Dynamic Customer Value Management: Asset Values under Demand Uncertainty using Airline Yield Management and Related Techniques

The focus of this paper is to demonstrate the close links between the airline and the manufacturing industry in so far as some of their decision support problems are concerned. We show that the yield management (YM) problem for the airline characterized by perishable and limited resources has counterparts in manufacturing and retail although with some variations. In the process of establishing similarities we highlight the importance of the concept of value of assets/resources, known as bid price in the airline terminology, that ties the two together. Several examples of its calculations and uses are provided. We believe that this new paradigm will open up new avenues for profits for manufacturers in the new era of e-commerce where the businesses shall have to be increasingly customer centric including pricing functions.