An efficient algorithm to allocate shelf space

Shelf space is one of the most important resources of a retail firm. This paper formulates a model and proposes an approach which is similar to the algorithm used for solving a knapsack problem. Subject to given constraints, the proposed heuristic allocates shelf space item by item according to a descending order of sales profit for each item per display area or length. Through the use of simulations, the performances of objective value and the computational efficiency of this method are evaluated. Three options are also proposed for improving the heuristics. Compared to an optimal method, the improved heuristic is shown to be a very efficient algorithm which allocates shelf space at near-optimal levels.