Demand estimation and assortment optimization under substitution: Methodology and application


Journal Article

An iterative heuristic that finds solutions within 0.5% of the optimal on average is discussed. New structural properties that relate the product selection and their inventory levels to product qualities such as demand rate, variability and batch size are also established. The decision process involves allocating a discrete number of facings to each product in order to maximize total expected gross profits from one or more subcategories. The results imply that products with higher demand rate should be assigned initial space, which would be profitable to assign more inventory to products. It is observed that the IH solutions are within 0.5% of the optimal solution on an average, with a maximum of 12.1%.

Cited Authors

  • Kök, AG; Fisher, ML

Published Date

  • December 1, 2004

Published In

Volume / Issue

  • 6 / 1

Start / End Page

  • 106 - 108

Electronic International Standard Serial Number (EISSN)

  • 1526-5498

International Standard Serial Number (ISSN)

  • 1523-4614

Citation Source

  • Scopus