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Cutting costs or enhancing revenues? An example of a multi-product firm with impatient customers illustrates an important choice facing operational researchers

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  • P C Bell

    (University of Western Ontario)

  • J Chen

    (University of Western Ontario)

Abstract

A new dilemma facing the operational researcher with limited resources is, whether to continue the traditional focus on improving the efficiency of the firm or to focus instead on improving the revenue side of the firm's income statement. In this article, we examine this decision using a model of a firm that was published in this journal by Levin et al. We use this model, as applied to a UK-based multi-product manufacturer of wooden furniture, to illustrate the dramatic revenue and profit gains potentially available by applying revenue management concepts in a manufacturing environment.

Suggested Citation

  • P C Bell & J Chen, 2006. "Cutting costs or enhancing revenues? An example of a multi-product firm with impatient customers illustrates an important choice facing operational researchers," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 57(4), pages 443-449, April.
    • Handle: RePEc:pal:jorsoc:v:57:y:2006:i:4:d:10.1057_palgrave.jors.2602012
    DOI: 10.1057/palgrave.jors.2602012
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    References listed on IDEAS

    as
    1. Jeffrey I. McGill & Garrett J. van Ryzin, 1999. "Revenue Management: Research Overview and Prospects," Transportation Science, INFORMS, vol. 33(2), pages 233-256, May.
    2. E J Levin & Y Ma & R E Wright, 2004. "Profit maximization in a multi-product firm with impatient customers," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 55(3), pages 211-218, March.
    3. Wedad Elmaghraby & P{i}nar Keskinocak, 2003. "Dynamic Pricing in the Presence of Inventory Considerations: Research Overview, Current Practices, and Future Directions," Management Science, INFORMS, vol. 49(10), pages 1287-1309, October.
    4. Gabriel Bitran & René Caldentey, 2003. "An Overview of Pricing Models for Revenue Management," Manufacturing & Service Operations Management, INFORMS, vol. 5(3), pages 203-229, August.
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    Cited by:

    1. Wan, Xing & Chen, Jing & Chen, Bintong, 2020. "Exploring service positioning in platform-based markets," International Journal of Production Economics, Elsevier, vol. 220(C).
    2. Peter C. Bell & Jing Chen, 2017. "Close integration of pricing and supply chain decisions has strategic as well as operations level benefits," Annals of Operations Research, Springer, vol. 257(1), pages 77-93, October.
    3. Zhang, Michael & Bell, Peter C. & Cai, Gangshu (George) & Chen, Xiangfeng, 2010. "Optimal fences and joint price and inventory decisions in distinct markets with demand leakage," European Journal of Operational Research, Elsevier, vol. 204(3), pages 589-596, August.
    4. John G. Wilson & Jing Chen, 2018. "On the optimality of coupon books," Annals of Operations Research, Springer, vol. 268(1), pages 405-423, September.
    5. Chen, Jing & Bell, Peter C., 2012. "Implementing market segmentation using full-refund and no-refund customer returns policies in a dual-channel supply chain structure," International Journal of Production Economics, Elsevier, vol. 136(1), pages 56-66.
    6. Marketa Kubickova, 2022. "Revenue management in manufacturing: systematic review of literature," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 21(2), pages 147-152, April.

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