Using revenue management to improve pricing and capacity management in programme management

Abstract

This paper presents revenue management models for pricing, capacity planning, and capacity reallocation and demonstrates their applicability for programme (project) management. In programme management, the allocation of capacity (resource time) to schedule activities requires the resolution of time versus revenue trade-offs. Thus, capacity planning and scheduling present a hierarchical problem for programme managers. Furthermore, current programme management methods do not consider the issue of price sensitivity exhibited in many programme management situations. Because of this omission, critical linkages between capacity management and scheduling of activities among programmes have not been addressed. Specifically, the issue of the reservation of capacity specifically for higher revenue generating activities has been omitted from programme management research. This paper asserts that, through capacity planning and scheduling, specific capacity should be reserved for customers willing to pay higher prices to have critical activities, for example, change orders, expedited. This capacity has scheduling effects that impact the programme NPV. This paper proposes potential solutions to capacity and programme scheduling problems using revenue management techniques.

Keywords:

• revenue (yield) management
• programme (project) management
• stochastic processes