A Retail Category Management Model Integrating Shelf Space and Inventory Levels

Asia-Pacific Journal of Operational Research, 2009

Posted: 24 Apr 2010 Last revised: 29 Jun 2010

See all articles by B. Ramaseshan

B. Ramaseshan

Curtin University - School of Marketing

Narasimaha Achuthan

Curtin University - Department of Mathematics and Statistics

Roger Collinson

Curtin University - Department of Mathematics and Statistics

Date Written: August 1, 2009

Abstract

A retail category management model that considers the interplay of optimal product assortment decisions, space allocation and inventory quantities is presented in this paper. Specifically, the proposed model maximizes the total net profit in terms of decision variables expressing product assortment, shelf space allocation and common review period. The model takes into consideration several constraints such as the available shelf space, backroom inventory space, retailer's financial resources, and estimates of rate of demand for products based on shelf space allocation and competing products. The review period can take any values greater than zero. Results of the proposed model were compared with the results of the current industry practice for randomly generated product assortments of size six, ten and fourteen. The model also outperformed the literature benchmark. The paper demonstrates that the optimal common review period is flexible enough to accommodate the administrative restrictions of delivery schedules for products, without significantly deviating from the optimal solution.

Keywords: Category management, product assortments, optimal shelf space allocation

Suggested Citation

Ramaseshan, B. and Achuthan, Narasimaha and Collinson, Roger, A Retail Category Management Model Integrating Shelf Space and Inventory Levels (August 1, 2009). Asia-Pacific Journal of Operational Research, 2009. Available at SSRN: https://ssrn.com/abstract=1491467

B. Ramaseshan (Contact Author)

Curtin University - School of Marketing

Australia

Narasimaha Achuthan

Curtin University - Department of Mathematics and Statistics ( email )

Bentley, WA 6148
Australia

Roger Collinson

Curtin University - Department of Mathematics and Statistics ( email )

Bentley, WA 6148
Australia

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