Maximizing Revenue Through Two-Dimensional Shelf-Space Allocation

Production and Operations Management, Forthcoming

Mays Business School Research Paper No. 2015-3

17 Pages Posted: 28 Jan 2015

See all articles by Neil Geismar

Neil Geismar

Texas A&M University - Mays Business School

Milind Dawande

University of Texas at Dallas - Department of Information Systems & Operations Management

B. P. S. Murthi

University of Texas at Dallas - Department of Marketing

Chelliah Sriskandarajah

Texas A&M University

Date Written: January 27, 2015

Abstract

We consider the problem of optimally allocating contiguous rectangular presentation spaces in order to maximize revenues. Such problems are encountered in the arrangement of products in retail shelf-space and in the design of feature advertising displays or webpages. Specifically, we allow (i) the shape of a product’s presentation to have a vertical as well as a horizontal component and (ii) displays to extend across multiple shelves for in-store presentations. Since the vertical location of the shelf on which a product is displayed affects its sales, each vertical location is assigned its own effectiveness with regard to revenue generation. The problem of maximizing the total weighted revenue of a display is strongly NP-hard. Therefore, we decompose it into two subproblems. The first consists of allocating products to different cabinets. In the second, within each cabinet, each product’s units are arranged in a contiguous rectangle and assigned a location. These subproblems are solved using an innovative approach that uses a combination of integer programming and an algorithm for the maximum-weight independent set problem. Based on computational studies on both real-world and simulated data, we demonstrate the efficiency and effectiveness of our approach. Specifically, the revenue generated by this scheme is within 1% of the optimum for actual data and within 5% for simulated data.

Keywords: shelf-space allocation; two-dimensional display; retail; location effects

Suggested Citation

Geismar, Neil and Dawande, Milind and Murthi, B. P. S. and Sriskandarajah, Chelliah, Maximizing Revenue Through Two-Dimensional Shelf-Space Allocation (January 27, 2015). Production and Operations Management, Forthcoming, Mays Business School Research Paper No. 2015-3, Available at SSRN: https://ssrn.com/abstract=2556446

Neil Geismar (Contact Author)

Texas A&M University - Mays Business School ( email )

Wehner 401Q, MS 4353
College Station, TX 77843-4218
United States

Milind Dawande

University of Texas at Dallas - Department of Information Systems & Operations Management ( email )

P.O. Box 830688
Richardson, TX 75083-0688
United States

B. P. S. Murthi

University of Texas at Dallas - Department of Marketing ( email )

Dallas, TX
United States
972-883-6355 (Phone)
972-883-2799 (Fax)

Chelliah Sriskandarajah

Texas A&M University ( email )

Langford Building A
798 Ross St.
77843-3137

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
78
Abstract Views
726
Rank
559,388
PlumX Metrics