chapter_14_operational_analysis | Lab Reports Technical Writing

Revenue Management

Lies at the core of any business. Without revenue expenses cannot be covered and the

business cannot operate. Successful revenue management results in selling the right

product or service to the right customer at the right price through the right in selling the

right product or service to the right customer at the right price through the right channel,

thereby maximizing revenue.

Revenue management produces optimal results when a company has accurate

historical information. Such as company must also adopt robust and dedicate resources

to the entire revenue-management process, companies implementing revenue

management effectively report up to 5 percent greater revenue than do those that forgot

such techniques.

Revenue Management in Restaurants

Selling the right seat in the right place to the right customer at the right price and for the

right duration. On the other hand, food service shores one major commonality with

airlines and hotels as well as cruise ship and even car rental industry. Despite the

unique nature of the food service industry, however, operators can practice revenue

management successfully as long as they adjust to the business requirements that

apply exclusively to their industry.

The right price

A more malleable revenue-management lever is price. This is achieved initially by

applying the appropriate pricing technique. Prices can be manipulated in order to

maximize revenue. For example a restaurant might offer early bird specials- specially

priced menu times from 4pm until 6 pm, a traditionally show time. Time limited coupons

can entire customers who might not otherwise patronize a food service operation. This

can raise revenue increment-tally by filling otherwise empty seats. Similar pricing

applications include happy hour specials/during low-demand periods and late-night

appetizer discounts. These strategies are intended to shift demand, increasing it during

traditionally slow day parts.

Cost Analysis Techniques

The most basic of these, food cost percentage and labor cost percentage, are widely

used as simple methods for analyzing individual foodservice operations as well as

comparing same-segment operations. The importance of cost analysis in management

decisions has been long recognized, mostly in determining, actual cost data, cost

estimates for the company and a product. Cost data and analysis helps managers in

making decisions in such areas like pricing, profit planning, setting standard cost, capital

investment decisions, marketing decisions etc.

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Revenue Management Lies at the core of any business. Without revenue expenses cannot be covered and the business cannot operate. Successful revenue management results in selling the right product or service to the right customer at the right price through the right in selling the right product or service to the right customer at the right price through the right channel, thereby maximizing revenue. Revenue management produces optimal results when a company has accurate historical information. Such as company must also adopt robust and dedicate resources to the entire revenue-management process, companies implementing revenue management effectively report up to 5 percent greater revenue than do those that forgot such techniques.  Revenue Management in Restaurants Selling the right seat in the right place to the right customer at the right price and for the right duration. On the other hand, food service shores one major commonality with airlines and hotels as well as cruise ship and even car rental industry. Despite the unique nature of the food service industry, however, operators can practice revenue management successfully as long as they adjust to the business requirements that apply exclusively to their industry.  The right price A more malleable revenue-management lever is price. This is achieved initially by applying the appropriate pricing technique. Prices can be manipulated in order to maximize revenue. For example a restaurant might offer early bird specials- specially priced menu times from 4pm until 6 pm, a traditionally show time. Time limited coupons can entire customers who might not otherwise patronize a food service operation. This can raise revenue increment-tally by filling otherwise empty seats. Similar pricing applications include happy hour specials/during low-demand periods and late-night appetizer discounts. These strategies are intended to shift demand, increasing it during traditionally slow day parts. Cost Analysis Techniques The most basic of these, food cost percentage and labor cost percentage, are widely used as simple methods for analyzing individual foodservice operations as well as comparing same-segment operations. The importance of cost analysis in management decisions has been long recognized, mostly in determining, actual cost data, cost estimates for the company and a product. Cost data and analysis helps managers in making decisions in such areas like pricing, profit planning, setting standard cost, capital investment decisions, marketing decisions etc.

Activity-based costing In the foodservice industry, this is readily apparent, particularly when fixed expenses in urban centers where rent is high are disproportionately greater than in locations where land cost is low. To this end, based costing (ABC), which has been applied in manufacturing, healthcare, and banking, can be effective because it allows managers to trace fixed costs to individual menu items. In applying ABC, the first step is to identify areas that are responsible for fixed costs. For example , in most food service operations fixed costs can be allocated largely to either the front of the house or the back of the house. Potential Food Cost The potential food cost is the cost of food under perfect or ideal conditions. Applied on a larger scale , a food service operator could calculate the potential food cost for an entire period. This would require multiplying the number of menu items dold by the potential food cost for each of the corresponding items. This results in the potential food cost dollars for the week provides the potential food cost percentage. This potential food cost approach suggests that any negative variance greater than 1% indicates a problem. Also , proper costing and pricing methods should provide for any allowance previously integrated into the potential food cost approach. Most foodservice managers today, therefore, treat the budgeted food cost as both the potential food cost and the true basis of comparison with actual cost(and accept only positive variances). Operational Analysis Techniques  is a process that examines how a business operates by identifying bottlenecks, problems, and opportunities for improvement. It is the evaluation of a company’s existing processes and operations to determine how those processes can be modified or improved to increase efficiency and reduce costs. T ools and Techniques used in Operational Analysis Techniques

It is commonly used to illustrate the notion that not things are equal, and the minority owns the majority. Unlike other principles, the Pareto Principle is merely an observation, not law. The Pareto Principle can be applied in a wide range of areas such as;  Manufacturing • Management • Human resources Advantages of the Pareto Principle It can give you a window into who to reward or what to fix. For example, if 20% of the design flaws in a car are leading to 80% of the crashes, you can identify and fix those flaws. Similarly, if 20% of your customers are driving 80% of your sales, you may want to focus on those customers and reward them for their loyalty. In this sense, the Pareto Principle becomes a guide for how to allocate resources efficiently. Disadvantages of the Pareto Principle The 80/20 split is true for Pareto's observation, that doesn't necessarily mean that it is always true. For instance, 40% of the workforce (or 40 out of 100 workers) may only complete 60% of the output. The remaining workers may not be as productive or may just be slacking off on the job. This further reiterates that the Pareto Principle is merely an observation and not necessarily a law.

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