Profit optimization system for supply chains with limited parts availability

• US 7,921,030 B1
• Filed: 04/04/2006
• Issued: 04/05/2011
• Est. Priority Date: 04/04/2006
• Status: Active Grant

• Current Assignee: PROS Incorporated (PROS Holdings, Inc.)
• Original Assignee: SignalDemand, Inc. (PROS Holdings, Inc.)
• Inventors: Lee, Hau Leung, Verma, Sushil Kumar, Pierce, Robert D.
• Primary Examiner(s): Hayes; John W
• Assistant Examiner(s): NELSON, FREDA ANN
• Application Number:
  US11/398,341
• Time in Patent Office: 1,827 Days
• Field of Search: 705/1.1, 705 7- 8, 705/10, 705/28, 705/35, 705/400, 705/26, 700/99, 1/1, 715/700, 717/105
• US Class Current: 717/107
• CPC Class Codes: G06Q 10/04 Forecasting or optimisation specially adapted for administrative or management purposes, e.g. linear programming or "cutting stock problem" market predictions or forecasting for commercial activities G06Q30/0202
• 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
• CPC Class Codes: G06Q 30/02 Marketing; Price estimation or determination; Fundraising
• CPC Class Codes: G06Q 30/0283 Price estimation or determination
• CPC Class Codes: G06Q 30/0605 Supply or demand aggregation

Abstract

A computer-based profit optimization model is provided that takes account of supply-side and demand-side factors in optimizing profit for an organization. The model takes into account which parts the organization uses to assemble various products. Demand curves are used to characterize the quantity of each product that will be demanded for various classes of product and classes of customer. Supply model data is used to determine which mix of products can be sold in view of parts availability. Using the demand model and supply model data, the optimization model can recommend a set of prices to use for selling the organization'"'"'s products to various customers and at various shipment times. The model ensures that the organization has sufficient resources available to produce the products and enforces user-supplied business rules and other constraints.

Claims

1. A method for using a profit optimization model in a computer-implemented system having a microprocessor to allow an organization that assembles multiple products from parts to optimize profit when selling the products, wherein products are organized in multiple price groups, customers to which the organization sells the products are organized in multiple customer classes, shipments of the products to the customers take place at multiple shipment times, and orders to purchase the products from the customers are received by the organization during a current order time period, the method comprising:

populating at least one database using the microprocessor with demand model data and supply model data that includes demand curve data for each of the multiple price groups and each of the multiple customer classes, wherein the supply model data includes structural attributes that define which of the parts can be used to assemble each of the products; and

using the profit optimization model on the computer-implemented system to optimize the organization'"'"'s profit in selling the products by determining optimal prices and sales quantities for the current order time period and for multiple combinations of price groups, customer classes, and shipment time periods, wherein the optimal prices for the multiple combinations of price groups, customer classes, and shipment time periods are identified at least in part using the demand curve data while the supply model data is used to ensure that the quantities of the products sold can be manufactured using parts available to the organization and wherein the profit optimization model is used to evaluate tradeoffs involved in selling different amounts of the products during the current time period versus holding product for later sales; and

performing preoptimization operations using the profit optimization model on the computer-implemented system, wherein performing the preoptimization operations includes determining, for each of the multiple shipment time periods and for each of the multiple customer classes, whether committed sales of the products exceed how many products can be assembled from the parts that are available and, if the committed sales exceed how many products can be assembled, holding constant oversold quantity variables at levels that allow the profit optimization model to produce a valid profit optimization result.

2. The method defined in claim 1, wherein performing the preoptimization operations includes determining whether lower bound sales quantities for each product can be assembled from the parts that are available to the organization and, if the lower bound sales quantities for each product cannot be met, repairing the lower bound sales quantities for the multiple combinations of price groups, customer classes, and shipment time periods by lowering the lower bound sales quantities to levels that allow the optimization model to produce a valid profit optimization result.

3. The method defined in claim 1 wherein using the profit optimization model on the computer-implemented system to optimize the organization'"'"'s profit comprises producing a production plan using the supply model data and the quantities of each product that will be demanded for the multiple combinations of price groups, customer classes, and shipment time periods.

4. The method defined in claim 1 wherein the parts available to the organization include parts already in inventory, the method further comprising using the profit optimization model on the computer-implemented system to optimize the organization'"'"'s profit in selling the products while ensuring that the products can be assembled using primarily the parts already in inventory.

5. The method defined in claim 1 wherein using the profit optimization model further comprises using the optimization model to identify which prices are to be used to sell the products based at least partly on structural attribute data defining which parts are used to form each of multiple assemblies.

6. The method defined in claim 1 wherein using the profit optimization model further comprises optimizing profit by performing optimization operations on only a subset of the products sold by the organization.

7. The method defined in claim 1 wherein using the profit optimization model further comprises using user-supplied business rules in optimizing the profit.

8. The method defined in claim 1 wherein using the profit optimization model further comprises using user-supplied business rules in optimizing the profit, wherein the user-supplied business rules include at least one rule on the relative pricing of the products.

9. The method defined in claim 1 wherein using the profit optimization model further comprises using risk parameters in the profit optimization model that quantify how much profit risk the organization wants to accept for each product.

10. The method defined in claim 1 wherein using the profit optimization model further comprises:

using at least one parameter to represent quantities of the products that have already been committed to be shipped; and

using at least one parameter to represent a starting inventory.

11. The method defined in claim 1 wherein using the profit optimization model further comprises using demand estimation tools to extract the demand curves from sales data.

12. The method defined in claim 1 wherein the products are produced at production time periods and wherein using the profit optimization model comprises applying the profit optimization model to short lead time manufacturing wherein the production time period for each product that is produced is adjacent to or identical to the shipment time period for that product.