Operations Management Essay

1453 Words6 Pages
practice, revenue management has meant setting prices according to predicted demand levels so that price-sensitive customers who are willing to purchase at off-peak times can do so at favorable prices, while price-insensitive customers who want to purchase at peak times will be able to do so. The application of revenue management has been most effective when it is applied to operations that have relatively fixed capacity, demand that is variable and uncertain, perishable inventory, appropriate cost and pricing structure, and varying customer price sensitivity. Those attributes are found in the restaurant industry. Thompson (2002, 2003) studied the issue of table combinability and found that combinable tables lead to higher revenue in smaller restaurants with larger mean party sizes, but that dedicated tables lead to higher revenue in other restaurants. He also found that, for restaurants using combinable tables, the revenue effect of good table mixes far exceeds the revenue effects resulting from different layouts of the same table mix. This research will be described in more detail below. Whether or not a restaurant has flexible capacity, if it can ensure that its table mix closely matches the party size composition of their customers, it will achieve higher seat occupancies and thus higher overall revenue. While some restaurants (most notably fine dining restaurants) use reservations to help manage their seat occupancy, the majority of U.S. restaurants do not take reservations and instead rely on walk-in business. This reliance on walk-in business makes the optimal table mix even more important. We decided to focus our efforts on determining the optimal table mix for a restaurant. To do this, we first examined the supply planning problem. SUPPLY PLANNING The supply planning problem can be divided into four parts: the number of facilities, the facility size, the

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