Applications of Revenue Management in Manufacturing

Dr. Mitchell H. Burman
Managing Partner
Analytics Consulting

One of the big success stories of Operations Research application has been in the area of revenue management. Huge increases in revenues with relatively small investments in technology have been well documented for a diverse collection of industries including airlines, hotels, rental car firms, cruise lines, broadcasting, and freight transportation. Revenue management is now being applied to manufacturing in a number of areas. Specifically, we will examine a situation where a production facility with fixed capacity must decide which incoming orders to accept. Unlike the previous service industry cases, which involved maximizing revenue for discrete events (a flight, a night in a hotel, a specific advertising slot), profit in this scenario is maximized over a time continuum. This situation opens an untapped area of revenue-management research.