Transportation National Group (Columbia Business School)

1816 Words Nov 24th, 2006 8 Pages
Preparation questions for Transportation National Group

1. What challenges does TNG face in managing its leases on trailers?

2. What is your assessment of TNG's current lease performance measures and controls, especially its use of ROI measures?

3. How might TNG implement revenue management? What ideas or approaches seem most viable in a business like this?

4. Based on the data for the Yakima branch, what is the potential revenue opportunity at this location from optimally controlling the availability of leases of various durations? That is, suppose TNG knew the demand; then what lease decision should TNG make? The spread sheet with the data from Exhibit 5 has been posted. (Note there is a small, inconsequential discrepancy between the
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Also high utilization may result in having more prospective customers in the future. It depends on the revenue management and utilization and ROI should be considered simultaneously.

TNG does not concentrate on the gross profit for the year (Exhibit 4) because it has already invested on the existing trailers. It could consider an opportunity of having a larger number of fleet trailers. Therefore, the focus is to maximize profit since it might waste the capital investment if the trailers are just to park, especially since the operating costs of serving the fleet are relatively small compared to the capital cost of equipment.

REVENUE MANAGEMENT

Revenue management is an integration of capacity and pricing. Given that TNG has a fixed number of trailers (capacity) that have very high capital costs, it should try to implement revenue management into its operational design so as to maximize revenue and minimize revenue loss (or opportunity costs) since operating costs to service the fleet are relatively small. It can do this by providing better service for certain customers and thus change a higher price (price differentiation) and also control the number of trailers leased at lower prices (balancing the tradeoff between current and future revenue).

Price Differentiation

TNG is actually already practicing some kind of price differentiation in that it is charging different prices