2004 IEEE International Conference on Systems, Man and Cybernetics

A Decision Support System for

Designing Business Strategies
- An Application to Soft Drink Business - *
Itsuo HATONO Kenichi KUROTANI Kenya MURAKAMI
Information Science and Fuji Electric Systems Fuji Electric Advanced
Technology Center, Co., Ltd., Technology Co., Ltd.
Kobe University Tokyo, Japan Tokyo, Japan
Kobe, 657-8501, Japan
hatono@kobe-u.ac.jp
Nobutada FUJII, Kanji UEDA
Research into Artifacts,
Center for Engineering
The University of Tokyo
Tokyo, Japan

-
Abstract mispaperdeals with a decision supportsystem
~~ ~~
of planning business strategies for demand chains. To de-
scribe the complex behavior ofeach element in the demand
chain, an agent based modeling approach and methodology
of i'irtual marker are introduced to develop the simulation
model. The proposed model is applied to so@ drink vending
machine busiriess as an example. Demand characteristics of
sop drinks through vending machines are investigated based
on the merhodology by simulation sriidies.
Keywords: Decision support, Demand chain, Simulation,
Business Strategy.
1 Introduction
T~cope with recent globalization ofeconomy and diversi.
fied customers' request, enterprises have required to estimate
the change of customers' preference immediately and draw
up the effective business strategies in order to overcome the
competitors in the market. However, it is not easy to predict
the customer's and competitors' behavior, both of which are
impomnt the effective strategies. In the
presence, many enterprises analyze the Of the
tomers by the conventional statistical methods and reflects
the results to own strategies.
In Ibis paper3 we to realize a demand simula-
system that can and support top1an the business
strategies based on the research on the biological manufac-
turing systems[*, 21. As the first step Of the research, we
develop a Prototype system of demand chain simulator for
soft drink business through vending machines.
*0-7S03-8566-7/04/$20.00 @ 2004 IBEE
2 Virtual Market Model
A virtual market model in this paper consists of the agents
corresponding to manufacturers of products, dealers, and
customers in a virtual market. We assume that each agent
determines own behavior autonomously based on the inter-
action between the other agents. In the virtual market, cus-
tomers' selection of products effect on the future new prod-
ucts. The introduction of new products to the market may
change the behavior of the customers. This means that the
model might be simulate the autonomous evolution process
of the demand chain and there is possiblity that we can
-
find the effective business strategies in the simulation Dro-
cess. Figure 1 illustrates the evolution process of the de-
mand chain. Furthermore, we can also analyze the effects
of the business strategies, and can adjust those by tuning the
Parameters in the simulation models.
2.1 Autonomous behavior of agents
Each agent has an evaluation function to determine own
behaviors, such as buying 01not, selection of types, volume,
and price of the product, and so on, In the evaluation func.
of the evaluation function are
tion, we that the
decided by the internal information in the agent and the ex-
temal one obtained through the interaction between agents.
As shown in Figure 2, the behavior of each agent happens
through the production How from the manufacturers cus-
tomers, and the monetary feed back in the direction from
customers to Furthemore, the flow and the
feed back cause the change of the internal information of
each agent.

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Figure 1: Emergence of demand chain.
Flow of products
A Furthermore, to represent the difference of the behavior of
Producer
Customer
Monetary flow
Figure 2: Material and monetary flows between the interact-
ing agents.
2.2 Soft drink business through vending ma-
chines
In this paper, we deal with the soft drink business through
vending machines as a case study of demand chain simula-
tion. ‘The soft drink business has the characteristics as fol-
lows:
The variety of the products is relatively small,
the market is relatively simple hut the market size is
large,
the products are very familiar to all the customers.
In this paper, we deal with only soft drinks such coffee, cola,
each of which is often sold through vending machines.
The demand of soft drinks through vending machines have
the characteristics as follows:
Characteristics of products: Soft drinks are consumer
products, small varieties(10-100 kinds of products )
and the volume of each product is large.
Demand fluctuation: The demand is much depend on the
seasons, change of temperature, the number of cus-
tomers that pass in front of each vending machine.
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Demand control: In order to increase the demand, the op-
erators of vending machines (dealers) takes measures,
such as campaign, promotion, change the arrangement
of products, change of the price, and so on.
For example, a typical business office of an operator deal
with about 250 kinds of products by 10 manufacturers, has
600 vending machines and several staffs (called root man) for
filling up, change of arrange, and change of price of products
at each vending machine. Each root man handles 80 vending
machines, and visits each vending machine in a week.
3 Modeling vending machine demand
chain
In this paper, we develop a simulation model of the de-
mand chain shown in Figure 3. The simulation model con-
sists of 4 agents; (1) soft drink manufacturers, (2) operators
of vending machines, (3) vending machines, (4) customers.
the customers at the various places that the vending machines
are located, we introduce an attribute “location,” each of
which corresponds to the places such as schools, buildings,
parks, and so on. A location can contains several vending
machines of different operators. We describe the behavior of
each agent as follows.
1. Soft drink manufacturers
Take measures, such advertisement, campaign for
the products based on own strategies.
Accept the orders from the operators and ship the
products from the stock.
Produce the products to keep the amount of the
stock.
2. Operators of vending machines
Order the product to keep the amount of the own
stock.
Select and arrange products in each vending ma-
chine based on own strategies.
Assign the vending machines to each root man and
the traveling schedule.
Change the price of each product based on the
strategies.
3. Location
Vending machines:
e Show the products to customers.
Sell the product to customers.
Customer:
Buy the product based on the own preference
for each product.
In this paper, we use OMNet++[3], which is a kind of
discrete event simulator. Figure 5 and 6 show the snapshots
of the demand chain simulation.
Figure 3: An example of demand chain of soft drink vending machine business.

Figure 4 Flow of planning process of the strategies.

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 Figure 6: A snapshot of location in demand chain simula-
tion.
Figure 5 : A snapshot of product flow in demand chain sim-
ulation.

Table 1: Example of simulation scenarios

7 1 1 Assumed situations Conditions and results to be simulated

* Their effective timing ?

* Their influences on sales ?

Their influences on sales ?

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3.1 Simulation scenarios
In this paper, we assume that each agent behaves in the
virtual market according to some scenarios. In the scenarios,
we try to draw up the strategies of manufacturer or operator
agents. The strategies are described as the parameters in the
agents in the simulation model. The parameters are evaluated
and adjusted based on the simulation results. By repeating
the process, we try to obtain some good strategies. Table 1
shows an example of the simulation scenarios in this paper.
Figure 4 shows the flow of planning process of the strat-
egy.

4 Numerical examples '0

I
100 200 300 do0 500 600 7W 800
I
9W
To evaluate the behavior of the simulator developed in this Simviafion xime
paper, we show the simulation results under the simple sim-
ulation conditions as follows: Figure 7: Simulation result in the case that AT is m.
3 soft drink manufacturers exist in the market.
3 operators exist in the market, each operator has 30
vending machines, and 3 root men.
e 5 locations exist. In each location, the average arrival
interval of customers is 0.004 simulation unit time.

Under the above conditions,

Operator 3 will down the price at 300 time unit from
120 Japanese yen to 1IO yen.

The other operators down by 10 Japanese yen if the

sales account decreases 15% after AT simulation unit
time.
Figure 7,s and 9 show the simulation results when AT is m,
15, and 40, respectively. When AT of an operator is 00, the
operator never change the price. The simulation results show Figure 8: Simulation result in the case that AT is 15.
that the strategy considering only the sales account leads the
excessive competition.
Figure 10 shows the simulation result under the condi-
tions as follows:

The price of each product is 120 Japanese yen (fixed).

The initial, standard, and minimum stock of each soft

drink manufacturer are 10,000, 7,000, and 10,000, re-
spectively.
Figure 11 shows the simulation results when only the initial
and standard stock of manufacturer 2 are changed to 20,000.
In these simulations, each manufacturer produces to increase
the stock until the standard one, when the stock is less than
the minimum.
In Fig. 10, the sales account of manufacturer 2 oscillate.
We can interpret the simulation result that the demand fore-
casting of manufacturer 2 is not accurate. On the other hand,
Fig. 11, the sales account manufacturer 2 does not. This Figure 9: Simulation result in the case that AT is 40.
means that standard stock 20,000 is adequate based on the
correct demand forecasting.

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 real market.

Acknowledgement
This research is supported by IMS/NGMS Phase II (Intel-
ligent Manufacturing Systems / Next Generation Manufac-
turing Systems) international research program and Grant-
in-Aid for Scientific Research (C) (No. 15560346) by Min-
isiry of Education, Culture, Sports, Science and Technology,
Japan.

References
?A3811
[ I ] K. Ueda, H. Vaario, and N. Fujii: Interactive manufac-
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Slmvlaln" time tem, Annals o f f h e U R P , Vol. 47, No. 1, pp. 389-392,
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Figure IO: Simulation result in the case that si,s"', and ss are [2] K. Ueda, J. Vaario, T. Takeshita, and I. Hatono: An
10000,7000, and 10000, respectively. emergent synthetic approach to supply network, Annals
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450WO [3] A. Varga: OMNeT++ - Discrete event sirnulator -,

I 2002.
http://www.hit.bme.hu/phdvargaa/omnetpp.htm,

soood lb0 200 360 400 GO 600 7W 8bO 810

Slm"1aIlOn me

Figure 1 1 : Simulation result in the case that s' and ss are

20000, and 20000 only in maker 2, respectively.

5 Conclusion
In this paper, we develop a demand chain simulation sys-
tem for soft drink business through vending machines in or-
der to analyze and draw up the business strategies. The sim-
ulation results suggest that the simulation system can be ap-
plicable to the real market.
Further research might be focused on the application to
more realistic simulation case studies and the implementa-
tion of adaptation mechanism of agents to obtain the effec-
tive strategies. Therefore, the agents predict the change of
the external environment including the behavior of the other
agents, and adapt the own strategies. By observing the adap-
tation process, we might be able to obtain the knowledge
about the effective strategies in the virtual market. If the vir-
tual market has enough similarity to the real market, we can
estimate the obtained the strategies are also effective in the

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