A Yield Management System (YMS) is an optimized process that occasionally incorporates reviews of transactions for goods or services already supplied as well as for goods or services to be supplied in the future. In addition, it reviews statistical information surrounding events, competitive market information like prices, seasonal sales patterns, and numerous other sales factors. YMS models are designed to predict the entire demand for all products and services they provide, specifically by price points and market segments. Usually, the entire demand will surpass what any particular company can produce in the period analyzed, thus each YMS strives to minimize a company’s outputs in order to maximize revenue.
Each YMS has at its core the following question: “Considering the current operating constraints of our company, what is the best mix of products and/or services for us to produce and sell in a set period, using what prices, to produce our highest anticipated revenue?”
The optimization that comes from YMS can aid your company in adjusting prices and allocating materials among your various market segments to ultimately maximize anticipated revenues. This can be achieved at different levels of detail. In the overall, such as all seats for all home games during a baseball season; in groups, such as all seats at a particular single home game; in a single market, such as sales revenues whenever a certain rival team visits the home team; in a certain product field, such as a reduced cost for all Tuesday home games.
Industries that employ YMS are airlines, hotels, stadiums and other venues with a fixed number of seats, and advertising. After an advance forecast of demand and application of a flexible pricing plan, consumers will sort themselves into categories based on their available funds (only being able to afford mid-week games), the particulars of their demands (must go to all weekend or night games) or purchase times (late reservations costing more than early ones).
Applying these conditions upon the consumer, a YMS’s ultimate goal provides an optimized variety of available goods or services at a variety of prices at varying times or for various features. The YMS also maintains an array of possible purchases over a set time period that is both reliable and at a high level.
Good Yield Management Systems maximize later sales at the highest possible prices. Companies over time will offer lower prices for the majority of their ball games, with these higher discounts contributing a greater volume of day-to-day income, saving their marginally-raised prices only for peak times, thus producing the highest possible overall revenue. The management of inventory items becomes more about the supply being able to maintain the demand rate of the company’s market or industry.