Assortment planning, space assignment and shelf location model
DOI:
https://doi.org/10.17981/ingecuc.15.2.2019.03Keywords:
shelf location and allocation, retail, mathematical modelling, mixed integer lineal programming, assortment planningAbstract
Introduction: Retailer’s operational decisions imply that through its assortment the demand can be satisfied achieving the highest possible profit making the best possible use of its exhibition space. This article presents a mixed integer linear programming model which main purpose is to maximize the profit of a retailer considering the effects of substitution between the items, space elasticity, service levels and buyer’s decisions.
Objective: To propose a decision model for space allocation, assortment planning and shelf location for a retailer.
Method: First different factors that affect the decisions under study are analyzed using primary and secondary sources. Then the formulation of the model is proposed and its performance is evaluated using real data from a product category at a retailer’s point of sale.
Results: For the test instance, the optimal solution was obtained in a reasonable computational time and the solution presents the best way to manage the assortment at the point of sale, improving the results of the current method.
Conclusions: The proposed model allows increasing the profitability of the chain through the selection of the appropriate assortment, with fair exhibition spaces and suggesting the exact location of the items.
Downloads
References
M. Karampatsa, E. Grigoroudis and N. F. Matsatsinis, “Retail Category Management: A Review on Assortment and Shelf-Space Planning Models,” in Operational Research in Business and Economics, E. Grigoroudis, M. Doumpos, Eds., Cham, Switzerland: Springer, 2017, pp. 35–67. https://doi.org/10.1007/978-3-319-33003-7_3
S. Greenhouse, “How Costco Became the Anti-Wal-Mart,” The New York Times. [Online . Available: http://www.nytimes.com/2005/07/17/business/yourmoney/how-costco-became-the-antiwalmart.htmltarget="_blank". [Accessed: 04-Oct-2017
A. H. Hübner and H. Kuhn, “Shelf and Inventory Management with Space-Elastic Demand,” in Operations Research Proceedings 2010, Hu B., Morasch K., Pickl S., Siegle M., eds., (GOR (Gesellschaft für Operations Research e.V.)), Berlin, Heidelberg: Springer, 2011, pp. 405–410. https://doi.org/10.1007/978-3-642-20009-0_64
P. M. Reyes and G. V. Frazier, “Goal programming model for grocery shelf space allocation,” Eur. J. Oper. Res., vol. 181, no. 2, pp. 634–644, Sep. 2007. https://doi.org/10.1016/j.ejor.2006.07.004
T. W. Gruen and R. H. Shah, “Determinants and outcomes of plan objectivity and implementation in category management relationships,” J. Retail., vol. 76, no. 4, pp. 483–510, Oct. 2000. https://doi.org/10.1016/S0022-4359(00)00041-5
G. Chetochine, Marketing estratégico de los canales de dictribución: Trade marketing, competencia, marca propia. Buenos aires, Argentina: Granica, 1994.
N. F. Palacios, “Diseño de un Modelo para la Planeación del Surtido, Asignación de Espacio y Localización en Góndola”, M. Eng. tesis, Esc. Colomb. de Ing. Julio Garavito, Bogotá, D.C., Colombia, 2017.
G. P. Cachon, C. Terwiesch and Y. Xu, “Retail Assortment Planning in the Presence of Consumer Search,” Manuf. Serv. Oper. Manag., vol. 7, no. 4, pp. 330–346, Oct. 2005. https://doi.org/10.1287/msom.1050.0088
R. A. Russell and T. L. Urban, “The location and allocation of products and product families on retail shelves,” Ann. Oper. Res., vol. 179, no. 1, pp. 131–147, Sep. 2010. https://doi.org/10.1007/s10479-008-0450-y
C. R. Ruiz Cruz, A. Zamora and C. J. Vidal, “Modelo de inventarios y espacio en góndola en puntos de venta para productos de abarrotes en un cadena de supermercados (2a. parte)”, Rev. Esc. Colomb. Ing. Julio Garavito, no. 79, pp. 15–25, Abr. 2010.
G. van Ryzin and S. Mahajan, “On the Relationship Between Inventory Costs and Variety Benefits in Retail Assortments,” Manage. Sci., vol. 45, no. 11, pp. 1496–1509, Nov. 1999. https://doi.org/10.1287/mnsc.45.11.1496
A. H. Hübner and H. Kuhn, “Retail category management: State-of-the-art review of quantitative research and software applications in assortment and shelf space management,” Omega, vol. 40, no. 2, pp. 199–209, Apr. 2012. https://doi.org/10.1016/j.omega.2011.05.008
Z. Li, “A Single-Period Assortment Optimization Model,” Prod. Oper. Manag., vol. 16, no. 3, pp. 369–380, May. 2007. https://doi.org/10.1111/j.1937-5956.2007.tb00265.x
V. Gaur and D. Honhon, “Assortment Planning and Inventory Decisions Under a Locational Choice Model,” Manage. Sci., vol. 52, no. 10, pp. 1528–1543, Oct. 2006. https://doi.org/10.1287/mnsc.1060.0580
A. G. Kök and M. L. Fisher, “Demand Estimation and Assortment Optimization Under Substitution: Methodology and Application,” Oper. Res., vol. 55, no. 6, pp. 1001–1021, Oct. 2007. https://doi.org/10.1287/opre.1070.0409
J.-K. Chong, T.-H. Ho and C. S. Tang, “A Modeling Framework for Category Assortment Planning,” Manuf. Serv. Oper. Manag., vol. 3, no. 3, pp. 191–210, Jul. 2001. https://doi.org/10.1287/msom.3.3.191.9891
B. Maddah and E. K. Bish, “Joint pricing, assortment, and inventory decisions for a retailer’s product line,” Nav. Res. Logist., vol. 54, no. 3, pp. 315–330, Jan. 2007. https://doi.org/10.1002/nav.20209
E. Yücel, F. Karaesmen, F. S. Salman and M. Türkay, “Optimizing product assortment under customer-driven demand substitution,” Eur. J. Oper. Res., vol. 199, no. 3, pp. 759–768, Dec. 2009. https://doi.org/10.1016/j.ejor.2008.08.004
R. Malsagne, “La productivité de la surface de vente passe maintenant par l’ordinateur,” Travail et Methodes, no. 274, pp. 3–8. 1972.
T. Monshouwer, A. Oosterom and J. Rovers, “Het Belang van Weloverwogern Assortimnentsbeheer,” Het Levensmiddelenbedriff, pp. 385–393, 1966.
X. Drèze, S. J. Hoch and M. E. Purk, “Shelf management and space elasticity,” J. Retail., vol. 70, no. 4, pp. 301–326, Dec. 1994. https://doi.org/10.1016/0022-4359(94)90002-7
H. Hwang, B. Choi and M.-J. Lee, “A model for shelf space allocation and inventory control considering location and inventory level effects on demand,” Int. J. Prod. Econ., vol. 97, no. 2, pp. 185–195, Aug. 2005. https://doi.org/10.1016/j.ijpe.2004.07.003
T. Flamand, A. Ghoniem, M. Haouari and B. Maddah, “Integrated assortment planning and store-wide shelf space allocation: An optimization-based approach,” Omega, vol. 81, pp. 134–149, Dec. 2018. https://doi.org/10.1016/j.omega.2017.10.006
J. Irion, J.-C. Lu, F. Al-Khayyal and Y.-C. Tsao, “A piecewise linearization framework for retail shelf space management models,” Eur. J. Oper. Res., vol. 222, no. 1, pp. 122–136, Oct. 2012. https://doi.org/10.1016/j.ejor.2012.04.021
H. Hwang, B. Choi, and M.-J. Lee, “A model for shelf space allocation and inventory control considering location and inventory level effects on demand,” Int. J. Prod. Econ., vol. 97, no. 2, pp. 185–195, Aug. 2005. https://doi.org/10.1016/j.ijpe.2004.07.003
H. Abbott and U. S. Palekar, “Retail replenishment models with display-space elastic demand,” Eur. J. Oper. Res., vol. 186, no. 2, pp. 586–607, Apr. 2008. https://doi.org/10.1016/j.ejor.2006.12.067
N. Borin, P. W. Farris and J. R. Freeland, “A Model for Determining Retail Product Category Assortment and Shelf Space Allocation,” Decis. Sci., vol. 25, no. 3, pp. 359–384, May 1994. https://doi.org/10.1111/j.1540-5915.1994.tb01848.x
T. L. Urban, “An inventory-theoretic approach to product assortment and shelf-space allocation,” J. Retail., vol. 74, no. 1, pp. 15–35, Mar. 1998. https://doi.org/10.1016/S0022-4359(99)80086-4
M. A. Hariga, A. Al-Ahmari and A.-R. A. Mohamed, “A joint optimisation model for inventory replenishment, product assortment, shelf space and display area allocation decisions,” Eur. J. Oper. Res., vol. 181, no. 1, pp. 239–251, Aug. 2007. https://doi.org/10.1016/j.ejor.2006.06.025
A. Hübner and K. Schaal, “An integrated assortment and shelf-space optimization model with demand substitution and space-elasticity effects,” Eur. J. Oper. Res., vol. 261, no. 1, pp. 302–316, Aug. 2017. https://doi.org/10.1016/j.ejor.2017.01.039
E. Frontoni, F. Marinelli, R. Rosetti and P. Zingaretti, “Shelf space re-allocation for out of stock reduction,” Comput. Ind. Eng., vol. 106, pp. 32–40, Apr. 2017. https://doi.org/10.1016/j.cie.2017.01.021
T. Bianchi-Aguiar, E. Silva, L. Guimarães, M. A. Carravilla and J. F. Oliveira, “Allocating products on shelves under merchandising rules: Multi-level product families with display directions,” Omega, vol. 76, pp. 47–62, Apr. 2018. https://doi.org/10.1016/j.omega.2017.04.002
C. H. Mowrey, P. J. Parikh and K. R. Gue, “A model to optimize rack layout in a retail store,” Eur. J. Oper. Res., vol. 271, no. 3, pp. 1100–1112, Dec. 2018. https://doi.org/10.1016/j.ejor.2018.05.062
N. Agrawal and S. A. Smith, “Optimal retail assortments for substitutable items purchased in sets,” Nav. Res. Logist., vol. 50, no. 7, pp. 793–822, May. Oct. 2003. https://doi.org/10.1002/nav.10090
Published
How to Cite
Issue
Section
License
Copyright (c) 2019 INGE CUC
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
Published papers are the exclusive responsibility of their authors and do not necessary reflect the opinions of the editorial committee.
INGE CUC Journal respects the moral rights of its authors, whom must cede the editorial committee the patrimonial rights of the published material. In turn, the authors inform that the current work is unpublished and has not been previously published.
All articles are licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
English
Español (España)
