8th International Con ference 24 - 25 April 2014, Mashhad, Iran

on e-Commerce
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Designing a Model of Decision Making in Layers of Supply,

Manufacturing, and Distribution of the Supply Chain: A
Recommender-Based System

Shiva Jalali, SayyedAlirezaHashemiGolpayegani, HodaGhavamipoor

Department of Computer Engineering and IT, Amirkabir University of Technology, Tehran,
Iran
{shivajalali, Sa. hashemi, h. ghavamipoor}@aut. ac. ir

Abstract Supply chain management - coordination

of production, inventory, location, and
The aim of this paper is to implement a transportation among the participants in a
recommender system based on supply chain - is to achieve the best
collaborative filtering in the supply chain combination of performance and
to offer a combination of the best accountability in the service market. One
suppliers, producers and distributors which of the important areas of supply chain
have the minimum cost and the maximum management is partner selection. Supplier
customer satisfaction. Up to now, the selection is one of the most important, and
investigations to determine recommender also most complex, issues for making
systems suitable for the order fulfillment decision in business and the supply chain.
procedure in the supply chain are very
small and inadequate. Moreover, for the components of the
supply chain to achieve success, one factor
The proposed method assumes that should be taken into account: moving from
components' conditions in all layers and mass production to mass customization,
scores recorded after each order exist in thereby reducing the costs of the chain and
the recommender system. Thus, by using a better service to customers [2]. So using a
method such as correlation coefficients, selection-and-evaluation system will be
the similarity ratio between the request of useful in mass customization supply chain.
current customer and that of other The research problem centers on
customers is calculated, and then the offer evaluation and selection of suitable
proposed to the most similar customer, suppliers, producers and distributors using
will be offered to current customers. of recommender systems, and the rationale
behind this research is to propose a model
of focused recommender system offering
Keywords order fulfillment procedure in supply
Supply chain, recommender systems, chains' layers. Since all the scores of order
supplier selection, producer selection, fulfillment are recorded in a database
distributor selection system, new customers can take advantage
of both the offers given to other customers
and the level of their satisfaction, and
1 - Introduction make the most appropriate decision.
Therefore, assumptions, information and

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8th International Conference 24 - 25 April 2014, Mashhad, Iran

on e-Commerce
with focus on e- Trust

general unknowns intended to solve the The remainder of this article is organized
proposed model are as follows: as follows: the next section contains the
basic definitions and concepts. In the third
section, the brief profile of similar
Assumptions: researches carried out in this field will be
explored. In the fourth section, the
• The given supply chain for the
methodology of solving the problem and
proposed model is industrial,
the results of implementing proposed
single-product with mass
approach are presented. Finally, the fifth
customization mechanism. This
section centers on the conclusions drawn
includes all layers in the supply
from this study.
chain from suppliers to retail
outlets. 2 - Terms and Definitions
• There exist a centralized
recommender system to offer the In this section, the basic concepts used in
components in three layers of this study are described.
supply, product, and distribution;
2-1 - Supply Chain
this system has a built-in database
to archive both chain components'
In the literature, various definitions of
conditions and the recorded scores
supply chain are mentioned: the supply
(from 0 to 5 pts.).
chain includes all the staged, direct or
indirect, activIties to meet customer
demand, and are not limited to the
Information: manufacturer and supplier; rather the
transportation, warehouses, retail sales and
• The consumer' order is given to the their clients will also be included [3]. It is
retailer by means of the number of an integrated process in which a number of
the goods and the desired price. different business organizations (suppliers,
• Supply chain components provide manufacturers, distributors and retailers)
the recommender system with their work together to: access to raw materials /
conditions and overall state at the parts, exchange these raw materials / parts
time of order placement. into final products specified, and deliver
• Scores recorded for other the final products to retailers [4]. The
customers exist in the system's general structure of a supply chain is
database. shown in Figure 1.

Unknowns:

• In the proposed solution, order

S u p pu,,,..
number to each component in the
chain and to all the layers will be
offered to the previous layers, and,

ttf
finally, the score of each customer
..
to the proposed procedure will be Di:siribuiion
CO"'\I1UmOr
Cuslom.er
obtained.

Figure 1: The general structure of a supply

chain

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 th International Conference 24 - 25 April 2014, Mashhad, Iran

on e-Commerce
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2.2 - Types of Supply Chain users to reach, among large amounts of

data, their goals faster [6].
Supply chains mainly consist of chain of
mass production and mass customization 2-5 - Types of recommender systems
which are explained below. There are two main types of recommender
systems conslstmg of content-based
A) Mass production filtering and collaborative filtering [7, 8].
This type of chain, chain product demand
estimation done over a period of time and 2-5-1 - content-based filtering
production over a period with a certain Content-based filtering systems, or
size is carried out. Also sales stands an cognitive filtering systems [9], suggest
independent of the production activity. items based on an analogy between content
items and user profile.
B) Mass customization
In this chain, ordering activIties are 2-5-2 - Collaborative filtering
conducted independent of production and
sales activities; the production activities Collaborative filtering is a technique used
are followed by sales activities. by some of the recommender systems. In
general, collaborative filtering is a process
2-3 - Supply Chain Management for filtering information or patterns using
Supply chain management - coordination techniques involving collaboration among
of production, inventory, location, and multiple agents, viewpoints, data sources,
transportation among the participants in a and so on. Collaborative filtering software
supply chain - is to achieve the best typically includes very large data sets.
combination of performance and Collaborative filtering methods are used
accountability in the service market. One for many types of data.
of the important areas of supply chain
management is partner selection; and 3 - Review of the related Literature
competitive advantage focuses not only on Most research studies in this area have
its core business, but also on establishing been conducted to select the suppliers and
long-term cooperation partners with each distributors by using various methods.
other. Selection problems are very Dominic et al carried out a case study of
important in many decision-making linear weighted model for supplier
situations even in real life [1] and finding selection considering both qualitative and
the combination of the best supplier, quantitative criteria in 2008 [10]. In this
manufacturer and distributor in the supply study, he invited the suppliers and asked
chain is, by and of itself, a major them of their terms and conditions for the
challenge. requested goods. After recording
conditions, based on its degree of
2-4 - recommender systems
importance, each feature is assigned a
Recommender systems or suggestion
weight relative to other features. Then
systems, by analyzing the behavior of their
value of each supplier with regard to all
users, offer the most suitable items (data,
measures is calculated and the supplier
information, goods, etc.). This approach
with the highest score is selected. This
has been proposed to deal with the
model is a powerful tool to assist managers
problems caused by the abundant and
/ decision makers.
growing volume of information and helps

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8th International Con ference 24 - 25 April 2014, Mashhad, Iran

on e-Commerce
with focus on e- Trust

Kheljani and his colleagues in 2010 [11] threshold level and customer satisfaction
utilized the method of mathematical lower than normal are removed and the
programming for supplier selection and remainder is given to a SOM network. The
minimization the total cost of the buyer network classifies the sessions and then
and supplier. Their intended supply chain uses data mining method of association
involves multiple suppliers and a buyer, rules to identify the specific patterns in
which is a framework in centralized each group. By using the obtained rules,
decision-making system for optimizing the the best supplier in each category is
total cost. They proposed a non-linear determined. Finally, a new order profile is
mathematical model to calculate and given to SOM network, and the most
minimize the total cost of the buyer and similar group and the corresponding
the supplier and showed that by using this supplier are determined.
solution, the total cost of the supply chain In a paper [14], Afzali in 2012 presents a
is reduced. method for supplier selection using data
mining and recommender systems. In this
Karimi and his colleagues in 2011 [12] paper, a collaborative filtering algorithm
presented a method for supplier selection and SOM neural network are used on two
in dynamic environments. This article is data sets. The first data set focuses on
for the selection of suppliers in the shortest related supply chains and the second data
time, with respect to the possible changes set provides features of different suppliers.
in their characteristics. In this paper, Initially, the first set of data is given to the
context -aware system and k-means recommender system for extracting models
clustering algorithm are used to classify and clustering supply chains by using
suppliers. In this process the suppliers, SOM. Then the characteristics of the
through a web site, declare their terms and desired supply chain are sent to the SOM
conditions including price, product quality, network. Based on the extracted model, the
production capacity, location, and possible network identifies the optimal clusters and
changes in it. Customers, via the same the inherent suppliers. Then the selected
website, determine their favorite features suppliers' features are extracted from the
including the quantity and quality of the second data set and will be sent to another
required product, and their location. Based SOM network to obtain the model. At the
on product quality and price, suppliers are final stage, the organization sends its
clustered with the k-means clustering desired condition of the supplier to the
algorithm; the cluster with the minimum network. According to the model, the
distance to each customer is selected as network determines the optimal clustering
best cluster. Then, among the suppliers in and the inherent supplier. This optimal
the cluster, those which have the minimum clustering, then, will be offered to the
spatial distances with the customer's organization.
location are selected and suggested to the
given customer. In what follows, articles related to
In 2011, Hosseini et al [13] proposed a distributor selection are examined.
model for supplier selection in a webinar Zou and et al in 2009 [15] conducted a
supply chain by using SOM neural study of distributors selection in the supply
network and data mining methods. In this chain based on rough sets. In this paper,
paper, it is assumed that all webinar rough set theory is used for selecting a
sessions are provided by one producer. distributor with a weighted combination of
First, the sessions with a price above a features. The main structure in rough set

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8th International Con ference 24 - 25 April 2014, Mashhad, Iran

on e-Commerce
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theory is called a reduct, and is defined the 4 - Problem Solving Methodology

minimal sufficient subset of attributes. The
term reduct is defined for the sets with In this section, a method for designing a

input and output characteristics or of centralized recommender system in order

decision tables, decision attributes and to offer the best order fulfillment

results. This table is given to analyzer procedure in supply chain is presented. By

software for a short time. After the extracting a clustering model and using the

calculation process, rules - the relationship information in the records, this method

between the features of the input and identifies the most similar offers and

output - and percentage of each are presents them.

obtained. To select more efficient rules, a

4.1 - Conceptual model and general
percentage threshold is specified; the rules
approach to the intended supply chain
which pass this threshold are extracted.
The conceptual model for this problem is
According to these rules, the distributors
given in Figure 2.
whose features are in line with the given
This supply chain consists of all layers
values are better distributors.
from suppliers to retailers; in other words '
In 2012, Ghorbani and Tavakoli [16] used . .
It IS a complete supply chain. In this
the fuzzy ART algorithm to design
context, centralized recommender system
distribution networks. The purpose of this
is a major component in the chain. It has a
algorithm is to classify and select
centralized database in which the chain
distributors. Fuzzy ART algorithm is
components' conditions and the customer's
utilized to classify the distributors
previous orders are archived. When a
according to their resemblance. In this
customer enters the chain and places an
method, a decision making team is chosen
order for the retailer, the retailer sends the
f�r setting the criteria and rating
. customer's order, which includes the
dlstnbutors. This team will score the
amount of the requested goods and the
distributor according to selected criteria.
recommended price, together with an offer
Then the algorithm classifies the
request, to the recommender system.
distributors with similar characteristics.

C Ut s:t:O rT1- E! r pa ra m e t:·e- f:S.

and recom rn. e· n. -d at i on
Ce ntra I re -com men der system - -r e q u E§t;

Figure 2: Conceptual model of approach

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nternat·lona I C on,eren
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ce -

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4.2 The process and instructions for

- Next, the extracted order with the same
implementing the methodology algorithm is clustered but this time the
cluster to which the new order belongs is
To implement the proposed solution, the selected. In the selected cluster, a number
model is trained and then tested. With this of former customers' orders with
methodology, 80 percent of the data sets - procedures and their scores exist So the
training data - are used to construct the similarity ratio between the new order and
proposed model; the remaining sets of data previous orders can be calculated by using
- testing data - will be utilized to assess the Pearson coefficient correlation in the
performance of the proposed model. The Formula 1.
general process of problem solving can be
categorized into three main stages. These (1)
stages include:

1) Determining the similarity of a new

customer with previous customers
2) Providing the most appropriate
approach to new customer order
3) Calculating the new customer rating
Where I represents customers order; it is
relative to the suggested procedure
composed of the number and the price of

4.2.1 Determining the similarity of a

-
goods; r,,i new customers' orders, ry,i

new customer with previous customers former customers' orders, and rx , ry the

In designing the model of recommender average weight of each order.

systems, collaborative filtering method is
used to determine the similarity of 4.2.2 Providing the most appropriate
-

customers. Recommender systems look for approach to new customer order

similarities between customers, based on
It was mentioned that for every customer
their order and the chain state when it is
in the database, there is score for a
put For the recommender system to faster
proposed procedure. After identifying the
find similar customers, a clustering
similarity between the new order and
method like K-means can be used, which
previous orders, each similarity ratio is
is not only simple, but also one of the most
multiplied by the similar customer's score,
exact methods for data clustering. This
hence determining the approximate score
method is faster than other clustering
for that specific order. The order with the
methods such as SOM, and there is no
highest approximate score is considered as
limitation on the number of clusters.
the most similar order, and its proposed
So in the proposed method, first the states
fulfillment procedure - the most suitable
of the existing chains in system database
offer - will be presented for the new order.
related to former clients (training data), are
given to the algorithm; then, after 4.2.3 Calculation of customers score to
-

determining what cluster each state the proposed procedure

belongs to, the cluster which belongs to
the current chain state in the new order After presenting the offer to a new
(testing data) is identified. Finally, orders, customer, a score must be logged into the
procedures, and scores of the specified system database for the proposed
cluster are extracted. procedure. The rating is based on the

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8th International Con ference 24 - 25 April 2014, Mashhad, Iran

on e-Commerce
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maximum score (5 pts.) subtracted by the parameter, and the average absolute error
value obtained by the relation of the prices is calculated by the following equation:
offered in the proposed procedure and the
desired price of the customer, and (3)
calculated through formula 2: 1
MAE = - * ABS(RS_rate- MATH_rate)
n
(2)
L NOrd * M dr In this formula, the difference score
Ef)
rate round(5- d ) between the recommender model and the
Num * Mon optimization method is used in which, n,
represents the total number of new orders,
Where NOrd is the number of customer
RSJate stands for the score given to the
orders to distributors d and MdT is the proposed procedure by the recommender
product sales price by the distributor d. system and MATHJate refers to the score

Num is the total number of customer order obtained through the optimization method.

and Mon is the proposed price.

4-5 - Results
4.3 - Sources of funding data set
It was mentioned that the proposed method

For implementing the proposed model, the has been implemented in 50 scenarios. To

design of experiments method (DOE) is evaluate this method, the numbers of

used to provide the data set. The design of clusters parameters, in each scenario, are

experiments includes an experiment or a changed and the accuracy of prediction is

set of experiments in which some intended measured. In one scenario, prediction

changes are made in the input variables to accuracy of 70 % and 80 % for the training

identify the amount of changes in the data set are shown in Chart 1.

output variables. For providing the data for

It can be concluded from this chart that the
this procedure the available calibration
suitable amount of clusters for states
tool in MATLAB software is used. To this
clustering equals 3 and for orders
end, the range for each variable is set; then
clustering is 5. Furthermore, the prediction
this tool chooses random data to cover the
accuracy for both training data sets is less
problem state and conditions. To do the
than 1. So we can claim that the results of
test, a set of, at maximum, 50 records
the proposed method are, to some extent,
containing customer orders are generated
in an optimal way.
that each record contains a number of
ordered goods and their price per unit. The 5 - Conclusion
50 scenarios are generated, each of which
the values are changed. The proposed In a complete supply chain, the purpose
model is implemented in each scenario, and the challenge is to find the best
and the results are compared with the combination of the best supplier,
optimal approach. manufacturer and distributor.
In each layer, decision making is an
4.4 - Method of Assessment important factor to influence the next
layer. These decisions should be made in
The primary method for evaluating the
the shortest time possible.
proposed technique is the accuracy of the
proposed procedure. This measurement is In this paper, a recommender system based
defined in terms of Mean Absolute Error on collaborative filtering have been

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8th International Con ference 24 - 25 April 2014, Mashhad, Iran

on e-Commerce
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designed which after receiving an order procedure is selected and proposed to the
from a customer, the best order fulfillment customer.

number of data=50
1 �----------�------------------------------

�Train=70%

a �------ �Train=80%
1,1 1,3 1,5 2,2 2,4 2,6 3,2 3,4 3,6 4,1 4,3 4,5 5,2 5,4 6,1 6,3 7,1 8,1

number of clusters

Chart 1: The prediction accuracy of 70% and 80% of the training data set

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8th International Con ference 24 - 25 April 2014, Mashhad, Iran

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