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SCM with Market Economics

SCM with Market Economics. 2002. 8.1 MAI Lab. Seminar Park Jung Joon. Supply chain management with market economics. Toshiya Kaihara, Faculty of Information Science, University of Marketing and Distribution Sciences, 3-1, Gakuen-nishi, Nishi, Kobe 651-2188, Japan

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SCM with Market Economics

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  1. SCM with Market Economics 2002. 8.1 MAI Lab. Seminar Park Jung Joon

  2. Supply chain managementwith market economics Toshiya Kaihara, Faculty of Information Science, University of Marketing and Distribution Sciences, 3-1, Gakuen-nishi, Nishi, Kobe 651-2188, Japan International Journal of Production Economics Volume 73, Issue 1, 31 August 2001, Pages 5-14

  3. Contents • Introduction • Market-oriented programming • Agent definition • Experimental results • Conclusion & Remark MAI-LAB Seminar

  4. Introduction (1/3) • SCM 등장의 배경 • 기업들의 가장 큰 어려움 중 하나는 ‘한정된 자원으로 다양한 오더의 완벽한 해결’ 하는 것 • MRP의 infinite capacity planning은 현실 및 현장과 동떨어진 작업의 연속 • APS (Advanced Planning and Scheduling)의 필요성 • Commit now. Deliver on time. • TOC (Theory of Constraints)에 기반을 둠 MAI-LAB Seminar

  5. Introduction (2/3) • But… • SCM is not always concerned with Pareto optimal solutions in product distribution • Pareto Optimality • 적어도 어느 한 사람의 효용이 감소되지 않고서는 다른 사람들의 후생이 증대될 수 없는 상태 • Market Economics (Microeconomics)를 통한 접근 • Decentralization of decision making (Multi-Agent System) • Minimal communication overhead (Bidding System) MAI-LAB Seminar

  6. Introduction (3/3) • The multi-agent paradigm • Autonomy, pro-activeness, social ability, emergence… • 전체 시스템의 목적은 서로 간의 협상을 통해 Local Objectives를 aggregate 하는 것 • In supply chain networks • 각 Business Unit 들은 Agent 들과 역할이 유사함 • Multi-agent paradigm의 Distributed decision making mechanism 을 도입함 • Each agent represents the independent business unit with conflicting and competing individual requirements, and may possess localised information relevant to their utilities MAI-LAB Seminar

  7. Market-oriented programming (1/2) • Market-based Approach • 경제학의 일반균형이론(General Equilibrium Theory) • 일반균형이론은 완전경쟁시장에서 경쟁적 평형에서의 파레토 최적을 보장함 • Price Mechanism • SCM 시스템 상에서 공급시장과 수요시장을 잇는 Multi Agent들을 상정 • 각각의 Resource들에 대해 Price와 Quantity에 대한 offer를 교환하며 dynamic한 환경에서 파레토 최적을 찾음 MAI-LAB Seminar

  8. Market-oriented programming (2/2) • Bidding Mechanism 수요함수 공급함수 MAI-LAB Seminar

  9. Yk=fk(Xk) : Production Function fk Ek=Sk - Ck Cobb-Douglas Function Agent definition (1/10) • Preliminaries MAI-LAB Seminar

  10. Agent definition (2/10) • Production function • Yk=fk(Xk) (1) • Xk={xk1,...,xkm} (2) • Yk={yk1,...,ykn} (3) • y=axb (where 0 < a, 0 < b < 1) (4) Cobb-Douglas Ftn. fkl of agent k for input-output resource set l(i,j)=l is given by • (5) • (6) • (7) MAI-LAB Seminar

  11. Agent definition (3/10) • Profit function • Suppose a set of single unit purchase prices for a resource set {xk1,...,xkm} is {p1,...,pm}, and a set of single unit sales prices for a resource set {yk1,...,ykn} is {P1,...,Pn} • then the total production cost Ck of agent k is defined as • ckl(i,j)=pixkl (8) • (9) MAI-LAB Seminar

  12. Agent definition (4/10) • then the total production cost Sk of agent k is defined as • skl(i,j)=Pjykl (10) • (11) • then the profit function Ek of agent k is finally acquired as • Ekl=skl-ckl,(12) • (13) MAI-LAB Seminar

  13. Agent definition (5/10) • Profit Maximize theorem under budget constraints • (14) • Theorem.Profit functionEkof agent k is maximised by minimisedrk, which satisfies the following conditions: • (15) subject to • (16) MAI-LAB Seminar

  14. Agent definition (6/10) • We have the following Eq. (17) by (8), (10), (12) and (13): (17) *자세한 증명과정은 생략 MAI-LAB Seminar

  15. Agent definition (7/10) • Demand/Supply function definition • Since Cobb¯Douglas function shown in (4) is differentiable and • (18) • then the proposed product function (5) perfectly satisfies the conditions (16) (19) MAI-LAB Seminar

  16. Agent definition (8/10) • Then we have • (20) • Supply function ykl, which maximises the profit, is also obtained by (5) and (20) as follows: • (21) MAI-LAB Seminar

  17. Agent definition (9/10) • Agent utility : Price elasticity • |(dx/dp)×(p/x)| (22) • (23) • Agent demand utility depends on bkl, and that means agent demand activity affects more, as the price elasticity has a greater value in 0<b<1 • Rk = rk +1 로 두면 • (24) • From the comparison between (23) and (24), the reduction rate of input resource xkl in the budget constraint depends on bkl • Additionally, budget change affects more to the amount of demand, as the value bkl increases MAI-LAB Seminar

  18. Agent definition (10/10) • Market-oriented programming in SCM model • Step 1 : Set initial price pi for all the resources • Step 2 : Agent k calculates xki by (20) assumed rk = 0, then computes Ck by (8), (9). If Ck > max Ck then go to step 3, otherwise go to step 4 • Step 3 : Modify rk followed by the Profit Maximize Theorem(Reduce rk to satisfy Ck =max Ck ) • Step 4 : Define current demand/supply functions with rk by (20), (21) • Step 5 : Agent k sends the acquired demand/supply function as bids into the market to indicate its willingness to buy/sell resources. • Step 6 : Market mechanism calculates the balanced prices of all resources in the competitive market • Step 7 : If all the balanced prices are sufficiently converged, then go to step 8, otherwise Step 2 • Step 8 : Allocate all the Resources under the acquired equilibrium prices MAI-LAB Seminar

  19. Experimental results • Experimental model • Outside Supply/Demand Function (25) (26) Market[ i ][ j] : i -> Market , j -> Good 3 Market layer, 2 agent layer, 3 types of agent, 3 types of good MAI-LAB Seminar

  20. Experimental results Table 1. Production function parameters of agents Table 2. Outside production function parameters of agents MAI-LAB Seminar

  21. Experimental results • Market dynamism and price elasticity • Market[0] Supply and demand oscillation Price oscillation MAI-LAB Seminar

  22. Experimental results • Market[1] Supply and demand oscillation Price oscillation MAI-LAB Seminar

  23. Experimental results • Market[2] Supply and demand oscillation Price oscillation MAI-LAB Seminar

  24. Experimental Summary • We have acquired several points to validate the proposed methodology • A Pareto optimal solution is attainable by the equilibration process • The equilibration process scales with price elasticity of trading goods • Outside supply and demand function reduce oscillation in the equilibration process • The dynamism in the equilibrium highly depends on the utility functions of agents MAI-LAB Seminar

  25. Conclusion & Remark • Contribution • On market-oriented programming • Algorithm for distributed computation • Illustration of the approach on a simple supply chain model • Effective SCM in global environment is expected by this research • 현실과 얼마만큼 일치하는가 ? 가정의 문제 MAI-LAB Seminar

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