Retailing

Retailing can be seen as the third phase in the flow of goods, following production and logistics. OR/MS has been used in retailing for some time, typical examples being the “newsboy problem” (a classical inventory problem) and the “traveling salesman problem,” one of the origins of combinatorial optimization.

Retail shops can be classified into several categories; independent stores, department stores, supermarkets, discount stores and convenience stores. In recent years, stores in the last three categories have outperformed the first two in profit efficiency, reflecting a change in consumer behavior. It is therefore crucial for independent and department stores to restructure their methods of retailing. Moreover, the net profit for some goods can be as low as 1–3%, the life cycle of goods is becoming shorter and the diversity of products wider. Consequently, the application of scientific management methods has assumed even greater importance.

OR/MS can be applied in many aspects of...