Friday, February 26, 2010

Twist with the public transport

today, I decided to attempt using the public transport system in chennai. Well. i failed! i realised that summer has begun, and more importantly, its hot at 11am. I waited in the bus stop after a meeting for nearly 15 mins. But then i reaslised that I dont know what bus i need to take! Damn! strike 1.

So i decided to take an educated guess. Now route no 54 - seems to be a frigging popular route. More than 12 busses of that route went in the 15 mins that I was there. I really need to try and understand how MTC does its route planning. Now imagine if they actually implement some yeild management methods to work on the routes.

There are three essential conditions for revenue management to be applicable:

  • That there is a fixed amount of resources available for sale.
  • That the resources sold are perishable. This means that there is a time limit to selling the resources, after which they cease to be of value.
  • That different customers are willing to pay a different price for using the same amount of resources.

If the resources available are not fixed or not perishable, the problem is limited to logistics, i.e. inventory or production management. If all customers would pay the same price for using the same amount of resources, the challenge would perhaps be limited to selling as quickly as possible, e.g. if there are costs for holding inventory.

Yield management is of especially high relevance in cases where the constant costs are relatively high compared to the variable costs. The less variable cost there is, the more the additional revenue earned will contribute to the overall profit. This is because it focuses on maximizing expected marginal revenue for a given operation and planning horizon. It optimizes resource utilization by ensuring inventory availability to customers with the highest expected net revenue contribution and extracting the greatest level of ‘willingness to pay’ from the entire customer base. Revenue management practitioners typically claim 3% to 7% incremental revenue gains due to revenue management activity. In many industries this can equate to over 100% increase in profits. A competent revenue management analyst with good decision support tools can generate $10,000 per hour..

Yield management has significantly altered the travel and hospitality industry since its inception in the mid 1980s. It requires analysts with detailed market knowledge and advanced computing systems who implement sophisticated mathematical techniques to analyze market behavior and capture revenue opportunities. It has evolved from the system airlines invented as a response to deregulation and quickly spread to hotels, car rental firms, cruise lines, media, and energy to name a few. Its effectiveness in generating incremental revenues from an existing operation and customer base has made it particularly attractive to business leaders that prefer to generate return from revenue growth and enhanced capability rather than downsizing and cost cutting.

I think it will make MTC more economically viable and more importantly - profitable!

They have a great group of talented drivers and conductors- the thing is now to optimize that specific factor to bring out the best in all necessary parties involved.

some info taken from wikipedia.

1 comment:

Vasu said...

I am impressed you took the effort to understand this in the first place. By nature, and by laziness, I am some person who relies extensively on public transport. And I have seen it at different stages in India and abroad. So, I may deviate a bit from your thoughts and some of, my own, if you don’t mind.
You've got to remember that when it comes to MTC or the erstwhile PTC, they have been operating in a haphazard and random manner for ages. While things have been improving, and I can vouch for it, the pace of improvement is nowhere synonymous with the growth in demand, living standards of customers, and the benchmarks set else where in the world. The only public transport I like in India, and that I think can aspire for an international benchmark is the Delhi Metro, and the BMTC Volvo service in Bangalore.
The MTC has a political and trade union dimension to it that cannot be underestimated. You can design the most sophisticated transport solution in the world, but the drivers and conductors would take off at their own sweet time. You cannot reprimand him as he knows who is backing him. Sad to say, but that’s the way it works. The Chennai drivers may be skilled, but they are amongst the rudest I have seen
Some other factors that strike my mind. Let’s say you charge higher and promise a better service. Let’s say you jack up prices 3 times for higher frequency of A.C, comfortable buses. Now, you are stepping into an auto fare territory, and they will move the earth to stop this. So, while different customers are ready for different prices, opposition and blocking will come from unexpected quarters.
The effectiveness of any system has to be evaluated in conjunction with the environment and other factors like I mentioned.


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