Integrated Supply Chain Analysis and Decision Support

(I98-S01)

RESEARCH TEAM
INVESTIGATORS: G. Berkstresser S. Fang R. King T. Little H. Nuttle J. Wilson

Textiles and Apparel Mgmt. Industrial Engineering Industrial Engineering Textiles and Apparel Mgmt. Industrial Engineering Industrial Engineering

RESEARCH TEAM
STUDENTS: S-H. Chen Y. Liao A. Medaglia Ph.D. Operations Research Ph.D. Industrial Engineering Ph.D. Operations Research

Background
Supply chains involve the activity and interaction of many entities. Successful operation requires coordination of decision making among the entities. Decisions must be made in settings involving vagueness and uncertainty. Performance evaluation is complicated by the presence of conflicting objectives. These issues become more serious as the number of operations and number of players in the chain increase.

Background (cont.)
Performance measures, such as service level and cost, and system parameters, such as inventory levels, plant capacities, and leadtimes, are understood in a general sort of way. Precise relationships between system parameters and performance measures are really not known and, in fact, will change from one time to another depending on uncertain factors such as customer demand and manufacturing yields.

Background (cont.)

Fuzzy mathematics permits one to directly model imprecise relationships using linguistic variables. While fuzzy logic permits one to do approximate reasoning to obtain useful results.

Objectives
Attack Critical Soft Goods Supply Chain integration and decision support problems using Fuzzy Mathematics and Neural Network technologies:
Develop the capability to model soft goods supply chain design and decision making problems using this framework. Develop mathematical models for specific scenarios involving both numerical and linguistic data. Design and evaluate approaches for solving the models. Prototype a decision support system.

Multi-Customer Due-Date Bargainer

Multi-Customer Due-Date Bargainer

Multi-Customer Due-Date Bargainer (MCDDB) is a new tool for due-date negotiation between a manufacturer and customers MCDDB Combines the Order Management, Resource Management, Due-Date Bargaining and Schedule Management Function into one package.

Steps of MCDDB
Step I: Input order data. Step II: Calculate the Manufacturers prefer Due-Date overtime). (no

Step III: Calculate the Fuzzy Promised Due-Date balancing overtime use and delayed delivery. Step IV: Execute bargaining process with dissatisfied customers.

Source: MCDDB (Beta

Source: MCDDB (Beta

Genetic Algorithm
Permutation Representation Genetic Operators:
Order Crossover (OX)
selected substring parent 1 1 2 3 4 5 6 7 8 9 1 offspring 7 9 3 4 5 6 1 2 8 sw the relative orders ap parent 2 5 7 4 9 1 3 6 2 8 1 2 6 4 5 3 7 8 9 2 3 4 5 6 7 8 9

: [3 6 8 1 9 4 5 2 7]

Reciprocal Exchange Mutation

select two positions at rendom

Roulette W heel Selection. Fitness Function: Total W eighted Easrliness/Tardiness

Source: MCDDB (Beta

 ( x)
1

Membership Functions
Fuzzy Customer Due-Date

di
Fuzzy Available Resource

d i

( x)
1

1 + r1

Source: MCDDB (Beta

Source: MCDDB (Beta

Source: MCDDB (Beta

Master Production Schedule

Source: MCDDB (Beta

Resource Utilization

Source: MCDDB (Beta

Supply Chain Modeling and Optimization Using Soft Computing Based Simulation

Introduction
Supply chains involve the activity and interaction of many entities. Decision makers typically have imprecise goals. e.g. High service level Some system parameters may also be imprecise. e.g. Production capacity Discrete event simulation can help design and analyze supply chains. Many configurations and courses of action need to be investigated. Even experts have to spend a considerable amount of time searching for good alternatives. Soft computing guided simulation speeds up the process.

Scheme
Supply Chain Configuration

Knowledge Extraction

Simulation

Input - Performance Data

Goals met? No Activate Fuzzy Rules/Logic

Yes Stop Fuzzy System / Relationship Identification

Soft Computing Guided Simulation

SCBS (Alpha Version)

Knits Retailer 1 Distribution Center 1

Distribution Center 2

Wovens

Retailer 2

Source: SCBS (Alpha Version)

Knits Retailer 1 Distribution Center 1

Distribution Center 2

Wovens

Retailer 2

Linguistic Terms
Factory
Production rate (low, medium, high) Finished inventory (small, medium, large) Utilization (low, medium, high)

Distribution Center
Inventory level (small, medium, large)

Demand Point / Retailer

Demand rate (low, medium, high) Service level (low, medium, high)

Changes in inventory limits

Large drop, Small drop, No change, Small increase, Large increase

Changes in production rates

Large reduction, Small reduction, No reduction, Small increase, Large increase

Knits Retailer 1 Distribution Center 1

Distribution Center 2

Wovens

Retailer 2

Source: SCBS (Alpha Version)

Rule base to guide supply chain reconfiguration

If Inventory level in the Distribution Center 1 is High and Inventory level in the Factory (Wovens) is Medium then Change in production rate in the Factory (Wovens) is Small Reduction. Example rule 2: If Service level in Retailer 1 is Low and Inventory level in the Distribution Center 1 is Low then Change in production rate in the Factory (Knits) is Large Increase. Example rule 1:

Goals
The degree of fulfillment of the goals can be evaluated. e.g.
Goal 1: Goal 2: Goal 3: High Service Level in Retailer 1. Low Inventory Level in Retailer 2. Medium Inventory Level in Factory (Knits).

Each goal is met to a certain degree. A complicated a multi-criteria objective can be specified using AND, OR, NOT operators,
e.g.
High S.L. in Retailer 1 and Low Inventory Level in Retailer 2 and not Low Throughput in Retailer 1 and Low Finished Inventory in Factory (Knits).

System / Relationship Identification

In the previous scheme

Supply Chain Configuration Knowledge Extraction

Simulation

Input - Performance Data

Goals met?

Yes
Stop Fuzzy System / Relationship Identification

No
Activate Fuzzy Rules/Logic

Soft Computing Guided Simulation

Source: SCBS (Alpha Version)

Methodologies for System Identification

Conventional Mathematics Fuzzy Systems Neural Networks

Flow Chart
Baseline design Subtractive clustering =>number of clusters =>number of rules FCM clustering algorithm =>input space partition =>membership functions in the IF parts Recursive least-squares estimation method to solve the linear leastsquares estimation problem for the parameters of the first order polynomial functions in the Then parts

Fine tuning Steepest descent method to solve the nonlinear optimization problem for the parameters of the membership functions in the IF parts

Neural Networks
Idea
to approximate the relationship between input and output data pairs.

Steps:
train the neural network with existing data. predict performance using trained neural network.

Network Architecture
Hidden Layer w11 x1 x2 xn wjn w21 v11 v21

Inputs

Input Layer

Output Layer

Outputs y1 y2

vmj ym

Test Case
Truck-Backup Problem
DOCK y=100 40 60

10

10

10

10

x=100

Results Comparison
Prediction Results
450 400

350

Testing Data

300

250

200

150

100

50 0 50 100 150 200 250 300 350 400 450 500

Training data NeuralNet Clustering

Decision Surface Modeling

Decision Surface Modeling (Retail Model & Sourcing Simulator)

Objective is to provide an interactive system that captures the essential features of the retail model in multidimensional, mathematical relationships between performance measures, e.g., service level, and key parameters, e.g., reorder leadtimes. Provide retailer with a rapid, easy-to-use, visual tool to help understand and predict the impact on system performance of what-if scenarios such as:
What are the consequences of reducing initial season inventory? What are the consequences of poor forecast? What are the cost/benefits of reducing reorder lead times?

Service Level vs Lead Time and Initial Inventory

97.7 97.0 96.2 95.4 94.6 93.9 93.1 92.3 91.6 3 2.8 2.6 2.3 2.1 1.9 1.7 1.4 50 47.9 45.7 43.6 41.4 39.3 1.2 1 37.1 35 65 62.9 60.7 58.6 56.4 54.3 52.1

Service Level

Lead Time(from 1 to 3) and Initial Inventory (from 35 to 65)

Source: Sourcing Simulator (Version

Neural Network Architecture

A neural network consists of several layers of computational units called neurons and a set of data-connections which join neurons in one layer to those in another. The network takes inputs and produces outputs through the work of trained neurons. Neurons usually calculate their outputs as a sigmoid, or signal activation function of their inputs,
1 f ( x) = x 1+ e

Using some known results, i.e., input-output pairs for the system being modeled, a weight is assigned to each connection to determine how an activation that travels along it influences the receiving neuron. The process of repeatedly exposing the network to known results for proper weight assignment is called training.

Learning Curve
Epoch vs Mean Square Error (MSE)
0.029 0.026 0.023 0.021 0.018 0.015 0.012 0.009 0.007 0.004 0.001 1 251 501 751 1001 1251 1501 1751 2001 2251 2501 2751 3001 3251 3501 3751 4001 4251 4501 4751

Epoch
Source: Sourcing Simulator (Version

Offshore vs QR Sourcing Service Level Performance

Offshore
100 100

QR

90

90

80

80 Service Level(SL) % 70

Service Level(SL) %

70

60

60

50 -30

-20

-10

10

20

30

50 -30

-20

-10

10

20

30

Volume Error Percent

Volume Error Percent

Source: Sourcing Simulator (Version

Early Peak vs Late Peak Demand Gross Margin Performance

Early Peak Demand

65000 64250 63500 62750 62000 61250 65000 64250 63500 62750 62000 61250

Late Peak Demand

Gross Margin

60500 59750 59000 35 45 55 65 4 3 2 1

Gross Margin

60500 59750 59000 35 45 55 65 4 3 2 1

Initial Stocking Percent of Plan [ 35 to 65 ] and Reorder Lead Time [ 1 to 4]

Initial Stocking Percent of Plan [ 35 to 65 ] and Reorder Lead Time [ 1 to 4]

Source: Sourcing Simulator (Version

Service Level -- Adjusted Gross Margin Tradeoff

Service Level Adjusted Gross Margin

Source: Sourcing Simulator (Version

Confidence Intervals for Estimated Decision Surfaces

A new approach based on jackknifing promises to yield reliable, realistic confidence and prediction bands on the estimated response surface. With k replications (runs) of n training patterns (design points), we combine k+1 response surface estimates to obtain both point and confidence interval estimates of the average response E[Y(x)] at each selected combination x = [x1, x2, ..., xm] of the m decision variables. On the jth replication of all training patterns, common random numbers are used to sharpen the estimation of the ANN weights; but as usual, different replications are mutually independent.

New Jackknife Procedure

Let Y(x) denote an ANN estimate of the average simulation response at design point x when all k replications of the simulation are included in the training data. Let Y-j(x) denote the ANN estimate of the average simulation response when the jth replication of each training pattern is deleted.

New Jackknife Procedure

The jth pseudovalue is Zj=kY(x) (k1)Y-j(x); and from the sample mean Z and the sample standard deviation SZ of the pseudovalues, we compute the 100(1)% confidence interval for the expected response at design point x: Z t1/2; k-1

SZ /k.

ANN Predictions vs Simulation Confidence Intervals For Normal Data

4.00E+05

Average Inventory Level (Pounds)

3.00E+05

2.00E+05

Jackknife Limit Jackknife Limit Simulation Limit Simulation Limit

1.00E+05 1 2 3 4 5 6 7 8 9 10

Testing Pattern

Confidence Intervals for Estimated Decision Surfaces

A new approach based on jackknifing promises to yield reliable, realistic confidence and prediction bands on the estimated response surface. With k replications (runs) of n training patterns (design points), we combine k+1 response surface estimates to obtain both point and confidence interval estimates of the average response E[Y(x)] at each selected combination x = [x1, x2, ..., xm] of the m decision variables. On the jth replication of all training patterns, common random numbers are used to sharpen the estimation of the ANN weights; but as usual, different replications are mutually independent.

ANN Predictions vs Simulation Confidence Intervals For Normal Data

4.00E+05

Average Inventory Level (Pounds)

3.00E+05

2.00E+05

Jackknife Limit Jackknife Limit Simulation Limit Simulation Limit

1.00E+05 1 2 3 4 5 6 7 8 9 10

Testing Pattern

ANN Predictions vs Simulation Confidence Intervals For Nonnormal Data

1.00

Percent of Orders Shipped Within 5 Days

Jackknife Limit
0.90

Jackknife Limit Simulation Limit Simulation Limit

0.80 8 9 10 11 12 13 14 15 16

Testing Pattern

5.00

ANN Prediction vs Simulation Confidence Intervals For Normal Data

Average Leadtime (Days)

4.00

3.00

Jackknife Limit Jackknife Limit Simulation Limit Simualtion Limit

2.00

1.00 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Testing Pattern

Fuzzy Inventory Replenishment System

Fuzzy Inventory Replenishment System

If demand is strong and inventory level is low then purchase amount is large.

Centennial Centennial
Apparel Apparel

Replenishment Policy Crisp (Q,R) System

Q = purchase amount R = re-order point Policy : whenever inventory is below R, purchase Q

Fuzzy (Q,R) Control System

Fuzzy Variables Membership Functions Fuzzy Rules Approximate Reasoning Method Defuzzification Method Policy : apply fuzzy rules to specify purchase quantity

Fuzzy (Q,R) Inventory System

Linguistic Variables
Inventory: Low, Medium, High Demand : Low, Medium, High Purchase : Low, Medium, High

Fuzzy (Q,R) Inventory System

Membership Functions
Trapezoid Numbers

Source: Fuzzy (Q,R) (Beta

Fuzzy (Q,R) Inventory System

Fuzzy Rules

Source: Fuzzy (Q,R) (Beta

Case Study

Source: Fuzzy (Q,R) (Beta

Case Study
Statistics from 50 Runs

Source: Fuzzy (Q,R) (Beta

Case Study

Modify Fuzzy Rules

Source: Fuzzy (Q,R) (Beta

Case Study

Performance Improved

Source: Fuzzy (Q,R) (Beta

More to come...
http://www.ie.ncsu.edu/fangroup/