Yield Management

If you have one or several resources, then you want to use them with maximal efficiency. For example, you want to earn as much profit as possible by selling products whose production consumes these resources. The situation becomes very interesting if the resource-related costs are mainly fixed and uncoupled from resource capacity utilization. Transportation services and other services are representative examples of scenarios where resource capacities are inflexible and perishable. You have to collect as much revenue as possible in order to maximize your revenue. If the market demand exceeds your resource capacities, then you cannot fulfill all individual customer demands. Filtering the most profitable customer requests from an incoming demand stream is essential. Yield management (or capacity management) provides quantitative tools to set up and deploy automatic filtering of demand streams to maximize the earned revenue with scarce resources. Yield management connects the (service) production operations with the sales (operations). This chapter provides a careful introduction to yield management concepts and techniques. We accompany the setup of a yield management system in a passenger rail service company that wants to sell tickets for their scheduled train services. As a result of this, we learn promising scenarios for a successful yield management application and specific decision support tools. In the end, you can overview the basic ideas and approaches of yield management and know when and how to implement and apply them.