Supply Chain Trading Agents: TAC-SCM Competition

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

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) CS-50 Supply Chain Trading Agents Slide 2

3. Trading is Not Just for Biz Schools CS-50 Supply Chain Trading Agents Slide 3

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 CS-50 Supply Chain Trading Agents Slide 4

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 CS-50 Supply Chain Trading Agents Slide 5

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 CS-50 Supply Chain Trading Agents Slide 6

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 CS-50 Supply Chain Trading Agents Slide 7

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 150-200 researchers worldwide • Game has been refined in collaboration with SICS and U. of Minnesota. CS-50 Supply Chain Trading Agents Slide 8

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 CS-50 Supply Chain Trading Agents Slide 9

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 CS-50 Supply Chain Trading Agents Slide 10

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

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

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

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

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 CS-50 Supply Chain Trading Agents Slide 15

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 CS-50 Supply Chain Trading Agents Slide 16

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 CS-50 Supply Chain Trading Agents Slide 17