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

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.

Keywords:

• manufacturing
• revenue management
• multi-product
• pricing
• market segmentation

Acknowledgements

We gratefully acknowledge financial support from the Natural Sciences and Engineering Research Council of Canada, the China Scholarship Council, and the Richard Ivey School of Business.