Supply Chain Trading Agents:

Competition-Based Research

Norman M. Sadeh
e-Supply Chain Management Laboratory
ISR- School of Computer Science
Carnegie Mellon University
 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)

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 Trading is Not Just for Biz Schools

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 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

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 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

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 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

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 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

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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.

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 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

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 The Supply Chain Trading Agent Competition
Suppliers
Supply Chain
Management
Manufacturers
RFQs &
orders

Production
schedule

Delivery
schedule

RFQs & orders

C ustomers

 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

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 Suppliers
… …

Component Market Place

Manufacturers

Bid RFQ
Bid
RFQ Bid
RFQ RFQno, price]
[RFQ RFQ [Desc, Qty,
RFQ Due Dt, Penalty]

PC Market Place

BANK Customers
 Suppliers
… …

Component Market Place

Manufacturers

Winning Bid RFQ

Bid Bid [Bid no, price] [Desc, Qty, Due Dt, Penalty]

PC Market Place

BANK Customers
 Suppliers
… …

Offer
RFQOffer Offer
RFQ RFQ[RFQ no, Price,
RFQ RFQ RFQ
Qty,Due dt] [Desc, Qty,Market
Component Due Dt]Place

Manufacturers

Bid RFQ
Bid Bid [RFQ no, price] [Desc, Qty, Due Dt, Penalty]

PC Market Place

BANK Customers
 Suppliers
… …

Accepted Offer
RFQ Offer RFQ Offer RFQ [RFQ no,RFQ
Price, RFQ RFQ
Qty,Due dt] [Desc, Qty,Market
Component Due Dt]Place

Manufacturers

Bid RFQ
Bid Bid [RFQ no, price] [Desc, Qty, Due Dt, Penalty]

PC Market Place

BANK Customers
 TAC-SCM Challenges
Suppliers

What supplies do I
buy? When?

How should I manage my

inventory? Too much is costly,
too little and I lose customers

PC assembly
How should I best
use my capacity?

How’s my bank
balance?

Who should I sell to? I can’t afford to be

BANK At what price? late, or I pay
customer penalties.

Customers

 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
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 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

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 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

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