A Convolution Algorithm For Evaluating Supply Chai

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A Convolution Algorithm for Evaluating Supply Chain Delivery Performance

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DOI: 10.1109/HICSS.2007.12 · Source: DBLP

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Proceedings of the 40th Hawaii International Conference on System Sciences - 2007

A Convolution Algorithm for Evaluating Supply Chain Delivery


Performance

Alfred L Guiffrida Robert A. Rzepka Mohamad Y. Jaber


Kent State University Rzepka and Associates Ryerson University
Kent, OH USA Alexandria, VA USA Toronto, Ontario CA

Abstract numerous operations and processes which are


stochastic in nature. An effective performance
The effective management of a supply chain measure must incorporate this inherent
requires performance measures that accurately uncertainty. The reduction of variability is
represent the underlying structure of the supply recognized as a critical aspect to the
chain. Measures such as delivery performance to improvement of supply chain performance [6].
the final customer often require summing a set of Lastly, simplifying assumptions are often used
random variables that capture the stochastic when modeling stochastic components (e.g.,
nature of activities across the various stages of supply, demand processing times, etc.) of the
the supply chain. The convolution calculus individual stages of the supply chain. Densities
required to evaluate these measures is complex that are reproductive under addition, such as the
and often leads to intractable results. In this normal, Poisson, or exponential, are routinely
paper we present a discrete convolution used since the additive property vastly simplifies
algorithm that simplifies this evaluation. The the mathematical complexity of the modeling
algorithm is demonstrated for a delivery effort [7], [8]. Hence, performance measures that
performance measure in a three stage serial are used for inventory and process management
supply chain. Numerical results and a may be limited in their general application.
supporting error analysis are presented for a set Given the wide array of possible performance
of experiments utilizing reproductive and non- measures and supply chain configurations, no
reproductive probability density functions. single modeling effort can capture all aspects of
a supply chain. In this research we concentrate
on one aspect of supply chain performance, the
delivery timeliness to the final customer in a
1. Introduction serial supply chain that is operating under a
centralized management structure. Delivery
A review of the literature identifies three major performance has been identified as a strategic
limitations to current supply chain performance level performance metric in supply chain
measures. First, several researchers have management [9]. Recent empirical research has
concerns over the lack of cost-based also identified delivery performance as a key
performance measures [1], [2]. Cost-based concern among supply chain practitioners [10],
performance measures are attractive since they [11]. In a centralized supply chain structure, a
are compatible across all stages of a supply chain single decision maker attempts to optimize
and easily integrate into existing cost analyses overall chain performance working in union with
that are required for process improvement. An information provided by decision makers at each
extensive collection of articles that examine stage of the supply chain. This approach to
supply chain management from the cost supply chain management has been addressed in
management and financial perspectives is found detail in the literature [12].
in [3]. The objectives of this paper are as follows: (1)
A second concern is that supply chain develop a cost-based performance measure for
performance measures often ignore variability analyzing delivery performance within the
[4], [5]. A typical supply chain consists of three supply chain, and (2) develop a framework for
fundamental stages, procurement, production and incorporating the variability found in the
distribution. Within each of these stages there are

1530-1605/07 $20.00 © 2007 IEEE 1


Proceedings of the 40th Hawaii International Conference on System Sciences - 2007

individual components of delivery lead time into are assumed to operate on a make-to-order basis.
the delivery performance measure. Clearly other supply chains configurations exist
In satisfying the first research objective, a (e.g., make-to-stock, combination make-to-stock
cost-based performance metric for evaluating and make-to-order) however at this stage of the
delivery performance will be developed. research we restrict our modeling to a make-to-
Delivery lead time is defined to be the elapsed stock orientation.
time from the receipt of an order at the first stage Let the activity duration of stage i, Wi , be
of a supply chain to the receipt of an order by the defined by a continuous probability density
final customer in the terminating stage of the function fW w; T with parameter set T .
supply chain. Delivery lead time is composed of
a series of internal manufacturing and processing Delivery time to the final customer is defined
n
lead times and external distribution and by X ¦ Wi . Under the assumption of
i 1
transportation lead times found at the various
stages of the supply chain. Delivery to the final impendence between stages, the form of the
customer is analyzed with regards to the probability density function f X x is defined by
customer’s specification of delivery timeliness as the following convolutions
defined by an on-time delivery window.
f
Untimely deliveries, e.g., early and late, are fW1W2 x ³ fW1 x  w2 fW2 w2 dw2
subject to penalty costs. f

In fulfilling the second research objective, a f

systems based modeling approach is used to f W1 W2 W3 x ³ fW1 W2 x  w3 f W3 w3 dw3 (1)
f
quantify uncertainty found within the supply
chain. Under the assumption of independence

f
among stages in a supply chain, we model each fW1W2 ˜˜˜Wn x ³ fW1W2 ˜˜˜Wn1 x  wn fWn wn dwn .
component of delivery lead time as a random f

variable with overall delivery lead time defined


as the sum of the internal (manufacturing and The mathematics defined in (1) are vastly
processing) and external (distribution and simplified when the summand density functions
transportation) lead times components found Wi are reproductive under addition. For the
within the various stages of the supply chain. purposes of conciseness, this paper restricts the
Unlike previous research, we do not restrict our number of stages to three, i.e. n = 3. Our
model solely to distributions that are assumption of independence between stages is
reproductive under addition. A PERL based not unreasonable as it has been commonly
discrete convolution algorithm is used to adopted in the literature in serial systems [7],
evaluate the cost-based delivery performance [13].
metric. Delivery to the final customer is analyzed with
This paper is organized as follows. In Section regard to the customer’s specification of delivery
2, the cost-based delivery performance measure timeliness as defined by a delivery window.
is developed. The measure is demonstrated for a Under the concept of a delivery window, the
supply chain when delivery lead time is defined customer supplies an earliest allowable delivery
by both reproductive and non-reproductive date and a latest allowable delivery date. A
random variables. In Section 3, a discrete delivery window is defined as the difference
convolution algorithm is introduced for between the earliest acceptable delivery date and
approximating the expected cost-based delivery the latest acceptable delivery date. Within the
performance measure. Numerical experiments delivery window, a delivery may be classified as
are presented in Section 4. Conclusions and early, on-time, or late (see Figure 1).
directions for future research are presented in Delivery lead time, X, is a random variable
Section 5. with probability density function f X x . The on-
time portion of the delivery window is defined
2. Model Development by c2  c1 . Ideally, c2  c1 0 . However, the
extent to which c2  c1 ! 0 may be measured in
Consider an n-stage serial supply chain
structure where an activity at each stage hours, days, or weeks depending on the
contributes to the overall delivery time to the industrial situation. Delivery windows are widely
final customer. All members of the supply chain used in modeling supply chain and time-based
manufacturing systems [14], [15].

2
Proceedings of the 40th Hawaii International Conference on System Sciences - 2007

fX x
demonstrate the computation aspects of
evaluating f X x in the following subsections.

2.1 Modeling Reproductive Densities

In this section we illustrate modeling of the


expected penalty cost model for an n stage serial
supply chain when the density functions that
define the activity times at each stage are
x reproductive under addition. Let the individual
a c1 c2 b
Early On-Time Late
stage activity times follow a normal (Gaussian)
Delivery Scenario
probability density function. The normal
Legend: probability density function is defined by the
a = earliest delivery time parameter set T ^P , v` and is reproductive
c1 beginning of on time delivery under addition with respect to both the mean P
c2 end of on time delivery and variance v . For fW w; P , v defined as a
b = latest acceptable delivery time normal(N) probability density function, applying
the convolution calculus outlined in (1) yields a
Figure 1. Normally distributed delivery window. delivery time X with density function
n n
Consider an n-stage serial supply chain in X ~ N §¨ x; P ¦ P i , v ¦ vi ·¸ where P i and vi are
© i 1 i 1 ¹
operation over a time horizon of length T years,
where a demand requirement of the final the delivery mean and variance for stage i, i[1,
customer for a single product of D units will be n] .
met with a constant delivery lot size Q. The Evaluating (2) for the reproductive normal and
expected penalty cost per delivery period introducing I ˜ and ) ˜ as the standard normal
for untimely delivery, Y, is density and cumulative distribution functions,
respectively, yields the total expected penalty
c
1 b cost for normally distributed delivery time
Y QH ³ (c1  x) f X ( x)dx  K ³ x  c2 f X x dx (2)
a c2
ª §c P· § § c1  P · ·º
QH « vI ¨¨ 1 ¸¸  c1  P ¨ )¨ ¸¸
Y ¨ ¨ v ¸ ¸» 
where: Q = constant delivery lot size per cycle; ¬« © v ¹ © © ¹ ¹¼»
H = inventory holding cost per unit per time; K = ª §c P · § § · ·º
penalty cost per time unit late (levied by the K « vI ¨¨ 2 ¸¸  c2  P ¨1  )¨ c2  P ¸ ¸» (3)
¨ ¨ ¸¸
final customer); a, b, c1 , c2 = parameters defining «¬ © v ¹ © © v ¹ ¹»¼
the delivery window; W j duration of delivery (see [17] for derivation details).
lead time component j j 1,2,, n and f X x
2.2 Modeling Non-Reproductive Densities
fW1 W2 Wn is the density function of delivery time
X. It is a common purchasing agreement practice When delivery time X is defined as a sum of
to allow the final customer to charge suppliers non-reproductive independent densities the
for untimely deliveries [16]. convolution mathematics defined by (1) is
A critical computational issue when using (2) complex and the defining form of f X x often
is to determine the analytical form of f X x . For becomes intractable for even small n. We
density functions that are reproductive under demonstrate this complexity with two examples.
addition (such as the normal or gamma), f X x is
relatively easy to define and the evaluation of (2) 2.2.1 Example 1
is straightforward. For derivations of (2) when
f X x follows the normal and gamma densities Consider the independent sum of a uniform
random variable, with density function
see [17]. However, when f X x is composed of
f1 w1 1 for 0 d w1 d 1 , and an exponential
the sum non-reproductive densities, the
random variable with density function,
evaluation of f X x is often intractable and
f 2 w2 e  w2 for 0 d w2 d f . Finding the density
prevents an exact representation of (2). We

3
Proceedings of the 40th Hawaii International Conference on System Sciences - 2007

function for the sum X W1  W2 requires the 2.3 Approximation Procedures


inversion of the Laplace transformation
Lr g x Lr f1 w1 Lr f 2 w2 and then the The two examples presented in Section 2.2
demonstrate the complexity introduced in
evaluation of the resulting contour integral
defining f X x for densities that are not
1 c if rw 1  e  r reproductive under addition. In both examples,
fX x ³e dr (4) the mathematical definitions of the summand
2S i c if r r  1
exponential and uniform densities were relatively
simple. Despite these elementary forms, the
for residue, Re r d 0. resultant probability density function for the sum
After considerable mathematical evaluation and of these random variables, f X x , was complex
simplification (see [18] for details), the density to the point that its use would lead to a difficult,
function of the sum is if not intractable, deviation of the expected
penalty cost. Given this complexity, an
­ 1  e x 0 d x d1 alternative approach is to use a methodology for
fX x ®  x 1 x
. (5) approximation the probability density function
¯e e 1d x  f
for f X x .
2.2.2 Example 2 Two approximation techniques have been
proposed in the literature for finding the
convolution of the sum of independent random
Let X W1  W2  W3 represent the sum of the variables (see [20] for a detailed discussion). The
three independent uniform random variables first method involves polynomial approximation
1 while the second method involves discretization.
each defined as follows: f1 w1 for
m Under the polynomial approximation method,
1 the distribution functions of the random variables
0 d w1 d m ; f 2 w2 for 0 d w2 d n ; and of interest are approximated by piece-wise
n
1 polynomial equations that are stated in terms of
f 3 w3 for 0 d w3 d p where m  n  p . the parameters of the associated densities. An
p iterative integration procedure is then used to
After considerable calculus and mathematical evaluate the piece-wise polynomial equations
simplification (see [19]), the density function for over a defined set of intervals to approximate the
X is true convolution. The polynomial approximation
­ x2 method can lead to computational complexity
° 0d xdm
° 2mnp concerns due to the rapid growth in the order of
° the polynomials as a result of the convolution
° k
mdxdn
° 2mnp operations and also due to the number of sub-
° 2 intervals over which the convolution is defined.
° k  xn
° ndxdg Under the discretization procedure, the density
° 2mnp
° k  xn 2  x p 2 gdxdh function of a continuous random variable is
° defined as a discrete density function. Once the
° 2mnp and p d m  n
fX x ® summand densities are represented in discrete
1 gdxdh
° forms, a discrete convolution operation to
° p and p ! mn n
° determine X ¦ Wi can be easily performed (see
2
° 2mn  x  p i 1
° hd x d m p
° 2mnp Section 3 for details of the algorithm) and the
° m  2 n px expected penalty cost model defined by (2) can
° mn d x d n p
° 2np be directed approximated by
° 2
° mn px
° m p d x d mn p m1 m2
2mnp

where:
¯ Y QH ¦
i 1
xi  c1 p X ( xi )  K ¦ c x
i 1
2 i p X xi (6)

2
k x2  x  m ; g min p, m  n ; h max p, m  n . where: m1 the number of early deliveries
x  c1 and m2 the number of late deliveries
x ! c 2 . Note that (6) is no longer dependant on

4
Proceedings of the 40th Hawaii International Conference on System Sciences - 2007

obtaining a mathematically defined form


for f X x . 1. Code Library
An approximate form for f X x can be 2. Experiment Design
3. Calculate Discrete Convolutions
determined by evaluating D k ¦X k
PX to 4. Calculate Statistical Measures
2
obtain estimates of the mean P X , variance V , X

coefficient of skewness J 1 , coefficient of


excess kurtosis J 2 for X using the following 3.1 Code Library
formulae [21]
The code library contains code that generates
PX D1 (7) variants, or values, that correspond to a
mathematical function with specific statistical
V X2 D 2  D1
2
(8) characteristics. The probability density
functions in this implementation include the
normal, exponential, gamma, uniform, Weibull
D 3  3D1D 2  2D12 and triangular [23], [24 ].
J1 1 .5
(9)
D 2  D12 The first code library requirement was to create
functions that were portable. The concept is
D 4  4D 1D 3  6D 12D 2  3D 14
code that is independent of operating system or
J2 2
3 . (10) hardware platform, can be ported to other
D 2  D 12 programming languages, and maintains the same
characteristics across all executions [24].
Using the values of (9) and (10), the J 1 , J 2 plane The second requirement is the ability to
illustrated in Figure 2 can be searched to find a initialize a function each time it was executed.
candidate density for approximating f X x . A The seed, or seed state, sets an arbitrary starting
quantitative distance measure for determining the point for the code generating the variants. The
best fit of an empirically estimated J 1 , J 2 pair to seed value should be unique for each execution;
otherwise, the variants from one execution to
the theoretical values of J 1 and J 2 illustrated in another will not be unique [24].
Figure 2 is found in [22]. A third requirement is periodicity. Given a
sufficient number of iterations, a function
executed on a deterministic computer will revisit
a previous value at some point. The goal is that
the underlying algorithm should have a
periodicity long enough that a value is not
repeated too soon.

3.2 Experiment Design

The key goal in this functional area is the


ability to specify probability density functions of
an n-stage model. The analyst will be presented
with a series of options requiring structured
responses. This information forms the basis of
Legend: N = normal, Lo = logistic, La = Laplace the experimental design that the individual is
E = exponential attempting to execute.
The primary option would be the choice of the
Figure 2. J 1 , J 2 Plane for common densities. probability density function at each stage of the
experiment as well as the value of N, or the
number of variates to be generated from each
3. Discrete Convolution Algorithm density function. The structured responses will
specify applicable parameters for each density
The main functional areas that this algorithm function. For example, the normal distribution
needed to address were: requires the specification of a mean and a

5
Proceedings of the 40th Hawaii International Conference on System Sciences - 2007

variance, while the triangular distribution absolute percentage error (APE) was evaluated
requires a minimum, modal and maximum value. using

3.3 Calculate Discrete Convolutions eq 6  eq 3


APE u 100% . (11)
eq 3
In mathematical theory, a convolution is a
mathematical operation which takes two
functions and produces a third. While this The parameters used were: Q = 500 units; H = $3
definition is conceptually easy, its execution can per unit per day; K = $1,500 per day late;
be quite daunting. a 20 days, b 40 days, c1 29 days and
Computationally, we must iteratively calculate c2 31 days. The number of samples used at
the sum of two variates and the product of their each stage of the discrete convolution algorithm
probabilities, where the first variate is drawn was varied for N 200, 300, 400 and 500 and
from stage n’s density function and the second five sample runs were conducted for each value
variate is drawn from stage n + 1’s density of n. Figure 3 illustrates the average APE that
function. Conceptually, this is not a difficult resulted across the five sample runs.
until the magnitude of the number of calculations
is understood. The complexity arises from the
95% Confidence Interval for Absolute Percentage Error.
fact that the calculations must be executed in a 6
nested loop structure.
5

Absolute Percentage Error


3.4 Calculate Statistical Measures 4

The final functional area of the algorithm 2

performed statistical calculations on the delivery


1
time X and evaluated the expected penalty cost
0
for untimely delivery. Initially, the first four
central moments for the distribution of X were N=200 N=300 N=400 N=500
determined. Using these values the mean,
Figure 3. Error analysis for normal distribution (based
variance, and coefficients of skewness and case) experiments.
excess kurtosis were calculated as defined by
equations (7)-(10). Lastly, expected cost for As expected, the average APE decreased as N
untimely delivery, Y, as defined by equation (6) increased, with an APE of less than 1.0%
was evaluated. achieved for N = 500. These test results suggest
that for large N (N = 400 or 500), that the
4. Numerical Experiments discrete convolution algorithm provides a
reasonably good approximation (APE no worse
The first set of numerical experiments that than 2%) to the exact expected delivery cost.
were conducted was designed to evaluate the Additional experiments with the same
error associated with estimating the expected parameter set and supply chain configuration
penalty cost model using the discrete were conducted for N 400 with 5 runs per
convolution algorithm. A three stage supply experiment to estimate the expected delivery cost
chain configuration was selected with the and when the activity times at each stage were
activity times per stage each defined by a normal defined by independent densities that are not
distribution. Delivery time to the customer was reproductive under addition (see Table 1).
defined as X W1  W2  W3 with W1 ~ N 10,2 , Given the non-reproductive nature of the
W2 ~ N 8,1 and W3 ~ N 12,3 . Since the normal densities defined in Table 1, f X x would have a
density is reproductive under addition, the highly complex and likely intractable form if
delivery distribution defined by f X x is known traditional convolution calculus or a polynomial
functional approximation was applied. Results
to be normal and (3) can be used to determine an
for the experiments based on the discrete
exact cost. This exact baseline cost was then
convolution algorithm are summarized in Table
compared to the estimated cost resulting from the
2. All table entries represent values averaged
discrete convolution algorithm (6) and the
over the 5 replications for each experiment.

6
Proceedings of the 40th Hawaii International Conference on System Sciences - 2007

a normal due to their common symmetry, but are


Table 1. Experiments for non reproductive densities. not exactly normal due to their leptokurtic
behavior. The density of X for experiment 3 is
Experiment Stage Density(parameters in days) most different from the normal as evident by its
1 1 triangular (4,5,6) lack of symmetry and platykurtic behavior.
2 triangular (11,15,19) Comparing the J 1,J 2 values of each
3 triangular (8,10,12)
2 1 uniform(4,6) experiment to Figure 2, suggests that the
2 triangular(11,15,19) distributions of X may be approximated by
3 normal(10,2) known densities. For experiments 1 and 2 a
3 1 triangular (13,15,17) Weibull density represents a reasonable
2 gamma(4,2) approximation while for experiment 3 the
3 uniform (10, 12) lognormal density appears to be a reasonable fit.

Table 2. Expected cost and parameter values.


5. Summary and Conclusions
Experiment Expected Cost f X x Parameters
Given the inherently uncertain nature of
1 $1,023 PX 29.9 days activities in a supply chain, it is likely that
V X2 3.3 performance measures for the supply chain will
J 1 0. 0 be based on the sum of random variables. Under
the assumption of independence, the defining
J 2 0.3
probability density function for such a
2 $1,471 PX 30.1 performance measure can be evaluated using a
V 2
X 5.1 convolution. However the mathematics
J 1 0. 0 associated with a convolution can become
complex and often intractable even for relatively
J 2 0.2
simple model environments. In this paper we
3 $1,443 PX 29.98 presented a discrete convolution model that
V X2 5.2 eliminates the mathematical complexity
J 1 0. 8 associated with the use of convolution calculus.
The model presented herein was demonstrated
J 2 1. 0
for a cost based delivery performance measure in
a three stage supply chain. In comparison to a
Examining Table 2, we observe that the base case model involving the reproductive
distributions of X in experiments 1 and 2 are normal distribution, the discrete convolution
symmetric J 1 0 , while the distribution in algorithm generated results that had an absolute
experiment 3 is positively skewed J 1 0.8 . This error of less than one percent. The robustness of
result is not surprising since all summand the discrete convolution model for evaluating
densities used experiments 1 and 2 were sums of random variables that are not
symmetric to start with (see Table 1). In reproductive under addition was demonstrated
experiment 3, the stage 2 gamma distribution through a series of numerical experiments.
was positively skewed and hence contributed to Numerical solutions and candidate forms of
the positively skewed result found in experiment known density functions where easily identified
3. for a set of experiments whose mathematical
The coefficient of excess kurtosis J 2 convolution solution would have been extremely
complex and perhaps intractable.
provides a measure of the “peakedness” of a When modeling more complex supply chain
density relative to the normal distribution. As a environments computational aspects of the
base case, the normal is termed mesokurtic model may be a limitation and require attention.
with J 2 0 . Densities with J 2 ! 0 have a sharper The realization is that the time to complete
peak than the normal and are termed leptokurtic; processing will increase greatly as the number of
densities with J 2  0 have a more flattened peak stages increases beyond three and when multiple
than the normal and are termed platykurtic. In performance measures are evaluated
comparison to the normal, the distributions of X simultaneously. One consideration is that this
resulting from experiments 1 and 2 are similar to application may need to be executed as a batch

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Proceedings of the 40th Hawaii International Conference on System Sciences - 2007

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