Optimizing product assortment under customer-driven demand substitution
The problem of product assortment and inventory planning under customer-driven demand substitution is analyzed and a mathematical model for this problem is provided in this paper. Realistic issues in a retail context such as supplier selection, shelf space constraints, and poor quality procurement are also taken into account. The performance of three modified models, one that neglects customers' substitution behavior, another that excludes supplier selection decision, and one that ignores shelf space limitations, are analyzed separately with computational experiments. The results of the analysis demonstrate that neglecting customer-driven substitution or excluding supplier selection or ignoring shelf space limitations may lead to significantly inefficient assortments. The effects of demand variability and substitution cost on optimal assortment and supplier selection decisions as well as on the optimal revenue are also investigated. The main contribution of this paper is the development of a practical and flexible model to aid retailers in finding optimal assortments to maximize the expected profit.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Peter M. Guadagni & John D. C. Little, 1983. "A Logit Model of Brand Choice Calibrated on Scanner Data," Marketing Science, INFORMS, vol. 2(3), pages 203-238.
- Garrett van Ryzin & Siddharth Mahajan, 1999. "On the Relationship Between Inventory Costs and Variety Benefits in Retail Assortments," Management Science, INFORMS, vol. 45(11), pages 1496-1509, November.
- David W. Pentico, 1974. "The Assortment Problem with Probabilistic Demands," Management Science, INFORMS, vol. 21(3), pages 286-290, November.
- Degraeve, Zeger & Labro, Eva & Roodhooft, Filip, 2000. "An evaluation of vendor selection models from a total cost of ownership perspective," European Journal of Operational Research, Elsevier, vol. 125(1), pages 34-58, August.
- Rajaram, Kumar & Tang, Christopher S., 2001. "The impact of product substitution on retail merchandising," European Journal of Operational Research, Elsevier, vol. 135(3), pages 582-601, December.
- Vishal Gaur & Dorothée Honhon, 2006. "Assortment Planning and Inventory Decisions Under a Locational Choice Model," Management Science, INFORMS, vol. 52(10), pages 1528-1543, October.
- Gérard P. Cachon & Christian Terwiesch & Yi Xu, 2005. "Retail Assortment Planning in the Presence of Consumer Search," Manufacturing & Service Operations Management, INFORMS, vol. 7(4), pages 330-346, August.
When requesting a correction, please mention this item's handle: RePEc:eee:ejores:v:199:y:2009:i:3:p:759-768. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.