Revenue Management In Manufacturing: A Research Landscape

Abstract

Revenue management is the science of using past history and current levels of order activity to forecast demand as accurately as possible in order to set and update pricing and product availability decisions across various sales channels to maximize profitability. In much the same way that revenue management has transformed the airline industry in selling tickets for the same flight at markedly different rates based upon product restrictions, time to departure, and the number of unsold seats, many manufacturing companies have started exploring innovative revenue management strategies in an effort to improve their operations and profitability. These strategies employ sophisticated demand forecasting and optimization models that are based on research from many areas, including management science and economics, and that can take advantage of the vast amount of data available through customer relationship management systems in order to calibrate the models. In this paper, we present an overview of revenue management systems and provide an extensive survey of published research along a landscape delineated by three fundamental dimensions of capacity management, pricing, and market segmentation.