Pricing And Revenue Management In A Supply Chain

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Questions Bank

Understanding the Supply Chain
Supply Chain Performance: Achieving Strategic Fit and Scope
Supply Chain Drivers and Metrics
Designing Distribution Networks and Applications to e-Business
Network Design in the Supply Chain
Designing Global Supply Chain Networks
Demand Forecasting in a Supply Chain
Aggregate Planning in a Supply Chain
Sales and Operations Planning: Planning Supply and Demand in a Supply Chain
Coordination in a Supply Chain
Managing Economies of Scale in the Supply Chain: Cycle Inventory
Managing Uncertainty in a Supply Chain: Safety Inventory
Determining the Optimal Level of Product Availability
Transportation in a Supply Chain
Sourcing Decisions in a Supply Chain
Pricing and Revenue Management in a Supply Chain
Sustainability and the Supply Chain

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Question 1

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Revenue management is the use of marketing to increase the profit generated from a limited supply of supply chain assets.

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Question 2

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Pricing may influence demand if customers are price sensitive.

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Question 3

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Revenue management may also be defined as the use of differential pricing based on customer segment, time of use, and product or capacity availability to increase supply chain surplus.

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Question 4

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Revenue management adjusts the pricing and available supply of assets to maximize profits.

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Question 5

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In theory, the concept of differential pricing decreases total cost for a firm.

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Question 6

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To differentiate between the various market segments, the firm must either eliminate barriers that identify product or service attributes the segments value differently.

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Question 7

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In most instances of differential pricing, demand from the segment paying the lower price arises earlier in time than demand from the segment paying the higher price.

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Question 8

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Spoilage occurs when the capacity reserved for higher price buyers is wasted because demand from the higher price segment does not materialize.

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Question 9

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Wastage occurs if higher price buyers have to be turned away because the capacity has already been committed to lower price buyers.

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Question 10

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An order from a lower price buyer should be accepted if the expected revenue from a higher price buyer is lower than the current revenue from the lower price buyer.

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Question 11

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Unused capacity from the past is extremely valuable.

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Question 12

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The tactic of varying price over time is suitable for assets such as fashion apparel that have a clear date beyond which they lose a lot of their value.

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Question 13

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Effective differential pricing over time will generally increase the level of product availability for the consumer willing to pay full price, but will decrease total profits for the retailer.

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Question 14

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The tactic of overbooking or overselling the available asset is suitable in any situation where customers are able to cancel orders and the value of the asset drops significantly after a deadline.

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Question 15

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The basic trade-off to consider during overbooking is between having wasted capacity (or inventory) because of few cancellations or having a shortage of capacity (or inventory) because of excessive cancellations.

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Question 16

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The cost of wasted capacity is the margin that would have been generated if the capacity had been used for production.

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Question 17

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The cost of a capacity shortage is the increase in productivity that results from having to go to a backup source.

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Question 18

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The goal when making the overbooking decision is to maximize supply chain profits by minimizing the cost of wasted capacity and the cost of capacity shortage.

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Question 19

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The amount of the asset reserved for the higher price segment is such that the expected marginal revenue from the higher priced segment is less than the price to the lower price segment.

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Question 20

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Faced with seasonal peaks, an effective revenue management tactic is to charge a higher price during the peak period and a higher price during off-peak periods.

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