Yield Management

Posted in Operations and Supply Chain Terms, Total Reads: 1167
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Definition: Yield Management

Yield management is a strategy or a set of strategies, where businesses can use their capacity constrained resources to realize maximum revenues and eventually, maximum profits (yield). Yield management also involves study of consumer behaviour, where the best possible strategies are used to influence the consumer to make purchase decisions to increase revenues.


More specifically in operations, in a field called revenue management, yield management involves control of inventory strategically, so as to sell at the right time and place, and maximise the yield.


The essential conditions for application of yield management are as follows:

  • Fixed amount of resources
  • Time associated with sale of those resources
  • Price discrimination where different people have capability to pay different prices for resources


Example:

In Airlines, yield management involves continuous monitoring of seat, demand and prices, and accordingly tweak the prices and availability to make the maximum possible profits.

 

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