Norman M. Sadeh e-Supply Chain Management Laboratory ISR- School of Computer Science Carnegie Mellon University Supply Chain Trading Agents: Competition-Based Research

Copyright ©2006 N. Sadeh CS-50 Supply Chain Trading Agents Slide 2 Outline  Morning Session (10-11:30am) What is the Supply Chain Trading Agent Competition (TAC-SCM)? N. Sadeh Evolution of the Competition, J. Collins The CS-50 Mini-Tournament, M. Benisch  Afternoon Session (1:30-3:00pm) CS-50 Mini-Tournament Results at 2pm Supply Chain Trading Panel  T. Sandholm, J. Collins, M. Fox, M. Benisch and N. Sadeh (moderator)

Copyright ©2006 N. Sadeh CS-50 Supply Chain Trading Agents Slide 3 Trading is Not Just for Biz Schools

Copyright ©2006 N. Sadeh CS-50 Supply Chain Trading Agents Slide 4 Automated Trading  On the NYSE, automated trading accounts for over 50% of portfolio trades most weeks As much as 70% in some weeks  eBay proxy bidding  Ariba spend management solutions  CombineNet’s combinatorial optimization sourcing engine  Speed is the key advantage

Copyright ©2006 N. Sadeh CS-50 Supply Chain Trading Agents Slide 5 So Isn’t This a Solved Problem?  If it’s already taking place, why is it still challenging? Market mechanisms Multi-attribute negotiation Competing in concurrent markets Adapting to opponent strategies  Markets with limited number of players Delegating decision to software programs is not free of risk

Copyright ©2006 N. Sadeh CS-50 Supply Chain Trading Agents Slide 6 Supply Chain Management  Planning and coordinating procurement, production and distribution activities From raw material suppliers to manufacturers …to distribution centers …to retailers and consumers Includes in-bound, out-bound and reverse logistics  Trillions of dollars annually  Can also be viewed as extending to the service sector and to digital products With different characteristics

Copyright ©2006 N. Sadeh CS-50 Supply Chain Trading Agents Slide 7 The Need for Agile Supply Chain Solutions  Shorter product life cycles  Increased demand for customization  Global competition  Outsourcing & focus on core competencies  Companies need to rapidly adapt their supply chains as business conditions change  Companies that can quickly evaluate a larger number of options and can effectively interoperate with others will win

Copyright ©2006 N. Sadeh CS-50 Supply Chain Trading Agents Slide 8 How Do You Evaluate Supply Chain Trading Solutions?  Evaluating techniques against a pre-specified set of solutions does not cut it  Need to capture the competitive/strategic nature of supply chain trading In 2003, our group launched the annual Supply Chain Trading Agent Competition (“TAC-SCM”) 20 teams from around the world in 2003 Over 30 teams in 2004 and 2005– around researchers worldwide Game has been refined in collaboration with SICS and U. of Minnesota.

Copyright ©2006 N. Sadeh CS-50 Supply Chain Trading Agents Slide 9 Underlying Research Objectives  Explore future possible supply chain trading scenarios Understand tradeoffs associated with different market mechanisms and contractual relationships Develop competitive and robust trading strategies Study emerging behavior resulting from multiple organizations competing in overlapping customer and supplier markets

Copyright ©2006 N. Sadeh CS-50 Supply Chain Trading Agents Slide 10 The Supply Chain Trading Agent Competition  Six PC assembly agents compete in each game Each has access to the same suppliers and customers Each agent has the same finite capacity  A game lasts 220 days, each day is simulated in 15 seconds agents bid on customer orders and negotiate supplies assemble and ship PCs Manage finances

BANK RFQ Bid [RFQ no, price] RFQ [Desc, Qty, Due Dt, Penalty] Suppliers Customers Manufacturers Component Market Place PC Market Place … …

BANK Bid Winning Bid [Bid no, price] RFQ [Desc, Qty, Due Dt, Penalty] … … Suppliers Customers Manufacturers Component Market Place PC Market Place

Suppliers Customers Manufacturers Component Market Place PC Market Place BANK Bid [RFQ no, price] RFQ [Desc, Qty, Due Dt, Penalty] RFQ [Desc, Qty, Due Dt] Offer [ RFQ no, Price, Qty,Due dt] … …

Suppliers Customers Manufacturers Component Market Place PC Market Place BANK Bid [RFQ no, price] RFQ [Desc, Qty, Due Dt, Penalty] RFQ [Desc, Qty, Due Dt] Offer Accepted Offer [ RFQ no, Price, Qty,Due dt] … …

Copyright ©2006 N. Sadeh CS-50 Supply Chain Trading Agents Slide 15 TAC-SCM Challenges  Concurrently compete in multiple markets with interdependencies and uncertainties  Managing capacity in an environment of constantly changing component supplies and customer demand  Adapt to adversary strategies

Copyright ©2006 N. Sadeh CS-50 Supply Chain Trading Agents Slide 16 TAC-SCM Tournament  Qualifying rounds (8-10 days)  Seeding rounds (8-10 days)  Final rounds over 3 days  Hundreds of games pitting many different combinations of agents under many different market conditions

Copyright ©2006 N. Sadeh CS-50 Supply Chain Trading Agents Slide 17 CS-50 Mini-Tournament  A selection of 6 agents that reached the final rounds in 2005 GoBlueOval – Ford/U. of Michigan (USA) MinneTAC – U. of Minnesota (USA) PhantAgent – U. of Bucharest (Roumania) GeminiJK – U. of Gelsenkirchen (Germany) Mertacor – U. of Thessaloniki (Greece) CMieux – Carnegie Mellon U. (USA)  Total of 15 games