System and method for automated analysis of sourcing agreements and performance

• US 7,890,360 B1
• Filed: 10/11/2002
• Issued: 02/15/2011
• Est. Priority Date: 10/12/2001
• Status: Expired due to Fees

• Current Assignee: Blake Johnson
• Original Assignee: Blake Johnson
• Inventors: Johnson, Blake, Vistnes, Richard, Gray, Allan, Kessinger, Colin, Benavides, Dario, Nagali, Venu
• Primary Examiner(s): LOFTIS, JOHNNA RONEE
• Application Number:
  US10/269,794
• Time in Patent Office: 3,049 Days
• Field of Search: 705/7, 705/8, 705/10
• US Class Current: 705/7.11
• CPC Class Codes: G06Q 10/06 Resources, workflows, human or project management; Enterprise or organisation planning; Enterprise or organisation modelling
• CPC Class Codes: G06Q 10/063 Operations research, analysis or management
• CPC Class Codes: G06Q 10/087 Inventory or stock management, e.g. order filling, procurement or balancing against orders

Abstract

A system and method is provided for sourcing agreement and performance analysis comprising the steps of identifying scenarios for material requirements, identifying scenarios for supply environments, identifying terms of existing and/or prospective sourcing agreements, identifying a set of sourcing agreement utilization policies, identifying inventory-related and shortage costs scenarios, and computing future sourcing performance based on the identified scenarios, existing or prospective sourcing agreements, and sourcing agreement utilization policies. Various cost/risk and other future performance measures (e.g., scenarios, metrics, etc.) are output from the stated computing step and business decisions.

Claims

1. A method for analysis of relative benefits of sourcing agreements and utilization policies for sourcing agreements when future sourcing-related business conditions are uncertain over a time period of analysis, the method comprising the steps of:

selecting two or more material requirements scenarios over the time period of analysis, such that each of the selected material requirements scenarios has a specified probability of occurrence;

identifying terms of one or more existing or prospective sourcing agreements, such that the identified terms specify price, quantity, and delivery terms for material under each of the one or more sourcing agreements;

identifying a set of sourcing agreement utilization policies for the one or more sourcing agreements, which specify, for each of the selected material requirements scenarios, the material to be purchased and actions to be taken under each of the sourcing agreements under that scenario; and

computing, by a computer in a computer system, future sourcing performance measures for each of the selected scenarios by applying the selected sourcing agreement utilization policy for the selected scenario to the material requirements over the time period of analysis under that scenario, subject to the terms of the sourcing agreements, such that the measures indicate relative benefits over the selected scenarios of the sourcing agreements given the sourcing agreement utilization policies, including future materials costs, shortage and inventory levels, and shortage and inventory-related costs for each of the selected scenarios.

2. The method of claim 1 further comprising the step of identifying two or more inventory-related costs scenarios for analysis in computing future sourcing performance measures.

3. The method of claim 1 further comprising the step of identifying two or more shortage cost scenarios for analysis in computing future sourcing performance measures.

4. The method of claim 1 further comprising the step of defining analysis assumptions based on identified costs scenarios.

5. The method of claim 1 further comprising the step of generating a joint probability distribution between the two or more material requirements scenarios and two or more supply environment scenarios.

6. The method of claim 1 further comprising the step of generating at least one output report of the future sourcing performance measures.

7. The method of claim 6, wherein the output report of the future sourcing performance measures comprises a report of inventory level with respect to number of units, material quantity with respect to units purchased, material availability with respect to inventory level and units purchased, and expected costs of obtaining the material and costs of maintaining the inventory level for each of the selected material requirements scenarios.

8. The method of claim 1, wherein the sourcing agreements include terms comprising future prices and quantities of materials.

9. The method of claim 1, wherein identifying terms of sourcing agreements further comprises identifying terms of current material inventory amount and material on order.

10. The method of claim 1, further including selecting two or more supply environment scenarios that are associated with at least one probabilistic model of uncertain future events.

11. The method of claim 10, wherein selecting two or more material requirements scenarios and selecting two or more supply environment scenarios further comprises determining a relationship between the respective scenarios.

12. The method of claim 1, wherein the set of sourcing agreement utilization policies is selected to achieve performance objectives for one or more of the future sourcing performance measures computed for the selected scenarios.

13. The method of claim 1, wherein the set of sourcing agreement utilization policies is selected to satisfy constraints on one or more of the future sourcing performance measures computed for the selected scenarios.

14. The method of claim 1, wherein the set of sourcing agreement utilization policies is selected in accordance with at least one of achieving performance objectives of, or satisfying constraints on, one or more of the future sourcing performance measures computed for the selected scenarios.

15. The method of claim 14, wherein at least one of the constraints or the objectives is specified for one or more subsets of the scenarios.

16. The method of claim 14, wherein at least one of the constraints or the objectives include values of sourcing performance measures that are aggregated across scenarios using probability values.

17. The method of claim 14, wherein at least one of the constraints or the objectives include values of sourcing performance measures that are aggregated across time.

18. The method of claim 17, wherein the sourcing performance measures include at least one of summations of quantity measures, or averages of quantity measures, or net present values of financial measures.

19. The method of claim 14, wherein at least one of the constraints or the objectives include the evolution of sourcing performance measures over time on one or more of the selected scenarios.

20. The method of claim 14, wherein at least one of the constraints or the objectives include at least one of inventory levels, or inventory policies, or inventory-related costs.

21. The method of claim 14, wherein at least one of the constraints or the objectives include at least one of shortage levels or shortage costs.

22. The method of claim 14, wherein at least one of the constraints or the objectives include at least one of buyer or supplier penalties or incentives.

23. The method of claim 14, wherein at least one of the constraints or the objectives include at least one of capacity constraints or capacity utilization policies.

24. The method of claim 14, wherein at least one of the constraints or the objectives include at least one of the available quantity or price of other related materials.

25. The method of claim 14, wherein at least one of the constraints or the objectives include the amount of material purchased under one or more combinations of future material price and availability conditions represented by two or more supply environment scenarios.

26. The method of claim 14, wherein at least one of the constraints or the objectives incorporate one or more future inventory cost conditions represented by two or more inventory cost scenarios.

27. The method of claim 14, wherein at least one of the constraints or the objectives incorporate one or more future shortage cost conditions represented by two or more shortage cost scenarios.

28. The method of claim 14, wherein at least one of the constraints or the objectives include actions under at least one of the specific sourcing agreements or the types of sourcing agreements.

29. The method of claim 14, wherein at least one of the constraints or the objectives include actions under sourcing agreements with at least one of specific suppliers or suppliers grouped by one or more characteristics.

30. The method of claim 14, further comprising:

generating a report that shows at least one of the terms of one or more sourcing agreements, or the values of one or more sourcing agreement utilization policies, together with at least one of objectives for or constraints on, one or more of the future sourcing performance measures.

31. The method of claim 14, further comprising:

generating a report that shows values of one or more sourcing performance metrics and at least one of objectives for, or constraints on, one or more of the future sourcing performance measures.

32. The method of claim 1, wherein the set of sourcing agreement utilization policies is selected, subject to one or more constraints on the sourcing agreement utilization policy values, or subject to one or more objectives of the sourcing agreement utilization policy values, or subject to both one or more constraints on the sourcing agreement utilization policy values and one or more objectives of the sourcing agreement utilization policy values.

33. The method of claim 32, wherein the one or more of the constraints or the objectives are specified for one or more subsets of the selected scenarios, such that at least one of the subsets include specified probability values.

34. The method of claim 32, wherein the one or more of the constraints or the objectives include values of sourcing agreement utilization policies that are aggregated across scenarios using probability values.

35. The method of claim 32, wherein the one or more of the constraints or the objectives include values of sourcing agreement utilization polices that are aggregated across time.

36. The method of claim 35, wherein the sourcing agreement utilization policies include at least one of summations of quantity measures, or averages of quantity measures, or net present values of financial measures.

37. The method of claim 32, wherein the one or more of the constraints or the objectives include the evolution of sourcing agreement utilization policy values over time on one or more of the selected scenarios.

38. The method of claim 32, wherein the one or more of the constraints or the objectives include at least one of inventory levels, or inventory policies, or inventory-related costs.

39. The method of claim 32, wherein the one or more of the constraints or the objectives include at least one of shortage levels, or shortage policies, or shortage costs.

40. The method of claim 32, wherein the one or more of the constraints or the objectives include at least one of capacity constraints or capacity utilization policies.

41. The method of claim 32, wherein the one or more of the constraints or the objectives include at least one of the quantity of other related materials or the price of other related materials.

42. The method of claim 32, wherein the one or more of the constraints or the objectives incorporate one or more future material price and availability conditions represented by two or more supply environment scenarios.

43. The method of claim 32, wherein the one or more of the constraints or the objectives incorporate one or more future inventory cost conditions represented by two or more inventory cost scenarios.

44. The method of claim 32, wherein the one or more of the constraints or the objectives incorporate one or more future shortage cost conditions represented by two or more shortage cost scenarios.

45. The method of claim 32, wherein the one or more of the constraints or the objectives include actions under specific sourcing agreements or types of sourcing agreements.

46. The method of claim 32, wherein the one or more of the constraints or the objectives include actions under sourcing agreements with at least one of the specific suppliers, or the suppliers grouped by one or more characteristics.

47. The method of claim 32, further comprising:

generating a report that shows at least one of terms of one or more sourcing agreements, or values of one or more sourcing agreement utilization policies, together with the at least one of objectives for, or constraints on, sourcing agreement utilization policy values.

48. The method of claim 32, further comprising:

generating a report that shows values of one or more sourcing performance metrics and at least one of objectives for, or constraints on, sourcing agreement utilization policy values.

49. The method of claim 1, wherein shortage costs include at least one of lost margin, lost revenue, expediting costs, on-time delivery costs, late delivery discounts, lost market share, or damaged customer relationships.

50. A system for analysis of relative benefits of sourcing agreements and utilization policies for sourcing agreements when future sourcing-related business conditions are uncertain over a time period of analysis, the system comprising:

means for selecting two or more material requirements scenarios over the time period of analysis, such that each of the selected material requirements scenarios has a specified probability of occurrence;

means for identifying terms of one or more existing or prospective sourcing agreements, such that the identified terms specify price, quantity, and delivery terms for material under each of the one or more sourcing agreements;

means for identifying a set of sourcing agreement utilization policies for the one or more sourcing agreements, which specify, for each of the selected material requirements scenarios, the material to be purchased and actions to be taken under each of the sourcing agreements under that scenario; and

means for computing future sourcing performance measures for each of the selected scenarios by applying the selected sourcing agreement utilization policy for the selected scenario to the material requirements over the time period of analysis under that scenario, subject to the terms of the sourcing agreements, such that the measures indicate relative benefits over the selected scenarios of the sourcing agreements given the sourcing agreement utilization policies, including future materials costs, shortage and inventory levels, and shortage and inventory-related costs for of the selected scenarios.

51. The system of claim 50, further including means for selecting two or more supply environment scenarios that are associated with at least one probabilistic model of uncertain future events.

52. The system of claim 50, wherein the means for computing future sourcing performance measures includes means for generating at least one output report of the future sourcing performance measures such that the output report comprises a report of inventory level with respect to number of units, material quantity with respect to units purchased, material availability with respect to inventory level and units purchased, and expected costs of obtaining the material and costs of maintaining the inventory level for each of the selected material requirements scenarios.

53. A method for analyzing relative benefits of sourcing agreements and utilization policies for sourcing agreements when future sourcing-related business conditions are uncertain over a time period of analysis, the method comprising the steps of

selecting a plurality of material requirements scenarios over the time period of analysis, such that each of the selected material requirements scenarios has a specified probability of occurrence;

identifying terms of one or more existing or prospective sourcing agreements, such that the identified terms specify price, quantity, and delivery terms for material under each of the one or more sourcing agreements;

identifying a set of sourcing agreement utilization policies for the one or more sourcing agreements, which specify, for each of the selected material requirements scenarios, the material to be purchased and actions to be taken under each of the sourcing agreements under that scenario; and

computing, by a computer in a computer system, future sourcing performance measures for each of the selected scenarios by applying the selected sourcing agreement utilization policy for the selected scenario to the material requirements over the time period of analysis under that scenario, subject to the terms of the sourcing agreements, such that the measures indicate relative benefits over the selected scenarios of the sourcing agreements given the sourcing agreement utilization policies, including future materials costs, shortage and inventory levels, and shortage and inventory-related costs for each of the selected scenarios.

54. The method of claim 53 wherein the plurality of scenarios comprises two or more material requirements scenarios.

55. The method of claim 53 wherein the plurality of scenarios comprises two or more supply environment scenarios.

56. The method of claim 53 wherein the plurality of scenarios comprises two or more inventory-related costs scenarios.

57. The method of claim 53 wherein the plurality of scenarios comprises two or more shortage costs scenarios.