Course Page

Demand Management and Price Optimization

Course Number:

45860


Faculty

Nicola Secomandi, ns7@andrew.cmu.edu


Program

MBA


Concentrations

Operations Management, Quantitative Analysis


Course Description

Matching supply with demand is an enormous challenge for firms: excess supply is costly, inadequate supply irritates customers and can yield lost revenue opportunities.  In this course we will explore how firms can improve the operational management of the demand for their products (goods or services) to more effectively align it with their supply.  This demand management orientation complements the traditional supply management view of operations management.  Thus, we will mainly focus on managing demand to meet supply with the goal of maximizing (net) revenue, rather than managing supply to meet demand with the goal of minimizing cost.  The former view is particularly relevant when the firm’s supply is fixed or relatively inflexible, as in service or service-like operations, but is also relevant in manufacturing in the short-term.  We will also explore opportunities to jointly manage supply and demand with the goal of maximizing margin.

Throughout this course we illustrate mathematical analysis and strategic principles applied to real operational challenges, i.e., the tools of demand management and price optimization.  We seek both rigor and relevance.  Our aim is to provide both tactical knowledge and high-level insights needed by general managers and management consultants.  We will demonstrate that companies can use (and have used) the tools from this course to significantly enhance their competitiveness.  We will cover different kinds of business processes, including service operations and manufacturing.  Specifically, the course deals with the management of reservations for capacity (revenue management), the optimization of tactical and operational pricing decisions (constrained-supply pricing, markdown pricing, and customized pricing), and the integration of demand and supply management decisions (joint pricing, inventory, production, and distribution management).

The course format includes lectures and discussions of cases and examples of successful practice.  Active student participation and relevant discussion are strongly encouraged.  The course learning objectives are to teach students how and when to implement the tools of demand management and price optimization, to provide them with rigorous and practically relevant education from the point of view of a high-level manager or consultant, and to stimulate cross-functional critical thinking, especially across the operations and marketing functions.  (8/13)


Format

Lecture: 100min/wk and Recitation: 50min/wk


Pre-requisites

None