Use of Decision Trees in Supply Chain Decision Making
The research paper involves the general overview of supply chain, decision making process in the supply chain of any organization. Three levels of a supply chain decision making process are briefly discussed. Agent based decision making process is also explained in this research paper. The complete decision making process in the supply chain form a tree that is called decision tree. The decision tree is very useful tool for effective decision making.
Decision trees are comprehensive tools for formulating all possible decision options. A decision tree is a method that can be used to help make good choices, ...view middle of the document...
At the strategic level the firms establish objectives and long term goals. These are qualitative or judgmental decision making that include activities like building relationships with suppliers and customers and integrating information technology (IT) within the supply chain. These decisions are least structured and most imaginative; they are the most risky and the most uncertain outcome.
The type of decisions that are made using qualitative methods are those where the possible outcomes are largely unknown and the input data is tertiary in nature. The strategic level decision making involves the selection of suppliers, transportation routes, manufacturing facilities, production levels, and warehouse location in supply chain management. Decision making at the strategic level may lack the precision in data.
Tactical level decision making
The supply chain tactical level is where the planning and scheduling is done to meet the actual demands. This decision making is to be of medium range. The decisions are made mostly using probabilistic method. The continual mismanagement at this level can greatly impact the strategic level. The types of decisions that can be made using probabilistic methods are those where the possible outcomes are only particularly enumerated. Its examples include payoff matrices and regression trees which require the decision maker to have an objective required outcome.
At the tactical level decisions need to be updated regularly i.e. on monthly, quarterly or yearly bases such as purchasing and production decisions, inventory policies, transportation strategies and customer strategies. The tactical level covers the planning of suppliers, manufacturing schedules etc. Here supply chain decisions are made to meet actual demand (Fox, 2002).
Some argue that the tactical and operational level are the same (Mills & Schmitz, 2002) yet they should be seen as separate as this level is characterized by the efforts towards the integration of business processes across the firm boundaries. The tactical level covers logistics decisions and areas such as quality management and the use and integration of modern information technology in the supply chain.
Supply chain management systems are instantiations of management support system which provide instances of decision technology. They are composed of intelligent decision agents, which interact with other decision agents to plan and execute one or more responsibilities (Fox et al., 2000). Intelligent decision agents are wholly independent, carrying out their own agenda, acting as an agent for no one, while being able of interacting and communicating with other decision agents.
An Agent based model
An agent based model uses mathematical models, numerical solution techniques and...