Intelligent e-Supply Chain Decision SupportSupply Chain Management: New Context ... Dynamic Supply...

University of Minnesota – Digital Technology CenterDecember 2002

Intelligent e-Supply Chain Decision Support

Norman M. SadehNorman M. Sadeh

ee--Supply Chain Management LaboratorySupply Chain Management LaboratorySchool of Computer Science School of Computer Science Carnegie Mellon UniversityCarnegie Mellon University

Copyright ©2002 Norman Sadeh

OutlineSupply Chain Management: New ContextSupply Chain Management: New ContextAgentAgent--Based Collaborative Decision SupportBased Collaborative Decision Support

MascotMascotAvailableAvailable--ToTo--Promise/CapacityPromise/Capacity--ToTo--Promise Promise FunctionalityFunctionalityEmpirical ResultsEmpirical ResultsDynamic Supply Chain Management PracticesDynamic Supply Chain Management Practices

Early ResultsEarly ResultsTAC’03: A Supply Chain Trading CompetitionTAC’03: A Supply Chain Trading Competition

Summary and Concluding RemarksSummary and Concluding Remarks


Supply Chain ManagementPlanning and coordinating procurement, production and Planning and coordinating procurement, production and distribution activitiesdistribution activities

From raw material suppliers to manufacturers …to From raw material suppliers to manufacturers …to distribution centers …to retailers and consumersdistribution centers …to retailers and consumers

Trillions of dollars annuallyTrillions of dollars annuallyGood practices directly impact the competitiveness of Good practices directly impact the competitiveness of companiescompanies

Timely and costTimely and cost--effective delivery of products to effective delivery of products to customerscustomersExtends to product design and configurationExtends to product design and configuration


Why is SCM Difficult?Involves multiple organizationsInvolves multiple organizationsEach organization tries to satisfy multiple objectives Each organization tries to satisfy multiple objectives

Cost, timeliness, quality, market share, etc.Cost, timeliness, quality, market share, etc.Each organization operates subject to:Each organization operates subject to:

Internal ConsiderationsInternal Considerations::Finite capacity, existing inventory, etc.Finite capacity, existing inventory, etc.

External ConsiderationsExternal ConsiderationsAvailable suppliers and their capacities, order Available suppliers and their capacities, order quantities and due dates, contractual quantities and due dates, contractual arrangements, transportation constraints, etc.arrangements, transportation constraints, etc.

Numerous sources of uncertaintyNumerous sources of uncertaintyCapacity, supplies, demand, etc.Capacity, supplies, demand, etc.


Historical Perspective

Purchasing Production Sales DistributionInventoryControl

MaterialsManagement

Suppliers ManufacturingManagement Distribution Customers

Suppliers Internal Supply Chain Customers

FunctionalSilos

EnterpriseIntegration

Dynamic Internet-enabled

Supply Chain

Supply ChainIntegration

Buyers/Sellers

Buyers/Sellers

Buyers/Sellers

Buyers/Sellerse-Commerce

e-Markets/Exchangese-Supply Chains


Beyond the Early eMarket HypeDynamic business practices are mainly confined to Dynamic business practices are mainly confined to MRO MRO Suppliers don’t like being evaluated solely based on Suppliers don’t like being evaluated solely based on priceprice

CovisintCovisint, E2open exchanges: more emphasis , E2open exchanges: more emphasis on supporting collaborationon supporting collaborationRequires richer environmentsRequires richer environments

•• Multiple attributes Multiple attributes –– not just pricenot just priceLack of adequate standardsLack of adequate standards

Lack of adequate decision support toolsLack of adequate decision support toolsEvaluate a large number of optionsEvaluate a large number of options

Standardization efforts are taking timeStandardization efforts are taking time


Some Open Research IssuesLong vs. Short term contractsLong vs. Short term contractsInformation exchangeInformation exchangeCollaborative decision supportCollaborative decision supportMultiMulti--attribute negotiationattribute negotiationPeerPeer--ToTo--Peer/local view vs. more Peer/local view vs. more loballobal viewview

P2P ChallengeP2P Challenge: Coordinating negotiation across : Coordinating negotiation across multiple tiersmultiple tiersChallenge for the Global ViewChallenge for the Global View: :

Creating the right incentives for information sharingCreating the right incentives for information sharingHow global? How often do you clear? etc.How global? How often do you clear? etc.


MASCOT: Collaborative Decision Support

Decisions are evaluated in Decisions are evaluated in collaborationcollaboration with with potential business partners potential business partners Supply chains can be Supply chains can be dynamicallydynamically set up in set up in response to changing market requirementsresponse to changing market requirementsEmphasis on Mixed Initiative Decision Emphasis on Mixed Initiative Decision SupportSupport

Don’t try to automate everything!Don’t try to automate everything!


MASCOT Supply Chain Agent

Bidding & Order Mgmt.Planning & Scheduling

Procurement

BusinessEntity

EnterpriseLevel

MascotAgent

eMarket

Tier 1Suppliers Prospective

Customer

eMarket Request forQuote

eMarket

Site Level MascotAgent

eMarket Site Level MascotAgent


MASCOT: Overall ObjectivesLeverage benefits of finite schedulingLeverage benefits of finite schedulingRapid and accurate evaluation of partnerRapid and accurate evaluation of partner--dependent dependent decisions :decisions :

Bids & Requests for QuotesBids & Requests for Quotes•• including realincluding real--time ATP/CTPtime ATP/CTP

Alternative product/subcomponent designsAlternative product/subcomponent designsMakeMake--oror--buy decisionsbuy decisions

Customizable mixedCustomizable mixed--initiative functionalityinitiative functionalityCollaborative solution development, Collaborative solution development, workflow managementworkflow management

Facilitate integration with legacy systemsFacilitate integration with legacy systems


A Customizable Agent Wrapper

Blackboard

Control KB

Agenda

ControllerControlProfile

GUI

Event Queue

EnterpriseSystem

eMarketPortal

PotentialBusinessPartner

PotentialCustomer

Bidding/Order Mgmt KS

BOM/Flow Config. KS

Demand Explosion KS

Communication KS

Knowledge Sources

Contexts

ExternalSystems

Outgoing messages

Incoming Events

Scheduling/CTP KS

RFQ/Procurement KS

Currentworkingcontext


Main Architectural FeaturesBlackboard Blackboard ContextsContexts: “What: “What--if”if”

Different assumptions (e.g. demand, resources, Different assumptions (e.g. demand, resources, suppliers) and different solutionssuppliers) and different solutionsUnresolved issues Unresolved issues

Extensible set of Knowledge SourcesExtensible set of Knowledge Sources ((KSsKSs))Allows for modular & reusable Allows for modular & reusable KSsKSsProvides for easy integration with legacy systemsProvides for easy integration with legacy systems

Mixed Initiative ControlMixed Initiative ControlCustomizable user profileCustomizable user profile


Unresolved IssuesHelp keep track of Help keep track of incomplete, inconsistent and incomplete, inconsistent and unsatisfactoryunsatisfactory aspects of a context solutionaspects of a context solution

Examples: unprocessed RFQ, insufficient availability Examples: unprocessed RFQ, insufficient availability of supplies, missed prior delivery commitmentof supplies, missed prior delivery commitment

Automatically updatedAutomatically updated as the solution is modifiedas the solution is modifiedSupports flexible mixed initiative Supports flexible mixed initiative workflow workflow managementmanagement

Associated with KS activations, scripts and goalsAssociated with KS activations, scripts and goals


Three Levels of Problem SolvingKnowledge Source ActivationsKnowledge Source Activations

e.g. Demand Explosion (RFQ1)e.g. Demand Explosion (RFQ1)ScriptsScripts

e.g. Evaluate (RFQ1) e.g. Evaluate (RFQ1) 1. Copy_Current_Context2. Incorporate(RFQ1)3. Demand_Explosion (RFQ1)4. Reoptimize_Schedule_with_Net_Demand (RFQ1)5. Procure_Subcomponents_Net_Demand(RFQ1)6. etc.

• Goals: Search among multiple options


Mixed Initiative Workflow Management

Blackboard:Update

Unresolved Issues

U/C:Select UnresolvedIssue to Resolve

KS:Execute

Resolution Method

ModifiedContext

UnresolvedIssue

SelectedUnresolved

Issue

U/C:Incorporate event

into Context

U/C:Select Resolution

Method

Controller:Activate

Resolution Method

SelectedResolution

Method

ModifiedContext

ModifiedCopy ofContext

ActivatedAgenda

ItemU/C:

Modify Assumptionswithin Context

(“What-if”)

U/C = User or Controller


StatusCustomized to support coordination between a Customized to support coordination between a machine shop and a tool shop at Raytheonmachine shop and a tool shop at Raytheon

Over 150 machine centers & over 100 peopleOver 150 machine centers & over 100 people50% of incoming orders require new tools50% of incoming orders require new tools

alternative BOM & process planning optionsalternative BOM & process planning optionsReduced tardiness by 23 percentReduced tardiness by 23 percent

Integration of process planning & schedulingIntegration of process planning & schedulingTighter coordinationTighter coordination

Used to study the benefits of different supply chain Used to study the benefits of different supply chain coordination policies and different order promising coordination policies and different order promising policiespolicies


Dynamic Supply Chain Coordination

Supply chainentity

•orders•requests for bid•bid acceptance/rejection•order cancelation/modification

•products•bid submissions•revised delivery dates

Supply chainentity

Supply chainentity

Supply chainentity


The Coordination ChallengeGenerate Generate robust yet competitive and costrobust yet competitive and cost--effective effective promise datespromise dates

MultiMulti--tier “capacitytier “capacity--toto--promise” functionalitypromise” functionalitySources of Sources of uncertaintyuncertainty are both internal and externalare both internal and external

incoming orders, supplies, internal capacity, etc.incoming orders, supplies, internal capacity, etc.Is it possible, through dynamic coordination, to reap Is it possible, through dynamic coordination, to reap the benefits of the benefits of finite schedulingfinite scheduling, while offsetting the , while offsetting the brittlenessbrittleness of its solutions ?of its solutions ?


Real-Time Promising(RTP):General Considerations

Net DemandNet Demand: Inventory Allocation & Demand : Inventory Allocation & Demand ExplosionExplosionSchedulingScheduling

Available vs. modified capacityAvailable vs. modified capacitySchedule around prior commitments vs. Schedule around prior commitments vs. reoptimizationreoptimizationSchedule Schedule ReoptimizationReoptimization

Assess impact on prior commitmentsAssess impact on prior commitmentsCosts & Priorities: order priorities, late delivery Costs & Priorities: order priorities, late delivery penalties, inventory costs, etc.penalties, inventory costs, etc.Other Tradeoff: Speed versus “optimality”Other Tradeoff: Speed versus “optimality”

Assess desirability & decide whether to submit quoteAssess desirability & decide whether to submit quoteMicroMicro--Boss RTP moduleBoss RTP module: real: real--time time reoptimizationreoptimization --user specifies desired response time user specifies desired response time (Sadeh et al. ‘94(Sadeh et al. ‘94--99)99)


RTP: Further Refinements

ProfitableProfitable--ToTo--PromisePromiseSelective RTP ValidationSelective RTP Validation


Profitable-To-PromiseOverall Profit = Total_Revenue Overall Profit = Total_Revenue -- Total_CostsTotal_Costs

Total_Revenue: Total_Revenue: Sum over all ordersSum over all ordersTotal_Costs: Total_Costs: Production costs, inventory costs Production costs, inventory costs (raw materials, in(raw materials, in--process, finished goods), late process, finished goods), late delivery penalties, etc.delivery penalties, etc.Takes into account impact on prior Takes into account impact on prior commitmentscommitments

e.g. late delivery penalty when another order e.g. late delivery penalty when another order gets bumpedgets bumped

Bid only if overall profit increasesBid only if overall profit increasesOther variations can be considered Other variations can be considered

e.g. strategic customers, market share e.g. strategic customers, market share considerationsconsiderations


Empirical Study: Multiple RFQ Processing Policies

Response:Response:Always bid Always bid -- no due date negotiationno due date negotiationOnly submit a bid if overall profit increasesOnly submit a bid if overall profit increasesBid conditional on acceptance of possibly relaxed Bid conditional on acceptance of possibly relaxed promise datepromise date

CapacityCapacity--ToTo--Promise ComputationPromise ComputationLeadtimeLeadtime--basedbasedLocal finite capacity scheduling & supply Local finite capacity scheduling & supply leadtimesleadtimesCoordinated finite capacity schedulingCoordinated finite capacity scheduling


Empirical Study: AssumptionsA lotA lot--forfor--lot makelot make--toto--order environmentorder environment

Internal sources of uncertainty at each tier due to resource Internal sources of uncertainty at each tier due to resource breakdowns and variations in processing timesbreakdowns and variations in processing times

Stochastic order arrivalStochastic order arrival

Finite capacity schedules regenerated dailyFinite capacity schedules regenerated daily

MicroMicro--Boss scheduling system Boss scheduling system

JIT objective: minimize sum of tardiness & inventory JIT objective: minimize sum of tardiness & inventory costscosts

Execution priority in accordance with the latest released Execution priority in accordance with the latest released scheduleschedule


Evaluation CriteriaNumber of bids refused or rejectedNumber of bids refused or rejectedNumber of tardy orders Number of tardy orders Average utilization of the most utilized resourceAverage utilization of the most utilized resourceAverage supply chain Average supply chain leadtimesleadtimesAverage dueAverage due--date adjustment (as part of bid negotiation)date adjustment (as part of bid negotiation)Profit (sales revenue minus costs)Profit (sales revenue minus costs)

Total inTotal in--system inventory costs (WIP and finished system inventory costs (WIP and finished goods)goods)Total tardiness costsTotal tardiness costs

Promise date accuracyPromise date accuracy


Basic Supply Chain Configuration

Agent 1

Agent 2

Agent 3

Agent 4

Agent 5

Agent 9

Agent 10

Agent 6

Agent 7

Agent 8

Supply chain Externalcustomers

Tier3 Tier2 Tier1


Benefits of Dynamic Finite Capacity Coordination

18 4000000

Ave

rage

lead

tim

e (d

ays)

(in

bars

)

Prof

it (in

hig

h-lo

w-li

nes)

15 3000000

12 2000000

9 1000000

6 0

3 -1000000

0 -2000000Leadtime-based Local FCS Coordinated FCS

Case with competition and negotiable promise dates


Benefits of Dynamic Coordination - Contd.6000000

4000000

0,80 1,00

Leadtime-basedLocal FCSCoordinated FCS

2000000

Ave

rage

pro

fit

00,40 0,60 1,20

Nominal load-2000000

-4000000

-6000000


Dynamic Supplier Selection

A manufacturer has a given set of customer orders A manufacturer has a given set of customer orders to satisfyto satisfyEach order has a required delivery date along with Each order has a required delivery date along with a penalty for missing that datea penalty for missing that dateThe manufacturer’s capacity is finiteThe manufacturer’s capacity is finiteEach order requires a number of components for Each order requires a number of components for which suppliers have submitted bidswhich suppliers have submitted bids

Supply bids include a price and delivery dateSupply bids include a price and delivery date


Supplier Bid SelectionSupplier BidSupplier BidSupplier Bid(Price, Delivery Date)

Component 11

Order 1

(Delivery Date, Late Penalty)

Supplier BidSupplier BidSupplier Bid Component 12

Order 2

Component 21

Component 23

Supplier BidSupplier BidSupplier Bid



Component 22


Trading Agent CompetitionTAC Classic: Travel Agent ScenariosTAC Classic: Travel Agent Scenarios

About 20 entries in the pastAbout 20 entries in the pastTAC’03: Supply Chain Trading CompetitionTAC’03: Supply Chain Trading Competition

Agents compete for supplies and demandAgents compete for supplies and demandFixed Assembly CapacityFixed Assembly CapacityRFQsRFQs from customers from customers –– delivery date and delivery date and tardiness penaltytardiness penaltyRFQsRFQs to suppliersto suppliersInterests on money borrowed from the bankInterests on money borrowed from the bank


Office hoursOffice hours

00:00 00:0000:00

Negotiationand planning

08:00 17:00 08:00 17:00

a day (24 h)

Production

Negotiationand planning

Production P

Productionand delivery

schedule

Deliveryof PCs to

customers

RFQsto

suppliers

Responsesfrom

suppliers

RFQs andorders fromcustomers

Componentsfrom

suppliers

14 game seconds Zero game seconds

A TAC Day


Summaryee--SCM is about more open and more dynamic SCM is about more open and more dynamic business practices business practices Mascot: Mascot:

Rapid evaluation of partnerRapid evaluation of partner--dependent decisionsdependent decisionsMixed initiative decision supportMixed initiative decision supportCoordinated realCoordinated real--time Profitabletime Profitable--ToTo--Promise Promise functionalityfunctionality

Ongoing work: Ongoing work: Combine eCombine e--SCM and multiSCM and multi--attribute negotiation attribute negotiation ––together with the Univ. of Michigantogether with the Univ. of MichiganDynamic Supplier SelectionDynamic Supplier SelectionTrading Agent CompetitionTrading Agent Competition


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