500 600 700
3 .16 120 80 40 0 100 200 300 400 500 600
4 .12 160 120 80 40 0 100 200 300 400 500
5 .10 200 160 120 80 40 0 100 200 300 400
6 .07 240 200 160 120 80 40 0 100 200 300
7 .04 280 240 200 160 120 80 40 0 100 200
8 .02 320 280 240 200 160 120 80 40 0 100
9 .01 360 320 280 240 200 160 120 80 40 0
Expected loss, $ 121.60 91.40 87.80 115.00 164.60 231.00 311.40 401.60 497.40 560.00
Daily Scheduling of
Telephone Operator Workshifts
0
5
10
15
20
25
30
Time
N
u
m
b
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r
o
f
o
p
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r
a
t
o
r
s
Scheduler program assigns
tours so that the number of
operators present each half
hour adds up to the number
required
Topline profile
12 2 4 6 8 10 12 2 4 6 8 10 12
Tour
0
500
1000
1500
2000
2500
Time
C
a
l
l
s
12 2 4 6 8 10 12 2 4 6 8 10 12
LP Model for Weekly Workshift
Schedule with Two Days-off Constraint
Objective function:
Minimize x
1
+ x
2
+ x
3
+ x
4
+ x
5
+ x
6
+ x
7
Constraints:
Sunday x
2
+ x
3
+ x
4
+ x
5
+ x
6
> 3
Monday x
3
+ x
4
+ x
5
+ x
6
+ x
7
> 6
Tuesday x
1
+ x
4
+ x
5
+ x
6
+ x
7
> 5
Wednesday x
1
+ x
2
+ x
5
+ x
6
+ x
7
> 6
Thursday x
1
+ x
2
+ x
3
+ x
6
+ x
7
> 5
Friday x
1
+ x
2
+ x
3
+ x
4
+ x
7
> 5
Saturday x
1
+ x
2
+ x
3
+ x
4
+ x
5
> 5
x
i >
0 and integer
Schedule matrix, x = day off
Operator Su M Tu W Th F Sa
1 x x ...
2 x x
3 ... x x
4 ... x x
5 x x
6 x x
7 x x
8 x x
Total 6 6 5 6 5 5 7
Required 3 6 5 6 5 5 5
Excess 3 0 0 0 0 0 2
Scheduling Part-time Bank Tellers
Objective function:
Minimize x1+ x2+x3+x4+x5+x6+x7
Constraints:
Sunday x2+x3+x4+x5+x6 > b1
Monday x3+x4+x5+x6+x7 > b2
0
1
2
3
4
5
6
7
T
e
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r
s
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q
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d
Mon. Tues. Wed. Thurs. Fri.
Two Full-time Tellers
5
4
1
3
2
1
4
3
2 1
5 2
Fri. Mon. Wed. Thurs Tues.
0
1
2
3
4
5
T
e
l
l
e
r
s
r
e
q
u
i
r
e
d
Decreasing part-time teller demand histogram
DAILY PART-TIME WORK SCHEDULE, X=workday
Teller Mon. Tues. Wed. Thurs. Fri.
1 x . x . x
2 x . . x x
3,4 x . . . x
5 . . x . x
Ideal Characteristics for Yield Management
Relatively Fixed Capacity
Ability to Segment Markets
Perishable Inventory
Product Sold in Advance
Fluctuating Demand
Low Marginal Sales Cost and High
Capacity Change Cost
Seasonal Allocation of Rooms by
Service Class for Resort Hotel
First class
Standard
Budget
P
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n
t
a
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f
c
a
p
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y
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t
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f
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s
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r
v
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c
l
a
s
s
e
s
60%
50%
30%
20%
50%
Peak Shoulder Off-peak Shoulder
(30%) (20%) (40%) (10%)
Summer Fall Winter Spring
Percentage of capacity allocated to different seasons
30%
20% 20%
10%
30%
50%
30%
Demand Control Chart for a Hotel
0
50
100
150
200
250
300
1 6
1
1
1
6
2
1
2
6
3
1
3
6
4
1
4
6
5
1
5
6
6
1
6
6
7
1
7
6
8
1
8
6
Days before arrival
R
e
s
e
r
v
a
t
i
o
n
s
Expected Reservation Accumulation
2 standard deviation control limits
Yield Management Using the
Critical Fractile Model
P d x
C
C C
F D
p F
u
u o
( )
( )
< s
+
s
( )
Topics for Discussion
What 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?
Interactive Exercise
Watch the PowerPoint presentation
concerning the overbooking experience at
the Doubletree Hotel in Houston, Texas.
How could this situation been handled
differently?