Transportation National Group (Columbia Business School)
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 spreadsheet and the exhibit in the case - just use the data in the spreadsheet.)
5. If TNG wanted to implement revenue management, what recommendations would you make going forward and how would you prioritize your recommendations?
CHALLENGES
Demand can vary geographically and seasonally. The highly seasonal nature of demand at many locations makes it difficult for the company to manage the leasing. The lease rates of the market also vary over time due to the differential season. Owing to the competition of local markets and differential demand, the company may, therefore, have little control over the local spot rates. Consequently, the profit may not be as high as the company may want since the price is mostly controlled by the local market. In addition, the company has to compete not only with the Excel, but also the local businesses.
It is important that the company consider the ability to accept the potential contracts in the future. Accepting or declining a current contract will definitely have an impact on the future ability. Regarding the geographical demand, one-way leases are also difficult to manage, because they involved one branch losing a piece of equipment and another branch gaining it. Whether this net change
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 spreadsheet and the exhibit in the case - just use the data in the spreadsheet.)
5. If TNG wanted to implement revenue management, what recommendations would you make going forward and how would you prioritize your recommendations?
CHALLENGES
Demand can vary geographically and seasonally. The highly seasonal nature of demand at many locations makes it difficult for the company to manage the leasing. The lease rates of the market also vary over time due to the differential season. Owing to the competition of local markets and differential demand, the company may, therefore, have little control over the local spot rates. Consequently, the profit may not be as high as the company may want since the price is mostly controlled by the local market. In addition, the company has to compete not only with the Excel, but also the local businesses.
It is important that the company consider the ability to accept the potential contracts in the future. Accepting or declining a current contract will definitely have an impact on the future ability. Regarding the geographical demand, one-way leases are also difficult to manage, because they involved one branch losing a piece of equipment and another branch gaining it. Whether this net change