Exact Optimization and Decomposition Approaches for 2D Shelf Space Allocation

Abstract

Shelf space is one of the scarcest resources, and its effective management to maximize profits has become essential to gain a competitive advantage for retailers. We consider the two-dimensional shelf space allocation problem (2DSSAP) with additional features motivated by literature and our interactions with a local bookstore. Two dimensions represent the width and height of rectangular arrangement space of a product. We determine optimal number of facings of all products in both dimensions and allocate them as contiguous rectangles to maximize profit. We first develop a mixed-integer linear mathematical programming model (MIP) for our problem and propose a solution method based on logic-based Benders decomposition (LBBD). Next, we construct an exact 2-stage algorithm (IP1/IP2), inspired by LBBD, which can handle larger and real-world size instances. To compare performances of our methods, we generate 100 test instances inspired by real-world applications and benchmarks from the literature. We observe that IP1/IP2 finds optimal solutions for real-world instances efficiently and can increase the local bookstore's profit up to 16.56\%. IP1/IP2 can provide optimal solutions for instances with 100 products in minutes and optimally solve up to 250 products (assigned to 8 rows x 160 columns) within a time limit of 1800 seconds. This exact 2-stage IP1/IP2 solution approach can be effective in solving similar problems such as display problem of webpage design, allocation of product families in grocery stores, and flyer advertising.

Keywords: Retailing; Two-Dimensional Shelf Space Allocation; Rectangular Display Problem; Mixed-Integer Linear Programming; Logic-Based Benders Decomposition; 2-Stage Algorithm