Production-Outsourcing Supply Chain Quality Management Based on Multi-Agent System

Ping Lou, Quan Liu, Zude Zhou, Shuhai Quan School of Automation, Wuhan University of Technology, Wuhan, Hubei, China

louping_98@163.com

Abstract - Quality is oue of the most importaut factors

for an enterprise to win the competition. Production­

outsourcing supply chain (POSC) is a kind of special supply

chain in which the core enterprise transfer the

manufacturing of products to the other enterprises. It results

in the separation of two important stages ---product

designing and product manufacturing for forming product

quality, that is product design and product manufacture are

completed by different enterprises respectively. Traditional

quality management which focuses on the inside of

enterprise and emphasizes the coordination and cooperation

of processes, elements and department inside an enterprise

cannot satisfy the requirements of this kind of pose quality

management. In this paper, the architecture of a distributed

cooperative quality management based on multi-agent

system is presented. And an incentive mechanism is put

forward to achieve the distributed cooperative quality

management for this kind of pose based on the information

sharing through this architecture.

Keywords - supply chain, quality management, multi­

agent system, incentive mechanism

I. INTRODUCTION

Modem manufacturing enterprises are confronting a more global manufacturing environment than ever. They usually encompass owned manufacturing and contracted transportation facilities, suppliers, distributors and consumer service centers to scatter over the globe, that is the competitiveness of enterprises is more dependent on the power of the supply chain instead of themselves. The competition has been shifting from enterprises to supply chains. The good quality, low cost and short lead time are important factors to win competition. Furthermore the renowned quality management gurus Juran thought that 215t century should be quality era. Consequently, much attention has been focused on supply chain management (SCM) and quality management (QM) in recently years, but few studies examine the supply chain quality management (SCQM). SCQM is the formal coordination and integration of business processes involving all partner organizations in the supply channel to measure, analyze and continually improve products, services, and processes in order to create value and achieve satisfaction of intermediate and fmal consumers in the marketplace [1]. Rather, the topic of quality management in the supply chain is largely fragmented and dispersed across many other disciplines. For example, Yeung studying from the

978-1-4244-3672-9/09/$25.00 ©2009 IEEE

cases shows that the founding of partnership is an effective method to improve the quality [2]; Kaynak et al. analyzed the relationship among the quality management of inner enterprises, supplier quality management model, and customer's satisfaction with a structure equation, the result shows that the supply chain quality management focuses on system integration instead of loose quality operations and suggests that quality management should be expand from the inside of enterprises to the outer, as well as to the whole supply chain further [3]; Tarantilis et al. improved the quality via Web-based ERP system managing supply chain [4]; Moon et al. improved the quality through the integration of process planning and scheduling [5]; Poteus and Rosenblatt firstly set up a probability model of defective products through considering the relation between quality and lot, and studied on the relation between optimal equipment investment and out-of-control probability [6, 7]; Sequentially, many scholars began to consider the effect of quality defection based on the traditional EOQ/EPQ model [8, 9, 10, 11].

The production-outsourcing supply chain (POSe) is a kind of special Sc. The core enterprise in POSC transfer its producing jobs or services to the other enterprises. The outsourcing of production and services is an effective enterprise operation pattern to assist enterprises to merge plenty of resources quickly in a short time. This outsourcing of production patter also brings a great many difficulties to production management, especially quality management, because the products are no longer fabricated only by one enterprise instead of the cooperation among enterprises.

Tn this paper, the features of Production-outsourcing supply chain (POSe) are explained based on the comparison between traditional quality management and POSC quality management in section II. An architecture of distributed cooperative POSC quality management (DCPOSCQM) based on multi-agent system and Web service technology is described in section TIT. An incentive mechanism for spurring the partners, involving the designer and the manufacturer on to the collaboration, rather to achieving the win-win are forward in section TV. At last the conclusion is presented to recapitulate the whole paper and to express briefly the research trend in the future.

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II. Traditional Quality Management vs. Production­Outsourcing Supply Chain Quality Management

According to the study of the relationship between product quality and the intensity of competition in a given industry, quality is defined as the degree to which a product is attractive to consumers [12]. It involves design quality and conformance quality; the former is based on such characteristics as performance, reliability, durability and serviceability to satisfy the requirements of consumers, while the latter refers to the degrees to which product specifications are met. The processes of product's designing and manufacturing are actually the forming of quality, viz. the process of value-added quality, and companies with the production of various quality information. The traditional quality management emphasizes quality management inside the enterprise. It focuses on the coordination and collaboration of processes, elements, and department inside one enterprise, and there is a litter consideration about the other enterprises. The traditional quality management is suited for the traditional manufacturing enterprise. Because in the traditional enterprise, the quality value-added process is occurred mainly inside the enterprise and the quality information is formed and flowed mostly inside the enterprise. Specially the design and production of products --- two key factors effecting quality are mainly completed inside one enterprise. Consequently, the quality information can smoothly and fluently flow inside the enterprise through the coordination and cooperation (Fig. 1). The information about the requirement of consumers and the information obtaining trom the process of manufacturing are of feedback to continuously improve the product's quality. Furthermore, on the one hand, the process of manufacturing has to be controlled and managed in order to manufacture the features and performances of products conforming to the design quality; and the processes of the designing and manufacturing have to continuously improve through the interaction between designing information and manufacturing information. The iterative four-step problem-solving process (called Deming cycle) is used to improve quality, which involves Plan, Do, Check, Act, also called PDCA cycle. The essence of this Deming cycle is quality improvement should be placed in a continuous feedback loop so that managers can identify and change the parts of the process that need improvements. Such traditional quality management makes enterprises to become a "quality management island" that cannot be suited for SCQM more specifically POSCQM ..

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Feedback Quality Information

Enterprise

Inspection

Supplier

Fig. 1. The Quality Information Flow

Compared to the traditional manufacturing enterprise, the manufacturing process of products in POSC is very different (Fig. 2). The core enterprise in the POSC usually keep its core competence and farm out the rest of work to the other enterprises in order to reduce the cost and improve the efficiency. For example, there are some big company (like HP, Nokia, MatteI, etc.) to subcontract their products manufacturing and services to those areas in which the labors are plentiful and inexpensive, such as China India and etc. In such POSC, the two key stages of qu�lity f�rming ---designing and manufacturing that form design quality and conformance quality respectively are performed by different enterprises. Consequently, the process of quality forming reaches across the line of enterprises. Like that the quality information is produced by different enterprises and the quality information flow is blocked by the line of enterprises so that it cannot smoothly and fluently flow just like inside one enterprise. Furthermore, each enterprise in POSC is self-interested entity and each enterprise pursues individual goals, while satisfying both local and external constraints. Consequently, its purpose and measure of quality management are perhaps very different and incongruous so that there are many difficulties to manage quality in the POSe. The traditional quality characterized by "quality management island" is no longer suited for the quality management of the POSe.

__ Quality flow

- -)I. Quality information flow �---______ I

Fig. 2 The Production-Outsourcing Supply Chain

Ill. Distributed Cooperative Quality Management Based on Multi-Agent System (DCQMBMA)

A. Motivations

The quality forming involving design quality and conformance quality is achieved by the different partners (or production systems) in the POSC. According to the traditional quality management, the quality improvement is a continuous and iterative process through Deming cycle. In the same way, to improve the quality in POSC needs the iterative four-step: Plan, Do, Check, and Act to control the quality. The differences is that the four-step is performed respectively by different partners in POSC instead of only by one company in traditional quality management. The achievement of POSCQM needs the partners to work together. However the quality information scatters in the different partners and the quality activities are also completed by the different partners. Furthermore, each company pursues individual goals rather than the global goal, pursues maximal individual profits rather the maximal global profits, and has such the characteristics as autonomy, social ability, reactivity, and pro-activeness. Consequently the POSCQM is a typical distributed system and need a distributed management architecture for it.

Agent technology and more specially multi-agent system are the best way to characterize or design distributed system and have been introduced for dealing with such characteristics. Moreover, Multi-agent system offer a way to elaborate systems that are decentralized rather than centralized and concurrent rather than sequential; and that is what characterize the quality management in the POSC.

B. The Architecture of DCQMBMA

The Architecture of DCQMBMA is developed to provide an automated framework that enable businesses (suppliers, consumers, manufacturers, and intermediaries) to effectively engage in complex and diverse collaborative activities in the POSCQM. The proposed architecture of DCQMBMA is shown in Fig. 3. This architecture is built upon the foundation of the combination of both Web service technology and multi-agent technology, viz., the features of agent technology characterized as autonomy, reactivity, pro-activity and society combine with Web service characterized as finding and accessing application over Internet. The architecture have six levels, including business application layer, Web service layer, function entity layer, ontology, communication layer and transport layer. The lower layer of the architecture is the transport layer that represents a group of methods and protocols in which the data can be transported over network. The next lower layer is the communication layer that represents a group of e-negotiation protocols such as Contract Net Protocol (CNP) which is responsible for the communication or interaction protocols among agents. The function entity layer that represents a group of

modeling and encapsulating approaches which are used to encapsulate various functional modules as functional agents. The Web service layer that involves a group approaches and protocols by which clients can provide or obtain services over network. The business application layer offer a wide variety of coordination and management mechanisms to fit with multiple quality management mode. The ontology for quality management provides natural, declarative way of identifYing concepts and terms in the field of quality

Business Application Layer

Web Service Layer Ontology for

Qnality

Function Entity Layer Management

(Agent Modeling and Encapsulation)

Communication Layer

Transport Layer

Flg.3 The ArchItecture ofDCQMBMA

In this architecture, quality management is treated as a coordination methodology that manages quality information and designing process, manufacturing process, auxiliary process, and applying process. The objective is to provide an automated coordination mechanism for the participant in a quality management. According the requirement of quality management, the functional modules include designing quality management, manufacturing quality management, auxiliary quality management, and applying quality management, which are encapsulated as designing quality agent, manufacturing quality agent, auxiliary quality agent and applying quality agent,. These agents construct a quality management cycle over the communication layer according to the quality management mode in order to improve the quality continuously (Fig. 4).

Fig. 4 Quality Management Cycle

Designing quality agent is responsible for planning objective of product quality and designing quality of a product according to the market investigation, involving establishing the quality level of products (the rank of quality), selecting performance parameters, setting the tolerance standard, and other technical conditions.

Manufacturing quality agent is responsible for quality control and maintenance in the manufacturing process under satisfying the technical conditions and requirements presented by design quality agent.

Auxiliary quality agent is responsible for providing resources for achieving a manufacturing process, involving procurement, facility maintenance, storing, delivery, and etc.

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Applying quality agent is responsible for sale service and investigating the utility of application and requirements from customers .

The coordination and collaboration between the four agents are to improve quality continuously.

C. The incentive Mechanism

In POSC the above four kinds of quality agent generally are not controlled by one company, viz., they are usually on behalf of different companies. Each agent is self-interested, has itself local objective and its private information. Rather the individual local objective of each agent usually conflict with the global objective of POSC, which induces profit loss. To resolve the conflict an flexible method is profit sharing to make these agent become a collaborative entity so as to improve product quality through the quality management cycle (Fig. 4). For explaining succinctly, the following subcontract model is used to explicate the alignment of interest ( Fig. 5). Tn this subcontract model the designer contracts with the manufacturer for production. D(q) stands for the function of demand, and q denotes the quality level for

manufacturing. q (O<q:Sl) is unobserved by the designer,

rather decided by the manufacturer. q' (0 < q:Sl) is

observed quality level by the designer, viz. the designer could obtain the quality information from the quality detection, but usually it is not actual quality level.

Subcontract D(q) Manufacturer

(q) Designer

Production (q') L...-___ ....I

Fig. 5 Subcontract Model

Suppose D(q) = Kq2 (K denotes a constant), the profit

functions for the designer and the manufacturer are as follows respectively:

1

II}) = Kq2[p, -p/q')] -M(q)

II'J = Kq2 [p/q') -c(q)]

(1)

(2)

where p, (=10)stands for the sales price of a product, pp(q'(=0.5) (=6)for the purchase price of a product from the manufacturer, c(q) for the manufacturing cost, and M(q) for maintenance cost after sales. Suppose c(q)=o.q

and M(q) = fJq 2 (a. (=5)and /3(=80) denote the weight ),

the total profit function for this model is as follows:

II = Kq2(p, -aq)-fJq 2 (3) From the first-order condition, the quality level qn

and qM respectively satistying the equation (4) and (5) maximize the total profit function n and the profit function of the manufacturer nM.

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an 2 fJ a;;=3aKq - Kp,qrr - =0

ail �= p/q')- 3aq'f =0 oq

(4)

(5)

Generally qn > qM that means the quality level qM maximizes the profit of manufacturer and qn maximizes the total profit, but they are not equal ( Fig. 6).

0.3 0.5 0.6

q

O.S

Fig. 6 The Profit Function Chart

nm

n'm

The incentive mechanism has to be designed to spur the manufacturer on to the quality improvement. Here the surplus because of the high level quality repays the manufacturer, then the profit function for the designer and for the manufacturer are transformed respectively as follows:

� � il"f = Kq2 [p, -pp(q')] -fJq -2 -J.(q'-Lq -+) (6)

1

II'}) = Kq2[p/q') -c(q)] + J.(q'-+ -q -+) (7)

where J.(=348) denotes the transfer weight. So the quality level decided by the manufacturer is improved when the profit function Il'M achieves the maximum (Fig. 6). Furthermore the profits of both the designer and the manufacturer are all increased through this incentive mechanism, viz. not only this incentive mechanism increases the total profit, but also increases the profits of both the designer and the manufacturer. Consequently win-win of both the designer and the manufacturer achieves, if the incentive mechanism is designed based on the information sharing through the architecture of DCQMBMA.

V. CONCLUSION

Much attention have been focused on both quality

management and supply chain management respectively in the literature, but the studies on their interlinking are often limited and tangential in nature. After the comparison between the traditional quality management

the characteristics of POSC quality management are first presented. According to the features and performances of

POSCQM, an architecture of distributed collaborative quality management based on the combination of both

multi-agent technology and Web service technology are

discussed. At last an incentive mechanism is designed to share profit so that the partnership in POSC is established

for quality effective management. Of course there are very different between the SCQM and the traditional

quality management. To improve the quality in SC is a long way to go.

ACKNOWLEDGMENT

This work has been supported by the International Cooperative Research Project Agreement (grant no. 2006DF A 73180). The authors would like to acknowledge the contributions from all collaborators. They would also like to thank Wuhan University of Technology, People's Republic of China, the National University of Singapore, and City University of Hongkong in supporting this cooperative project.

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