CTC case study
CTC CASE STUDY
Executive Summary
CTC’s problem is within its traditional pricing system, with both its inefficiency and lack of flexibility. The worksheets were formatted to show both the “ideal”( unconstrained and realistic ( constrained) circumstances, to analyze them and come for the best possible solution within the boundaries. One big concept that was present in determining which quantities were “optimal” was demand elasticity. Trends were found, and the conclusion that a elasticity with an absolute value of 1, represented an overall revenue maximizing point was discovered. Unfortunately those specific combinations were out of reach due to the fact that they went past the weight capacity of the ships( 24000 tons). Going back to the problem with the pricing strategy, its biggest problem was that in calculating the optimal prices, it took into consideration the weight of cargo and the volume of the port. This meant that for each route, each price or quantity was subject to an individual constraint, and all the other ten routes were not tied to each other in any way. the new pricing model proposed, takes into consideration that there is no individual constraints but rather an overall constraint which is the weight and volume of the ship travelling those routes, so within those constraints what dictates price is the demand. It was clearly stated that 40’ containers were not only preferred but more efficient to be used than 20’ containers, so this new pricing model brings in a higher ratio of the TEU in 40” to 20”, which could not only mean more efficiency , but lower costs in the long run. Finally, while doing the study , it was discovered that the optimal quantities that led to the maximum attainable revenue were not possible to attain due to the overload capacity of the boat, so one of the major recommendations was to loosen the weight constraint during the high season, but also implement a different policy for the
Executive Summary
CTC’s problem is within its traditional pricing system, with both its inefficiency and lack of flexibility. The worksheets were formatted to show both the “ideal”( unconstrained and realistic ( constrained) circumstances, to analyze them and come for the best possible solution within the boundaries. One big concept that was present in determining which quantities were “optimal” was demand elasticity. Trends were found, and the conclusion that a elasticity with an absolute value of 1, represented an overall revenue maximizing point was discovered. Unfortunately those specific combinations were out of reach due to the fact that they went past the weight capacity of the ships( 24000 tons). Going back to the problem with the pricing strategy, its biggest problem was that in calculating the optimal prices, it took into consideration the weight of cargo and the volume of the port. This meant that for each route, each price or quantity was subject to an individual constraint, and all the other ten routes were not tied to each other in any way. the new pricing model proposed, takes into consideration that there is no individual constraints but rather an overall constraint which is the weight and volume of the ship travelling those routes, so within those constraints what dictates price is the demand. It was clearly stated that 40’ containers were not only preferred but more efficient to be used than 20’ containers, so this new pricing model brings in a higher ratio of the TEU in 40” to 20”, which could not only mean more efficiency , but lower costs in the long run. Finally, while doing the study , it was discovered that the optimal quantities that led to the maximum attainable revenue were not possible to attain due to the overload capacity of the boat, so one of the major recommendations was to loosen the weight constraint during the high season, but also implement a different policy for the