Shelf Space Allocation for Specific Products on Shelves Selected in Advance

Abstract

Purpose: The aim of the research is to develop the shelf space allocation model for specific products on shelves selected in advance, based on the practical retail requirements. Retailers and manufacturers may impose particular conditions for the appearance of products on the shelf based on its package type, brand, price, form and size. Shelf space allocation must be in line with the store positioning strategy of the retailer. Design/Methodology/Approach: This paper proposed dynamic programming to solve the profit maximization problem on small problem sizes considering extra allocation parameters such as capping and nesting. The distribution of shelf space to products has a direct effect on the competitiveness of the retail store. Findings: The paper presented major profit differences between shelf space allocation without capping and nesting parameters and including them. The computational experiments were performed to test the additional gains received with the usage of capping and nesting parameters. Practical Implications: This research provided qualitative insights for the retailers by comparing the profit gained with and without the capping and nesting allocation possibilities proposed in the model. Originality/Value: In this paper the basic shelf space allocation problem was simplified with selection of the shelf to place the products in advance, next the basic shelf space allocation model was extended with capping and nesting on-shelf allocation methods.