Discussion Board Replies
INSTRUCTIONS!!!!!!!!
The Replies
You will be required to write substantive replies to two Discussion threads. Each reply must be a minimum of 300 words and include at least 2 scholarly resources. Acceptable sources include the textbook, the Bible, outside scholarly articles, etc.
Substantive replies, in contrast to perfunctory replies, add value to the forum, enhance learning, and contain references to any new concepts or ideas presented.
The following suggestions will aid you in successfully composing substantive responses:
· Compare/contrast the findings of others with your research.
· Compare how the findings of others relate/add to the concepts learned in the required readings.
· Share additional knowledge regarding the key topic that relates to the thread.
Discussion Board # 1
Key Concept Explanation: Yield/Revenue Management
Meredith and Shafer (2016) define yield management, also called revenue management, as “the attempt to allocate the fixed capacity of a service to match the highest revenue demand in the marketplace.” It is commonly used strategies in industries such as airlines, hotels, rental car, and cruise lines. This became an interesting topic for me because I evidence dynamic pricing changes in these industries as I was traveling Europe. I would like to know more about the strategy.
Comparison
Businesses with following characteristics can have the most benefits of yield management: fixed capacity, perishable capacity, segmentable mark, and capacity sold in advance, uncertain demand, and low marginal sales cost and high marginal capacity addition cost (Meredith et at., 2016). As mentioned before, industries like airlines, hotels, and rental cars have all of these characteristics. For example, an aircraft flying from Los Angeles to New York can carry 150 people; fixed capacity. If that aircraft only takes 100 people for a trip, the empty 50 sears will never create a profit for an airline; perishable capacity. The demand for the trip can be segmented based on season, time, and date. The flight will be booked in advance. An airline will never be certain on how many people will be on board for a certain trip. All these characteristic make an airline company adopt yield management strategy.
Yield management requires deep analysis of capacity and market demand. For an example, a rental car company can expect more sales in summer season because that is the season when the most people go on a travel. With it’s a limited capacity, fleet availability, a rental car can charge more during the season to maximize the profit. On the other hand, during a slow season, that rental car company can lower the price of rentals to lure demand to utilize the fleet. It is better than letting the car sitting on a parking lot because each day the fleet is sitting in the parking not is an income perished.
Article Summary
Vinod (2015) explains how yield management was developed in the United States through the article, “Evolution of yield management in travel.” The age of yield management stated with the deregulation of the US airline industry in 1978. Before this, the government had tight control over the industry on how airlines operate. The deregulation transformed the industry by enhancing productivity and competition and changing dynamics of how airlines create profits.
The original form of yield management can be seen from early to mid-1980s. PEOPLExpress came to the industry and started to fierce the competition by introducing low-fare flights. In order to compete with low-fare airlines, American Airline adopted yield management technique through DYNAMO (Dynamic Inventory Allocation Modeling optimizer). PEOPLExpress grew rapidly but failed to manage their profit to operate to cover their expenses. After that point, many revenue management techniques came out, such as O&D (Origin & destination).
Over the past decades, the yield management expanded its presence in other industries such as hotels, rental cars, and so forth. Advancement of technologies, yield management techniques upgraded its ability to forecast supply and demand to maximize possible profit. Yield management is focused on following value proposition: Code share Partnerships, Dynamic Pricing, Dynamic Availability, Restriction-free Pricing, and Total Revenue Management.
Biblical Integration
Making profit is a key to a successful business. However, profit is not the only thing that Christian managers should look for. Strategies such as yield management should be implemented to maximize profit, but as Christian managers, it should be just and fair. Bible says, “He who hates unjust gain will prolong his days” (Proverbs 28:16, ESV). Bible also says, “So are the ways of everyone who gains by violence; It takes away the life of its processors” (Proverb 1:19, ESV). Creating profit should not be unjust or hurting someone else unfairly because “Better is a little with righteousness than great income with injustice” (Proverbs 16:8, ESV).
Application
The popular application of yield management is in travel rental industries because the day that a providing service does not get utilized is a cost for an organization. For an example, if an aircraft can accommodate 200 people only flies with 150, an airline failed to maximize its revenue. Therefore, that airline can utilize dynamic pricing to sell seats at a price where supply meets demand to maximize the utilization of the seats. If an organization has a product or service that has an expiration or daily usage, yield management can optimize profit through pricing or inventory management.
Annotated Bibliography
Bouchet, A., Troilo, M, & Walkup, B. R. (2016). Dynamic pricing usage in sports for revenue management. Managerial Finance, 42(9), 913-921. Retrieved from https://search-proquest-com.ezproxy.liberty.edu/docview/1823185533?pq-origsite=summon&accountid=12085
Yield management is very popular strategies in travel industries, but the authors did not see a popular usage of it in sports businesses. The authors conducted a survey of professional sports industry in North America on how the industries utilizing yield management. The major application that the industry can adopt is dynamic pricing to charge customers based on many factors, such as the popularity of games, seasons, and so forth. The study showed that almost 70 percent of organizations believe that they are adopting some sort of yield management strategy in their organization. However, nearly 50 percent of the organizations did not have an automated system to make decisions on prices. About 30 percent of them does not apply the strategy frequent enough to make the most benefit off from it.
Cetin, G., Demircifici, T., & Bilgihan, A. (2016). Meeting revenue management challenges: Knowledge, skills, and abilities. International Journal of Hospitality Management, 57, 132-142. Retrieved from
This article gives interesting insight because it talks about what knowledge, skills, and abilities do organizations or managers require to successfully implement or manage yield management strategy. The authors interview revenue managers and identified these key knowledge, skills, and abilities to be successful. Revenue managers claimed there are five main challenges: Personal, internal, organizational, industrial, and external. To conquer these challenges, the managers introduced five crucial knowledge, skills, and abilities: Analytical, technical, social, generic, and ethical. This introduced skillset is key to improve revenue performance which is a key to hospitality profitability.
Marco, A., Marcella, N. & Claudio, A. P. (2015). Combined effects of capacity and time on fares: Insights from the yield management of a low-cost airline. Review of Economics and Statistics, 97(4), 900-915. Retrieved from https://www.mitpressjournals.org/doi/10.1162/REST_a_00451
Yield management is a popular strategy in hospitality and travel industries. The authors analyzed how yield management operates in a successful low-cost airline, Ryanair. Ryanair implemented six strategies to manage profit and costs: simple pricing structure, direction selling to customers, simplified point-to-point route, intensive aircraft utilization, employees working in multiple roles, and standardized fleet to reduce maintenance cost. Ryanair’s simple pricing structure dynamics changes as seat availability changes, but there is no discrimination based on minimum stay or weekday vs. weekends. This simple but dynamic pricing structure and simplified and effective business model helped Ryanair to keep the name of low-fare airlines while creating best profit for the company.
Sahut, J., Hikkernova, L., & Pupion, P. (2016). Perceived unfairness of prices resulting from yield management practice in hotels. Journal of Business Research, 69(11), 4901-4906. Retrieved from
This article discusses how customers will perceive hotel industries yield management practices. Many hotels adopted dynamic pricing and price discrimination based on four scenarios. First will be a hotel offering different price of a same type of room based on the different season. Next one will be offering different price based on the period of reservation. The other will be charging for a no-show equivalent to the cost of the first night. Lastly, a hotel charges different price depends on the days of the week. The survey revealed that customers felt most comfortable on price change depends on seasons. However, all the other categories, customers felt unfairness. The feeling of fairness was present when customers believe the hotels does not attempt to increase profit by without agreeable reason.
References
Bouchet, A., Troilo, M, & Walkup, B. R. (2016). Dynamic pricing usage in sports for revenue management. Managerial Finance, 42(9), 913-921. Retrieved from https://search-proquest-com.ezproxy.liberty.edu/docview/1823185533?pq-origsite=summon&accountid=12085
Cetin, G., Demircifici, T., & Bilgihan, A. (2016). Meeting revenue management challenges: Knowledge, skills and abilities. International Journal of Hospitality Management, 57, 132-142. Retrieved from
Marco, A., Marcella, N. & Claudio, A. P. (2015). Combined effects of capacity and time on fares: Insights from the yield management of a low-cost airline.Review of Economics and Statistics, 97(4), 900-915. Retrieved from https://www.mitpressjournals.org/doi/10.1162/REST_a_00451
Meredith, J. R., & Shafer, S. M. (2016). Operations and supply chain management for MBAs (6th ed.). Hoboken, NJ: John Wiley & Sons, Inc. ISBN: 9781119239536
Sahut, J., Hikkernova, L., & Pupion, P. (2016). Perceived unfairness of prices resulting from yield management practice in hotels. Journal of Business Research, 69(11), 4901-4906. Retrieved from
Vinod, B. (2016). Evolution of yield management in travel. Journal of Revenue and Pricing Management, 15(3-4), 203-211. Retrieved fromhttps://link.springer.com/article/10.1057%2Frpm.2016.15
Discussion Board # 2
Key Concept Explanation: Capacity Planning for Services
Capacity planning is the strategic process of determining supply and demand for an organization. The managers must ask themselves how much of a particular product or service must we provide to be able to meet the demands of our customers and what needs to be put in place to help meet those demands. Capacity planning can be a difficult process especially in the services industry. In addition, the differences between long- and short-term planning is much more pronounced in service firms (Meredith & Shafer, 2016). Generally speaking, it is more difficult to anticipate capacity planning in the short run as it is impossible to store up inventory for services. Sometimes in service capacity planning, it is hard to determine whether the problem is truly a capacity issue or a scheduling issue (Meredith & Shafer, 2016).
My job as the administrator in a service industry organization is often made difficult due to capacity planning. It is a constant battle to have the right number of staff members so that our patients have the best quality care possible, our staff is satisfied with the amount of work that they are given and our agency is making a profit by not having too many staff members on case load. I chose this particular key concept due to recent issues that I have been dealing with in regards to us growing too quickly to maintain with our current staff. Our organization has tripled our case load in the time span of 2 months and despite planning for potential growth, we did not anticipate near the growth we have had in such a short time span.
Comparison
One of the important considerations to make when capacity planning in the service industry is to develop models that represent current functioning capacity as well as past growth trends to try and estimate future growth rates. A recent study out of Norway looked at the usage of emergency out of hours primary care as it related to specific issues and severity in the patients (Raknes & Hunskaar, 2017). The purpose of this study was to try and determine the capacity needs of the out of hours primary care so that they could best provide the services that the patients were most commonly needing.
In the Netherlands, the issue of physician assistants versus nurse practitioners versus medical doctors are influencing the focus of capacity planning studies (Biezen, Derckx, Wensing & Laurant, 2017). A recent study was performed in multiple general practitioner clinics to determine the case mix of the clinic and how many patient tasks could be completed by a physician’s assistant or nurse practitioner versus a doctor. The results of this study showed that there were many tasks that could be completed by a physician’s assistant or nurse practitioners that would improve capacity allowance of the clinic by taking some of the responsibility off the general practitioner and also improving the clinics budget (Biezen, Derckx, Wensing & Laurant, 2017).
Article Summary
Rau, Tsai, Liang, Tan, Syu, Jheng, Ciou and Jaw (2013) wrote an interesting research article that looked at capacity planning in an outpatient physical therapy office. The authors developed a simulation model that looked at patient characteristics and how they related to time spent with therapy treatment. By using this model they were better able to understand the capacity loads for each of their therapists and the treatment rooms on a daily basis. Once the capacity loads were determined, the research was able to provide information that the authors needed to employ various strategies to improve patient care and other performance measures in the clinic. While one might assume that the easiest solution to improve productivity is simply to hire more therapists, the simulation provided in this research shows that not only is it related to staff, but you must also factor in how the patient process flows and the capacity limitations related to space and equipment availability.
While the research supported the fact that operating below max capacity allowed for improved patient care and quality services, that wasn’t necessarily the best business friendly strategy. The research project showed that there was a fine balance between operating as close to capacity as possible while still maintaining excellent patient care and improved profitability. One of the things that was found in this particular study group, was that it was extremely important for a smooth patient flow in regards to appointments and scheduling practices to keep the clinic functioning as close to capacity as possible (Rau, Tsai, Liang, Tan, Syu, Jheng, Ciou & Jaw, 2013).
Biblical Integration
Part of good capacity planning for services includes being able to anticipate needs of an organizations customers so that they can be provided with the best services possible. An organization must be ready and prepared for their customers’ needs to not only provide them with the services that they require but manage to do so with quality. Just as an organization must be ready, we must be ready as Christians to face the future of what God has in store for us. “Therefore you also must be ready, for the Son of Man is coming at an hour you do not expect.” (Luke 12:40, ESV).
Application
It is important for service organizations to properly assess their capacity needs in order to have adequate staffing and provide the best services. The better an organization is set up to manage their organization based on capacity, the more productive and profitable they will be. While service industry are often more difficult to do capacity planning with, the proper strategy and simulation can provide useful information in completing this planning. In my current organization it is crucial for us to maintain focus on our capacity planning in order to maintain the proper balance between employees, quality and profit.
Annotated Bibliography
Biezen, M., Derckx, E., Wensing, M. & Laurant, M. (2017) Factors influencing decision of general practitioners and managers to train and employ a nurse practitioner or physician assistant in primary care: a qualitative study. BMC Family Practice. 18, 1-10. Retrieved from http://ezproxy.liberty.edu/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=a9h&AN=121191366&site=ehost-live&scope=site
Because of the significant increase in the need for primary care, research has begun to be conducted regarding the use of nurse practitioners and physician assistants to help support the general practitioner in providing patient care. This study was done to analyze patients’ needs especially during afterhour’s emergency clinics to see if the case load could just as well be supported by a nurse practitioner or physician assistant as a general practitioner. The research found that it was beneficial to hire nurse practitioners and physician’s assistants to handle minor issues with the patients and to help decrease the load that was placed on the general practitioner.
Meredith, J. R. & Shafer, S. M. (2016) Operations and Supply Chain Management for MBAs. John Wiley & Sons, Inc: Hoboken, NJ
Raknes, G. & Hunskaar, S. (2017) Reasons for encounter by different levels of urgency in out-of-hours emergency primary health care in Norway: a cross sectional study. BMC Emergency Medicine. 17, 1-10. Retrieved from http://ezproxy.liberty.edu/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=a9h&AN=123823966&site=ehost-live&scope=site
This study looked at the case mix surrounding the usage of afterhour’s emergency primary care in Norway. Because there is such a vast difference in the use of emergency primary care versus emergency department as well as a variation of usage reasons among demographic area, the authors sought to determine a trend within after hour’s primary emergency care so that the proper services could be offered to the clients needing them. They concluded that their evidenced suggested that musculoskeletal, respiratory, skin, digestive and unspecified issues were the most common ailments among the emergent primary care and that these finding should be used to help facilitate proper staffing and education of the primary care facilities.
Rau, C., Tsai, P. J., Liang, S. M., Tan, J., Syu, H., Jheng, Y., Ciou, T. & Jaw, F. (2013) Using discrete-event simulation in strategic capacity planning for an outpatient physical therapy service. Healthcare Management Science. 16(4), 352-365. Retrieved from http://ezproxy.liberty.edu/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=91842725&site=ehost-live&scope=site