On the optimal product assortment: Comparing product and customer based strategies
This paper deals with the following general question: which products should be in our product assortment/portfolio if part or all of the (potential) customers only order if we can deliver on-time the desired quantities for all or a predefined subset of the products that the customers desire (one-stop-shopping concept)? In this context, two strategies are compared: a product based assortment, in which products are included based on their expected individual contribution to the total net profit, and a customer based assortment, in which customers are included based on their expected contribution to the total net profit. Mathematical models are presented to calculate the net profit for each of the above two strategies for a manufacturer confronted with limited production capacity, setup times, setup cost, and holding cost. The results of a case study from practice show that an assortment made up of products selected based on their individual contribution may lead to a much lower expected total net profit than a customer based assortment. Suggestions for further research are given.
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.:
- Yehuda Kahane, 1977. "Determination of the Product Mix and the Business Policy of an Insurance Company--A Portfolio Approach," Management Science, INFORMS, vol. 23(10), pages 1060-1069, June.
- 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.
- Khouja, Moutaz & Goyal, Suresh, 2008. "A review of the joint replenishment problem literature: 1989-2005," European Journal of Operational Research, Elsevier, vol. 186(1), pages 1-16, April.
- Amiya K. Chakravarty, 1984. "Joint Inventory Replenishments with Group Discounts Based on Invoice Value," Management Science, INFORMS, vol. 30(9), pages 1105-1112, September.
- Sharad Borle & Peter Boatwright & Joseph B. Kadane & Joseph C. Nunes & Shmueli Galit, 2005. "The Effect of Product Assortment Changes on Customer Retention," Marketing Science, INFORMS, vol. 24(4), pages 616-622, July.
- Paul R. Messinger & Chakravarthi Narasimhan, 1997. "A Model of Retail Formats Based on Consumers' Economizing on Shopping Time," Marketing Science, INFORMS, vol. 16(1), pages 1-23.
- 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.
- Sunder Kekre & Kannan Srinivasan, 1990. "Broader Product Line: A Necessity to Achieve Success?," Management Science, INFORMS, vol. 36(10), pages 1216-1232, 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.
- Chen, Tsung-Hui & Chen, Jen-Ming, 2005. "Optimizing supply chain collaboration based on joint replenishment and channel coordination," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 41(4), pages 261-285, July.
- de Groote, Xavier, 1994. "Flexibility and marketing/manufacturing coordination," International Journal of Production Economics, Elsevier, vol. 36(2), pages 153-167, September.
When requesting a correction, please mention this item's handle: RePEc:eee:proeco:v:125:y:2010:i:1:p:167-172. 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: (Shamier, Wendy)
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.