The interdependence of inventory management and retail shelf management

Acknowledges that the effect of displayed inventory on retail sales is widely recognized in the logistics, marketing and operations management literature and has been empirically verified. However, neither the marketing literature (shelf-space allocation models) nor the operations management literature (inventory control models) has appropriately modeled this effect. The displayed-inventory news-vendor problem is developed and analyzed, utilizing a simple model to illustrate the interdependencies between the inventory and space-allocation decisions. The model is then extended to the multi-item case, which can be incorporated as part of a comprehensive shelf-management system.