HW13 - Shelf Optimization Case - EDA
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Kennesaw State University *
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Industrial Engineering
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Dec 6, 2023
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ISYE 6501 - Homework 13 – E. Dwomoh-Appiah
SHELF OPTIMIZATION SPACE
Hypothesis:
More shelf space will lead to more sales
More product sales imply more complimentary product sales
Larger complementary product sales if complementary products are next to
each other
Desired Outcomes
How much shelf space should the company have to maximize their sales and
profit?
Restrictions
Min and Max amount of shelf space required for each product
Total shelf space available in store – Key is division of shelf space
among products
Factors to Ignore
Promotions
Payments for space
SOLUTION
Variables / data points that would realistically be necessary for this Analysis
Product Data:
Product Sales
Product Cost
Product Price
Product Size
Type
Demographic:
Median income
Average Household size
Average distance of store from competitors
# of competitors in a 5mile radius
Space:
# of shelves
# of racks on each shelf
STEP I: Determine Complimentary Products
To start this analysis, I will determine complementary products using regression analysis.
The sales of product “X” will be used as the response variable and other products will be
used as predictor variables.
MODEL I – Simple Linear Regression Model in to determine complementary relationship
between products important factors to classify
Given:
Product Sales, Product Price, Product Type
Use
A Simple Linear Regression Model
To:
Determine products that are
complementary
STEP II: Determine Correlation between Shelf Space and Product(s) sales
In the next step, I would want to understand if there is any correlation between shelf space
and product sales. Will a larger shelf space for a product increase sales? Will a smaller shelf
space decrease sale of a product?
MODEL II – Pearson or Kendall Correlation Model
Given:
Time series of Sales of products and shelf
occupation of these products
Use
Pearson or Kendall Correlation Model
To:
To determine correlation relationship
between product sales and Shelf space
STEP III
After determining complementary products and determining between product sales and
amount of shelve space the next step is to use an optimization model to solve for how much
shelf space will a company need to maximize sales and profits.
Given:
The output from the first two models, the
complementary product(s) price and
product cost
Use
An Optimization Model
To:
Maximize the sales and profits of a
company, subject to min and max amount
of shelve space available for each product
and the total shelf space available in the
store
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