Solving the grocery backroom sizing problem

Abstract

Backrooms are an important echelon of the retail supply chain. However, research focus has been mostly targeted to optimise both distribution centres and stores' sales area. In this paper, we propose two mathematical programming formulations to solve the grocery backroom sizing problem. This problem consists of determining the dimension of each storage department in the backroom area to optimise its overall efficiency. The first formulation is a bottom-up approach that aims to reduce the backroom life-cycle costs by determining the optimum floor space and storage height for each department. The second is a top-down approach based on Data Envelopment Analysis (DEA), which determines the efficient level of storage floor space for each backroom department, based on a comparison with the benchmarks observed among existing stores. Each approach has distinct characteristics that turn the models suitable for different retail contexts. We also describe the application of the proposed approaches to a case study of a European retailer. The application of this methodology in the design process demonstrated substantial potential for space savings (6% for the bottom-up model and 16% for the top-down model). This space reduction should either allow higher revenues in the sales area and/or lower backroom-related costs.

Keywords:

• Backroom sizing
• grocery retail
• MILP
• DEA

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1 Picking frequency in department d per year is determined by the maximum ratio between $\frac{ExpectedDemand}{PresentationStock}$ of all the categories stored in department d.

2 Notice that all stores are delivered the same number of times per week.

Additional information

Funding

This work is financed by the North Portugal Regional Operational Programme (NORTE 2020), under the PORTUGAL 2020 Partnership Agreement, and through the European Regional Development Fund (ERDF), within the project NORTE-01-0145-FEDER-000020.