Overbooking

Posted in Operations and Supply Chain Terms, Total Reads: 1207
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Definition: Overbooking

It refers to excessive selling of goods and services about its available capacity.

This is a common practice used by travel and tourism industry to maximize their revenues. Lot of time customers don’t turn out and his slot remain unutilized. Though he has paid for it, companies sell extra in anticipation that at least some customers won’t travel, thus increasing their profitability.

Eg: Internet service providers sell more bandwidth then what they actually have. It assumes that not everyone will be using the bandwidth at the same time. Even if capacity is overused, then only its services would be affected and won’t stop totally.


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