Students developed a product portfolio optimization tool for SOK
SOK is currently renewing the product selections of Sokos Emotion stores. Due to the growth of e-commerce, SOK needs to determine which products they will keep in stores and which ones they can sell only online. SOK also wants to respond to their customer’s needs by customizing the product selection of each store. There are thousands of different products in each store’s product selection, which makes it ineffective to manually determine the least profitable products. Emotion Itäkeskus was used as the pilot store in this project, but the tool can be used to customize any Emotion store’s product selection.
The objective of this project was to create an optimization tool which helps SOK determine which products they can remove from the physical store based on their sales data. In addition, the tool shows how removing these products would affect the key figures of the store, such as sales volume and marginal profit. The project was carried out by two Aalto students: Business Analytics student Sara Hyttinen from the School of Business and Mathematics and Operations Research student Matias Linnankoski from the School of Science.
The students started the project by interviewing employees of SOK to gain a better understanding of the preferences and challenges concerning the client. After the interviews, the students transformed the interview results into quantitative measures and used them to develop the optimization model. The optimization model was then implemented with Excel, which was used as the user interface for the tool.
Hans Backström, Sales Director of SOK, was satisfied with the project’s results and the cooperation with the student team.
‘The goals of the project were successfully achieved. The optimization tool seems easy to use and helps us to optimize our product selection from the perspective of profitability. The outcomes of the project are significant for SOK, and we are looking forward to using this tool to customize the product selections of our stores. Overall, we are very pleased with the project’s results and the work of the student team,’ says Backström.
Professor Juuso Liesiö from the School of Business was the academic advisor for the project.
‘Sara and Matias did a great job on the project, and it was a pleasure to support them in their work. I was very impressed by the agile way in which they rapidly produce computer implementations of pen&paper formulations of complex mathematical optimization models. Indeed, the project exemplified how our students possess not only strong competencies in the theory of mathematical modelling, but also the skills to implement such models into practical analytics tools that can support real-life decision making.’
According to Professor Liesiö, this project highlights what Aalto is all about: a multidisciplinary team working on a project, sharing a common language in mathematical modelling but bringing in their own diverse competencies to deliver excellent project outcomes. He would also like to express his gratitude to SOK for delivering such an interesting project topic to work on, and for their flexible cooperation during the project. He thinks these types of links to businesses are essential for Aalto to deliver maximal societal impact.
The students found the project interesting and rewarding.
‘It was very insightful to see how product selections are created and how the process can be transformed into a quantitative model. We enjoyed conducting the interviews and overall, the people from SOK were very helpful and interested in our results. In addition, we gained valuable experience from real-life business problems,’ the students say.
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