Overview (Optimization - Shelf Price)

Owned by Ondřej Tesař
Mar 08, 2024
2 min read

Purpose

Optimization - Shelf Price Accelerator intends to optimize the shelf prices for end customer, typically of a B2C company. This accelerator enables price optimization based on:

  • Maximization of the revenue and/or profit

  • Setting shelf prices limits

  • Aligning prices across sales channels

  • Adjusting sold quantity depending on price changes (thanks to an advanced elasticity model)

  • Aligning rules with competitor prices

  • Managing stock coverage expectations

Outputs

The output of the optimization model are shelf prices by product, store and time period. These shelf prices are displayed in the interface and can be fetched in any part of Pricefx solution and also queried by external systems through APIs.

A set of dashboards is also provided to allow you to review and assess the outputs with charts and tables with the recommended shelf price, forecasted revenue and margin, stock coverage etc.

Approach

The optimization relies on two parts:

Here is an overview of the two models working together with inputs and outputs:

To be as fast and generic as possible, a standardized waterfall is built into the Accelerator and is designed to cover most of the customer needs. This waterfall looks like this:


Waterfall structure

With this data structure in place and the model parameters properly set, most of the work is done by the Optimization Engine, which positions the shelf price based on the price boundaries, competition prices, stock coverage etc. in order to optimize revenue and/or margin.

For details see Optimization Engine.

Limitations

  • Time period – It is key to manage properly time periods, meaning selecting full time period of the transactions scope, both for the multi-factor elasticity and shelf price optimization. Partial period will result in incomplete results and wrong forecast due to biased inputs.

  • Product scope – The accelerator relies on past transactions, so a product with no sales will not be part of the optimization.

  • No predefined extension point – There is no out-of-the-box extension point defined for now. If you intend to add specific features, custom code should be written. (But then the accelerator becomes specific and it cannot be updated without extra effort to port those modifications.) Do not hesitate to report specific requirements and possible extension points to Pricefx.