Joint optimization models for shelf display and inventory control considering the impact of spatial relationship on demand

• Published in: European journal of operational research 2016-12, Vol.255 (3), p.797-808
• Main Authors: Zhao, Ju, Zhou, Yong-Wu, Wahab, M.I.M.
• Format: Article
• Language: English
• Subjects: Benchmarks; Display location selection; Heuristic; Inventory; Inventory control; Joint replenishment; Mathematical models; Optimization; Optimization algorithms; Shelf space allocation; Simulated annealing based hyper-heuristics; Studies
• ISSN: 0377-2217; 1872-6860
• DOI: 10.1016/j.ejor.2016.05.025

•A more realistic demand function incorporating spatial relationship is proposed.•A model integrating shelf allocation with joint replenishment is investigated.•Simulated annealing based hyper-heuristic algorithm is proposed to solve the model.•The model provides rather different shelf allocation and replenishment policy.•The performance of the proposed model is superior to that of existing models. This research investigates joint optimization models for shelf space allocation and display location with multi-item replenishment. The demand for each item is considered to be dependent not only on its and other items’ allocated shelf space and displayed locations, but also on spatial relationships between items. Joint optimization models are developed for two different scenarios: (a) each item is replenished individually; and (b) multiple items are replenished jointly. A multi-stage simulated annealing (SA) based hyper-heuristic algorithm is proposed to solve both joint optimization models. These models are then evaluated numerically for different problem sizes. The results demonstrate that: (1) the proposed SA based hyper-heuristic algorithm is robust and efficient for both joint optimization models; and (2) the model for the joint replenishment policy leads to a higher profit than that of the model for the individual replenishment policy. Hence, the joint optimization model with joint replenishment policy will be helpful for retailers making decisions about shelf display arrangement and inventory control for multiple items.