Modified EOQ Model for Refrigerated Display’s Shelf-Space Allocation Problem

Abstract

Abstract This study modifies the economic order quantity (EOQ) model for the problem of allocating refrigerated rack space in retail. The purpose of this study is to obtain the amount of space allocation for each product that can maximize retail profits. In the modified EOQ model, there are three components of storage costs, specifically storage costs, energy costs and quality costs. Energy costs and quality costs are adjusted to the ratio of cooled performance (i.e. Coefficient of Performance) and quality deterioration rate, respectively. This study adapts Water’s algorithm for EOQ orders with constraints on storage space in determining the amount of space allocation for each product. The Water’s algorithm uses an Additional Cost approach that is inherent in each unit of space used. The results show the cooling temperature is an important parameter in determining energy costs and quality costs. Through numerical examples, it is determined the right storage temperature and space allocation which gives maximum profit.