Revenue management in the news

Two stories about revenue management have been in the news recently. As I heard about them, I wondered what data had been used within the companies concerned to inform the decisions.

Ryanair, the budget airline, has announced that the cost per item for checked baggage will be higher in July and August than at other times. (£15 per item normally, £20 in July/August; those are the online fees; in person at the airport costs more, and so does the second item). Ryanair reckons that the introduction of fees for checked baggage has reduced the number of passengers with hold baggage from 80% to about 25%. Presumably the company expects that there will be an increase during the holiday months, which will mean that they will need more ground staff, more fuel and possibly fewer passengers.

The other story concerns telephone charges. For many years in the UK, phone calls between 6pm and 8am during the week have been cheaper. Earlier this year, BT (British Telecom, phone provider) changed this period to be 7pm to 7am, and recently another supplier, TalkTalk, has followed suit. It is suggested that the motive is more concerned with profits than regulating peak demand, since the hour 6pm to 7pm is not generally used for business calls, more for domestic. It may be that there is high demand for domestic internet services in the early evening, and therefore this is an attempt to shift telephone demand away from that period. But the companies are not saying.

One of the speakers on this subject was described as working in "Pricing consulting" and I thought to look up such businesses on the internet. I really should know better! "Pricing consulting" led to numerous pages advising how much to charge for consultancy! The perennial problem of words which can be nouns or verbs.

Genetic algorithms

I am ashamed to admit that I was slow to appreciate the possibilities of genetic algorithms. Way back in the 1980's, pre-internet, my colleague Keith and I were visited by a group of researchers from a local compnay who wanted to set up a project with our OR staff at the university. One of them asked if I had thought of using GAs. At that time, I had never heard of them; it was two or three years later that I next encountered them, and I suspect that if we had known even a little about GAs when the project proposal was being put together, we might have been able to contribute some applications in the literature. Since then, some of my work has used GAs and other meta-heuristics.

I was amused to discover the cartoon in xkcd, which imagines what might happen if food recipes were created using GAs.



It reminded me of other examples of cross-over from GAs to everyday life. Ian Stewart imagined evolution of crosses between cats and birds, with an imaginary landscape of various combinations of cats with wings and birds with paws. There have been several research projects for creating abstract art by GAs, and some of these projects have linked the concept to abstract music as well. Somehow, even if we had caught on to the idea of GAs after that casual conversation, I don't think that I would have gone into computer art!

Snow, cold and outlying data

One of the recurrent problems of production monitoring is to try and determine if a process is out of control. Observations are made at various times, and from these, one is supposed to determine whether or not there are problems.

An article on the website of KNMI (the Dutch Meteorological Institute) asks whether the winter of 2009-2010 was unusual. It is here. The author asks whether the weather was unusual, by looking at various statistics from different parts of the world. What makes the page so interesting is the way that the statistics are considered with and without a model that incorporates global warming. It is a reminder for O.R. workers doing control modelling to make sure that observations are related to the correct underlying model.

Marshmallow towers

I wish that I had more time to look at some of the amazing/fascinating talks at TED (www.ted.com). I came across Tom Wujec's short talk about his "Build a marshmallow tower" this week (Thank you to Boing Boing.)
http://www.ted.com/talks/tom_wujec_build_a_tower.html
Among the lessons from the research are that successful projects need organising, they need specialist expertise, and that there is great value in iteration, testing and improving. (Note the success of groups with someone with organisational skills, the work of architects, the kindergarten students.)

These lessons apply to O.R. projects as well.
(1) Time spent planning is seldom wasted;
(2) O.R. is not just about techniques; there needs to be experience of project work provided by a broad exposure to O.R. work
(3) the process of O.R. model-building ought to be iterative, with feedback from simple models feeding the refinement of the next development of that model.

O.R. on a trip to London

We went to London for a two-day break last week, and, inevitably, I looked at some of the experience with a pair of O.R.-problem-seeker's spectacles. Two of the things I saw are worth recording.

We went to the theatre (Phantom of the Opera); earlier in the year we had booked online and bought the cheapest tickets on sale ... even for a treat like this, we couldn't face paying some of the prices. The cheapest seats are £25; in Exeter and Taunton, where we generally go to the theatre, the most expensive seats are less than £20. When we got to the theatre, we discovered that the section in which our seats were located was closed for the evening, and we were bumped up to higher quality seats ... in fact the most expensive ones, at £59 each. At no charge, of course. So here is the cheapskate's optimal policy for theatre-going. Book well in advance, for a midweek (less popular) evening, in the cheapest section fof the theatre. Then wait and see what happens when you arrive. At worst, you have your seats. But you may get an upgrade instead. (Oh, and take your own chocolates ... theatre prices are high!)



We bought Oyster cards to pay for the trips around London on the bus and tube. The cost of fares is deducted from the balance on the card, up to a daily maximum, which depends on where you travel and when. So, off-peak, in zones 1-2, the cap is £5.60, which is also the price of a day card. We didn't save much except time with that. We did save when we used the tube in the morning rush-hour. Even then, the scheme has a cap on the day's deduction. Looking at the calculation of caps, we spotted an anomaly. For someone whose use of the system consists of one journay in the morning rush-hour and a number of journeys in the off-peak season, the cap may be more than the combined rush-hour fare and the cost of the day card. So it is better not to use the same Oyster card for the rush-hour and the rest of the day. So here's the optimal strategy for anyone doing this type of day's travelling very often. Have two cards. Use one for the rush-hour, and the other for the wandering about. It depends on what zones you are using, so I am not going to spell out what to do ... an exercise for the reader.

Queues in Nationwide Building Society

I suspect that the problem of queue control is the most obvious area where O.R. has made impacts on everyday life. Certainly, it is the example that I use in my "cocktail-party" explanation of what O.R. models.

Last week, the U.K.'s largest building society, the Nationwide, announced that any of its card customers wishing to withdraw less than £100 would have to use a cash machine (ATM = Automatic Teller Machine). This was an attempt to cut queues. The building society, like most others, offers numerous financial services, such as mortgages, savings accounts and insurance. Already, there are attempts to reduce the queues at the tellers, by filtering the customers according to the type of transaction. In Exeter's branch, there are four tellers, and a single queue, with several assistants on the customer side of the tellers who ask people who are queueing whether their transaction could be handled in some other way.

But the latest move has attracted criticism, as the customers who are most affected are thought to be those who are least comfortable with the ATMs -- the elderly, the disabled .... Maybe those customers could be encouraged to sabotage the scheme by carrying (say) £80, queueing to deposit it, and then withdrawing £100 at once. That way they will get the £20 they need, and without facing the (to them dreaded) ATMs.

Where does this quotation come from?

We were in a seminar today about God's work in mission and this quotation was thrown into the discussion. It doesn't feature (yet) on Google, so I am putting it here for Google to find!

"If the impossible is not part of our plans, then God is not one of our partners".

What does that have to do with O.R.? Not much, but it is a reminder that O.R. cannot be applied to Christian work because of God's role in it!