IDEAS home Printed from https://ideas.repec.org/a/eee/jomega/v81y2018icp134-149.html
   My bibliography  Save this article

Integrated assortment planning and store-wide shelf space allocation: An optimization-based approach

Author

Listed:
  • Flamand, Tulay
  • Ghoniem, Ahmed
  • Haouari, Mohamed
  • Maddah, Bacel

Abstract

This paper investigates retail assortment planning along with store-wide shelf space allocation in a manner that maximizes the overall store profit. Each shelf comprises a set of contiguous segments whose attractiveness depends on the store layout. The expected profit accruing from allocating space to a product category depends not only on shelf segment attractiveness, but also on the profitability of product categories, their expected demand volumes, and their impulse purchase potential. Moreover, assortment affinities and allocation affinity/disaffinity considerations are enforced amongst certain pairs of interdependent product categories. A mixed-integer programming model is developed as a standalone approach to the problem and is also embedded in an optimization-based heuristic. The latter employs an initial feasible solution that is iteratively refined by re-optimizing subsets of shelves that are selected using a probabilistic scheme. A motivational case study in the context of grocery stores demonstrates the usefulness of the methodology and insights into the structure of optimal solutions are discussed. We show that the model selects a composite assortment of fast-movers and high-impulse product categories and constructs an effective retail shelf space allocation that promotes shopping convenience and unplanned purchases. Further, our computational study examines a testbed of 50 instances involving up to 800 product categories and 100 shelves for which our heuristic consistently yields solutions within 0.5% optimal in manageable times and drastically outperforms CPLEX with a time limit.

Suggested Citation

  • 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.
  • Handle: RePEc:eee:jomega:v:81:y:2018:i:c:p:134-149
    DOI: 10.1016/j.omega.2017.10.006
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0305048317310058
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Hansen, Jared M. & Raut, Sumit & Swami, Sanjeev, 2010. "Retail Shelf Allocation: A Comparative Analysis of Heuristic and Meta-Heuristic Approaches," Journal of Retailing, Elsevier, vol. 86(1), pages 94-105.
    2. Amrouche, Nawel & Zaccour, Georges, 2007. "Shelf-space allocation of national and private brands," European Journal of Operational Research, Elsevier, vol. 180(2), pages 648-663, July.
    3. Yang, Ming-Hsien & Chen, Wen-Cher, 1999. "A study on shelf space allocation and management," International Journal of Production Economics, Elsevier, vol. 60(1), pages 309-317, April.
    4. Tulay Flamand & Ahmed Ghoniem & Bacel Maddah, 2016. "Promoting impulse buying by allocating retail shelf space to grouped product categories," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 67(7), pages 953-969, July.
    5. Murray, Chase C. & Talukdar, Debabrata & Gosavi, Abhijit, 2010. "Joint Optimization of Product Price, Display Orientation and Shelf-Space Allocation in Retail Category Management," Journal of Retailing, Elsevier, vol. 86(2), pages 125-136.
    6. 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.
    7. Gérard P. Cachon & A. Gürhan Kök, 2007. "Category Management and Coordination in Retail Assortment Planning in the Presence of Basket Shopping Consumers," Management Science, INFORMS, vol. 53(6), pages 934-951, June.
    8. Hariga, Moncer A. & Al-Ahmari, Abdulrahman & Mohamed, Abdel-Rahman A., 2007. "A joint optimisation model for inventory replenishment, product assortment, shelf space and display area allocation decisions," European Journal of Operational Research, Elsevier, vol. 181(1), pages 239-251, August.
    9. Teresa Bianchi-Aguiar & Elsa Silva & Luis Guimarães & Maria Antónia Carravilla & José F. Oliveira & João Günther Amaral & Jorge Liz & Sérgio Lapela, 2016. "Using Analytics to Enhance a Food Retailer’s Shelf-Space Management," Interfaces, INFORMS, vol. 46(5), pages 424-444, October.
    10. Robert Russell & Timothy Urban, 2010. "The location and allocation of products and product families on retail shelves," Annals of Operations Research, Springer, vol. 179(1), pages 131-147, September.
    11. 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.
    12. repec:dau:papers:123456789/1757 is not listed on IDEAS
    13. Yang, Ming-Hsien, 2001. "An efficient algorithm to allocate shelf space," European Journal of Operational Research, Elsevier, vol. 131(1), pages 107-118, May.
    14. 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.
    15. Hansen, Pierre & Heinsbroek, Hans, 1979. "Product selection and space allocation in supermarkets," European Journal of Operational Research, Elsevier, vol. 3(6), pages 474-484, November.
    16. Ahmed Ghoniem & Bacel Maddah & Ameera Ibrahim, 2016. "Optimizing assortment and pricing of multiple retail categories with cross-selling," Journal of Global Optimization, Springer, vol. 66(2), pages 291-309, October.
    17. Hasmukh Gajjar & Gajendra Adil, 2010. "A piecewise linearization for retail shelf space allocation problem and a local search heuristic," Annals of Operations Research, Springer, vol. 179(1), pages 149-167, September.
    18. Ahmed Ghoniem & Tulay Flamand & Mohamed Haouari, 2016. "Exact Solution Methods for a Generalized Assignment Problem with Location/Allocation Considerations," INFORMS Journal on Computing, INFORMS, vol. 28(3), pages 589-602, August.
    19. Dominik Kress & Nils Boysen & Erwin Pesch, 2017. "Which items should be stored together? A basic partition problem to assign storage space in group-based storage systems," IISE Transactions, Taylor & Francis Journals, vol. 49(1), pages 13-30, January.
    20. Pierre Desmet & Valérie Renaudin, 1998. "Estimation of Product Category Sales Responsiveness to Allocated Shelf Space," Post-Print halshs-00143451, HAL.
    21. Ahmed Ghoniem & Tulay Flamand & Mohamed Haouari, 2016. "Optimization-Based Very Large-Scale Neighborhood Search for Generalized Assignment Problems with Location/Allocation Considerations," INFORMS Journal on Computing, INFORMS, vol. 28(3), pages 575-588, August.
    22. Bacel Maddah & Ebru K. Bish & Hussein Tarhini, 2014. "Newsvendor pricing and assortment under Poisson decomposition," IISE Transactions, Taylor & Francis Journals, vol. 46(6), pages 567-584, June.
    23. Hübner, Alexander H. & Kuhn, Heinrich, 2012. "Retail category management: State-of-the-art review of quantitative research and software applications in assortment and shelf space management," Omega, Elsevier, vol. 40(2), pages 199-209, April.
    24. Kacen, Jacqueline J. & Hess, James D. & Walker, Doug, 2012. "Spontaneous selection: The influence of product and retailing factors on consumer impulse purchases," Journal of Retailing and Consumer Services, Elsevier, vol. 19(6), pages 578-588.
    25. Evan E. Anderson & Henry N. Amato, 1974. "A Mathematical Model for Simultaneously Determining the Optimal Brand-Collection and Display-Area Allocation," Operations Research, INFORMS, vol. 22(1), pages 13-21, February.
    26. 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.
    27. Marcel Corstjens & Peter Doyle, 1981. "A Model for Optimizing Retail Space Allocations," Management Science, INFORMS, vol. 27(7), pages 822-833, July.
    28. Shun Yin Lam & Mark Vandenbosch & John Hulland & Michael Pearce, 2001. "Evaluating Promotions in Shopping Environments: Decomposing Sales Response into Attraction, Conversion, and Spending Effects," Marketing Science, INFORMS, vol. 20(2), pages 194-215, March.
    Full references (including those not matched with items on IDEAS)

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jomega:v:81:y:2018:i:c:p:134-149. 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). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/375/description#description .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.