The NewsVendorFacings.lng Model

The how many facings problem

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tsw = total shelf width available for facings,
for each product p:
c( p) = cost per unit,
r( p) = revenue or selling price per unit,
w( p) = width of a facing,
f( p) = items per facing, e.g., stacked behind each other,
mu( p) = mean demand per day (assume re-stock each night),
sd( p) standard deviation in demand per day,

How many facings should we allocate to each product?

Essential ideas:
total facings cannot exceed tsw,
Want to stock for each product mean demand + safety stock,
We tend to give more safety stock to product p for which:
r( p) - c( p) is high,
f( p) is high,
w( p) is low,
sd( p) is high.

This can be done to optimize total expected profit.
Computed parameters:
phi( s, p) = Prob{ demand for product p is >= s}
z( p, s) = 1 if we stock at least s, (thus z(s+1,p) <= z(s,p))


Uncertainty | Inventory | Newsboy Problem | Facings | Newsvendor | Planogram |