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An efficient algorithm for capacitated assortment planning with stochastic demand and substitution

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  • Hübner, Alexander
  • Kuhn, Heinrich
  • Kühn, Sandro

Abstract

The ever increasing product variety in grocery retailing is in conflict with the limited shelf space. Managing the assortment and regular order quantity for perishable and non-perishable products is therefore a core task for retailers. Retailers want to maximize profit by considering potential revenues, purchase costs, diminishing profits for products and opportunity costs for unfulfilled demand when determining assortment sizes and order volume to meet stochastic consumer demand.

Suggested Citation

  • Hübner, Alexander & Kuhn, Heinrich & Kühn, Sandro, 2016. "An efficient algorithm for capacitated assortment planning with stochastic demand and substitution," European Journal of Operational Research, Elsevier, vol. 250(2), pages 505-520.
    • Handle: RePEc:eee:ejores:v:250:y:2016:i:2:p:505-520
    DOI: 10.1016/j.ejor.2015.11.007
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    Cited by:

    1. Seyed Jafar Sajadi & Ali Ahmadi, 2022. "An integrated optimization model and metaheuristics for assortment planning, shelf space allocation, and inventory management of perishable products: A real application," PLOS ONE, Public Library of Science, vol. 17(3), pages 1-30, March.
    2. Li, Zonghuo & Yang, Wensheng & Jin, Hyun Seung & Wang, Di, 2021. "Omnichannel retailing operations with coupon promotions," Journal of Retailing and Consumer Services, Elsevier, vol. 58(C).
    3. Kateryna Czerniachowska, 2022. "A genetic algorithm for the retail shelf space allocation problem with virtual segments," OPSEARCH, Springer;Operational Research Society of India, vol. 59(1), pages 364-412, March.
    4. Silbermayr, Lena & Waitz, Martin, 2024. "Omni-channel inventory management of perishable products under transshipment and substitution," International Journal of Production Economics, Elsevier, vol. 267(C).
    5. Naragain Phumchusri & Thiti Chewcharat & Supawish Kanokpongsakorn, 2024. "Price promotion optimization model for multiperiod planning: a case study of beauty category products sold in a convenience store chain," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 23(2), pages 164-178, April.
    6. Alexander Hübner & Fabian Schäfer & Kai N. Schaal, 2020. "Maximizing Profit via Assortment and Shelf‐Space Optimization for Two‐Dimensional Shelves," Production and Operations Management, Production and Operations Management Society, vol. 29(3), pages 547-570, March.
    7. Ma, Shaohui & Fildes, Robert, 2017. "A retail store SKU promotions optimization model for category multi-period profit maximization," European Journal of Operational Research, Elsevier, vol. 260(2), pages 680-692.
    8. Mou, Shandong & Robb, David J. & DeHoratius, Nicole, 2018. "Retail store operations: Literature review and research directions," European Journal of Operational Research, Elsevier, vol. 265(2), pages 399-422.
    9. Uzma Mushtaque & Jennifer A. Pazour, 2022. "Assortment optimization under cardinality effects and novelty for unequal profit margin items," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 21(1), pages 106-126, February.
    10. Hübner, Alexander & Schaal, Kai, 2017. "A shelf-space optimization model when demand is stochastic and space-elastic," Omega, Elsevier, vol. 68(C), pages 139-154.
    11. Wan, Mingchao & Huang, Yihui & Zhao, Lei & Deng, Tianhu & Fransoo, Jan C., 2018. "Demand estimation under multi-store multi-product substitution in high density traditional retail," European Journal of Operational Research, Elsevier, vol. 266(1), pages 99-111.
    12. Hans Corsten & Michael Hopf & Benedikt Kasper & Clemens Thielen, 2018. "Assortment planning for multiple chain stores," OR Spectrum: Quantitative Approaches in Management, Springer;Gesellschaft für Operations Research e.V., vol. 40(4), pages 875-912, October.
    13. Zhen-Yu Chen & Zhi-Ping Fan & Minghe Sun, 2023. "Machine Learning Methods for Data-Driven Demand Estimation and Assortment Planning Considering Cross-Selling and Substitutions," INFORMS Journal on Computing, INFORMS, vol. 35(1), pages 158-177, January.
    14. Alexander Hübner & Kai Schaal, 2017. "Effect of replenishment and backroom on retail shelf-space planning," Business Research, Springer;German Academic Association for Business Research, vol. 10(1), pages 123-156, June.
    15. Bianchi-Aguiar, Teresa & Hübner, Alexander & Carravilla, Maria Antónia & Oliveira, José Fernando, 2021. "Retail shelf space planning problems: A comprehensive review and classification framework," European Journal of Operational Research, Elsevier, vol. 289(1), pages 1-16.
    16. Schäfer, Fabian & Hense, Jonas & Hübner, Alexander, 2023. "An analytical assessment of demand effects in omni-channel assortment planning," Omega, Elsevier, vol. 115(C).
    17. Flamand, Tulay & Ghoniem, Ahmed & Haouari, Mohamed & Maddah, Bacel, 2018. "Integrated assortment planning and store-wide shelf space allocation: An optimization-based approach," Omega, Elsevier, vol. 81(C), pages 134-149.
    18. Chan, Rebecca & Li, Zhaolin & Matsypura, Dmytro, 2020. "Assortment optimisation problem: A distribution-free approach," Omega, Elsevier, vol. 95(C).
    19. Ostermeier, Manuel & Düsterhöft, Tobias & Hübner, Alexander, 2021. "A model and solution approach for store-wide shelf space allocation," Omega, Elsevier, vol. 102(C).
    20. Timonina-Farkas, Anna & Katsifou, Argyro & Seifert, Ralf W., 2020. "Product assortment and space allocation strategies to attract loyal and non-loyal customers," European Journal of Operational Research, Elsevier, vol. 285(3), pages 1058-1076.
    21. Transchel, Sandra & Buisman, Marjolein E. & Haijema, Rene, 2022. "Joint assortment and inventory optimization for vertically differentiated products under consumer-driven substitution," European Journal of Operational Research, Elsevier, vol. 301(1), pages 163-179.
    22. Menezes, Mozart B.C. & Pinto, Roberto, 2022. "Product proliferation, cannibalisation, and substitution: A first look into entailed risk and complexity," International Journal of Production Economics, Elsevier, vol. 243(C).
    23. Düsterhöft, Tobias & Hübner, Alexander & Schaal, Kai, 2020. "A practical approach to the shelf-space allocation and replenishment problem with heterogeneously sized shelves," European Journal of Operational Research, Elsevier, vol. 282(1), pages 252-266.
    24. Hübner, Alexander & Schaal, Kai, 2017. "An integrated assortment and shelf-space optimization model with demand substitution and space-elasticity effects," European Journal of Operational Research, Elsevier, vol. 261(1), pages 302-316.
    25. Schaal, Kai & Hübner, Alexander, 2018. "When does cross-space elasticity matter in shelf-space planning? A decision analytics approach," Omega, Elsevier, vol. 80(C), pages 135-152.

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