SupernetworksSupernetworks:: D Decision-Makingecision-Makingin thein the

2121stst Century Century

Anna NagurneyJohn F. Smith Memorial Professor

andDirector

The Virtual Center for Supernetworks

Presented to the Deans’ Council May 4, 2004The Virtual Center for

Supernetworkshttp://supernet.som.umass.edu

Funding provided by:Funding provided by:

AT&T Foundation

National Science Foundation

John F. Smith MemorialFund - University ofMassachusetts at Amherst

Virtual Center forVirtual Center for Supernetworks Supernetworks

• Established in 2001 at the Isenberg Schoolof Management to serve as a resource forresearchers, educators, students, andpractitioners.

• In 2003, founded the SupernetworksLaboratory for Computation andVisualization.

The center emphasizes the importance ofcritical infrastructure networks, theirinterrelationships and analysis, andexpands upon scientific andmanagement network tools fordecision-making.

The center team is multidisciplinary andmulticultural and at present consists ofstudents from four different continents.

The center supports undergraduates inresearch since they are our future andprovide new and fresh perspectives.

Center associates from different academicinstitutions and industry work closelywith the center director and studentassociates.

The Supernetwork TeamThe Supernetwork Team

New International AssociatesNew International Associates

Patrizia Daniele

University of Catania

Italy

Monica Gabriela Cojocaru

University of Guelph

Ontario, Canada

Bellagio Bellagio ResearchResearch Team Residency Team Residency

March 2004March 2004

We are in a New Era ofWe are in a New Era ofDecision-Making characterizedDecision-Making characterizedby:by:

• increasing risk and uncertainty;• importance of dynamics and realizing a

fast and sound response to evolvingevents;

• complex interactions among decision-makers in organizations;

• alternative and at times conflictingcriteria used in decision-making;

• global reach of many decisions, and• high impact of many decisions.

The complexity of today's decision-making environments in organizationsrequires the development andharnessing of appropriate and rigorousscientific tools which must be based oninformation technology since only suchtechnology provides one with the speedand accuracy needed to model complexinteractions and to optimizeaccordingly.

The New Era is Network-Based with theInternet providing critical infrastructurealong with transportation/logistical networksas well as other telecommunicationnetworks and energy networks.

No longer are networks independent of oneanother but critically linked with majorquestions arising regarding decision-makingand appropriate management tools.

Indeed, the events of 9/11 coupled withthe recent computer worm and virusesalong with the biggest blackout in UShistory demonstrate irrevocably that wemust as a nation harness the best andmost powerful methodologies forthe modeling, analysis, and solution ofcomplex decision-making problems.

BackgroundBackground

Throughout history, networks have servedas the foundation for connecting humansto one another and their activities.

• Roads were laid, bridges built, andwaterways crossed so that humans, bethey on foot, on animal, or vehicle couldtraverse physical distance throughtransportation. The airways wereconquered through flight.

• Communications were conducted usingthe available means of the period, fromsmoke signals, drum beats, and pigeons,to the telegraph, telephone, andcomputer networks of today.

Importance of Networks toImportance of Networks tothe Economy and the Nationthe Economy and the Nation

• US consumers, businesses, andgovernments spend annually over $950billion on transportation (US DOT).

• Corporate buyers spend annually over$517.6 billion on telecommunications(Purchasing).

• Energy expenditures in the UnitedStates exceed $515.8 billion a year (USDept. of Commerce).

Information technology hastransformed the ways in whichindividuals work, travel, and conducttheir daily activities, with profoundimplications for existing and futurenetworks.

The decision-making process itself hasbeen altered due to the addition ofalternatives and options which were notpossible or even feasible.

The boundaries for decision-makinghave been redrawn as individuals cannow work from home or purchaseproducts from work.

We live in an era in which theWe live in an era in which thefreedom to choose is weightedfreedom to choose is weightedby the immensity of choices andby the immensity of choices andpossibilities:possibilities:

• Where should one live?

• Where should one work? Andwhen?

• How should one travel? Orcommunicate? And with whom?

• Where should one shop? And how?

Not only has individual decision-makingbeen transformed in this new era butorganizations have as well.

How do we capture in a rigorous mannercooperation vs. competition and theramifications, centralized control vs.decentralized control, and differentcriteria in decision-making?

Moreover, what are the results on theflows on the networks be they in theform of vehicles, messages, products,and/or services, as well as financial?

Who wins and who loses?Who wins and who loses?

Classical NetworksClassical Networks

Network System Nodes Links FlowsTransportat ionUrban Intersections, Roads Autos

Homes,Places of Work

Air Airports Airline Routes PlanesRail Railyards Railroad Track TrainsManufacturing Distribution Points, Routes Parts,and Logist ics Processing Points Assembly Line ProductsCommunicat ion Computers Cables Messages

Satellites Radio MessagesPhone Exchanges Cables, Voice,

Microwaves VideoEnergy Pumping Stations Pipelines Water

Plants Pipelines Gas, Oil

Reality of Today’s NetworksReality of Today’s Networks

Reality of Today's Networks:• large-scale nature and complexity of

network topology;• congestion;• alternative behavior of users of the

network, which may lead to paradoxicalphenomena;

• the interactions among networksthemselves such as in transportationversus telecommunications networks;

• policies surrounding networks todaymay have a major impact not onlyeconomically but also socially,politically, and security-wise.

Large-Scale and ComplexityLarge-Scale and Complexity

• Chicago's Regional TransportationNetwork has 12,982 nodes, 39,018links, and 2,297,945 origin/destinationpairs.

• AT&T's domestic network has 100,000origin/destination pairs. In the detailgraph applications in which nodes arephone numbers and edges are calls,there are 300 million nodes and 4 billionedges.

CongestionCongestion

• In the case of transportation networksin the United States alone, congestionresults in $100 billion in lostproductivity, whereas the figure inEurope is estimated to be $150 billion.

• In terms of the Internet, the FCCreports that the volume of traffic isdoubling every 100 days, which isremarkable given that telephone traffichas typically increased only by about 5percent a year.

System-Optimization versusSystem-Optimization versusUser-OptimizationUser-Optimization

In transportation networks, travelersselect their routes of travel from anorigin to a destination so as to minimizetheir own travel cost or travel time,which although optimal from anindividual's perspective (user-optimization) may not be optimal froma societal one (system-optimization)where one has control over the flows onthe network.

TheThe Braess’ Braess’ Paradox Paradox

Assume a network with a singleO/D pair (1,4) . There are 2paths available to travelers:p1=(a,c) and p2=(b,d).

For a travel demand of 6, theequilibrium path flows arexp1

* = xp2* = 3 and

The equilibrium path travel costis Cp1

= Cp2= 83.

32

1

4

a

c

b

d

ca(fa)=10 fa cb(fb) = fb+50

cc(fc) = fc+50 cd(fd) = 10fd

Adding a Link IncreasedAdding a Link IncreasedTravel Cost for All!Travel Cost for All!

Adding a new link creates a newpath p3=(a,e,d).

The original flow distributionpattern is no longer anequilibrium pattern, since at thislevel of flow the cost on path p3,Cp3=70.

The new equilibrium flow patternnetwork is xp1

* = xp2* = xp3

*=2.The equilibrium path travel costs:Cp1 = Cp2 = Cp3

= 92.

32

1

4

a

c

b

d

e

ce(fe) = fe + 10

This phenomenon is also relevant totelecommunications networks and,in particular, to the Internet whichis another example of anoncooperative network.

Recently, we have discoveredRecently, we have discoveredparadoxes in networks withparadoxes in networks withzero emission links such aszero emission links such astelecommmunicationtelecommmunication networks: networks:

• The addition of a zero emission link mayresult in an increase in total emissions withno change in demand!

• A decrease in demand on a network with azero emission link may result in an increasein total emissions!

One must incorporate the networktopology, the relevant cost and demandstructure, as well as the behavior of theusers of the network(s) into anynetwork-based policy!

These paradoxes further illustrate theinterconnectivity among distinctnetwork systems and that they cannotbe studied simply in isolation!!!

SupernetworksSupernetworks: A New Paradigm: A New Paradigm

SupernetworksSupernetworks• Supernetworks may be comprised of such

networks as transportation,telecommunication, logistical, and/orfinancial networks.

• They may be multilevel as when theyformalize the study of supply chainnetworks or multitiered as in the case offinancial networks with intermediation.

• Decision-makers may be faced withmultiple criteria; thus, the study ofsupernetworks also includes the study ofmulticriteria decision-making.

The tools that we have beenThe tools that we have beenusing in our using in our supernetworkssupernetworksresearch include:research include:

• network theory• optimization theory• game theory• variational inequality theory and• projected dynamical systems theory

(which we have been instrumental indeveloping)

• network visualization tools.

SupernetworksSupernetworks

Computer ScienceComputer Science

ManagementManagementScienceScience

EngineeringEngineering

EconomicsEconomicsand Financeand Finance

A Multidisciplinary ParadigmA Multidisciplinary Paradigm

We are interested not only in addressingtopological issues in terms ofconnectivity but in predicting thevarious flows on the networks whetherphysical or abstract subject to humandecision-making under the associatedconstraints, be they budget, time,security, risk, and/or cost-related.

Some Successes

• We were the first the lay down thetheoretical foundations for dynamicalsystems with constraints (calledprojected dynamical systems) whichallows for the qualitative analysis ofsuch systems including stability analysisalong with discrete-time algorithms.

• The applications that we have studiedrange from dynamic transportationnetworks to global supply chains andinternational financial networks withrisk management.

• We have demonstrated through severaldistinct network systems how risk andstochastic components could be directlyincorporated into a variationalinequality framework.

• We were the first to quantify and modeldecision-making on multitierednetworks as well as multilevel networks(along with the dynamics).

• We have made fundamental extensionsto multicriteria decision-making onnetworks with multiple decision-makers.

Novel Applications

Applications of Applications of SupernetworksSupernetworks• Telecommuting/Commuting Decision-

Making

• Teleshopping/Shopping Decision-Making

• Supply Chain Networks with ElectronicCommerce

• Financial Networks with ElectronicTransactions

• Reverse Supply Chains with E-Cycling

• Energy Networks/Power Grids

• Knowledge Networks

A A SupernetworkSupernetwork Conceptualization Conceptualizationof Commuting versusof Commuting versus

TelecommutingTelecommuting

AA Supernetwork Supernetwork Framework for Framework forTeleshoppingTeleshopping versus Shopping versus Shopping

TheThe Supernetwork Supernetwork Structure of Structure ofa Supply Chain Networka Supply Chain Network

International Financial NetworksInternational Financial Networkswith Electronic Transactionswith Electronic Transactions

The 4-Tiered E-Cycling NetworkThe 4-Tiered E-Cycling Network

Power GridsPower Grids

New Directions

A Knowledge SupernetworkA Knowledge Supernetwork

2

1

3 4

n

2

1

3 4

n2

1

3 4

n

Knowledge Product 1

Knowledge Product 2

Knowledge Product k

The framework is rigorous in itsfoundations and both qualitative andcomputational in its perspective.

We are partnering with the AmericanQuality and Productivity Center ofHouston, Texas to apply the results toHP and the AID.

Some Center Activities

Within the past 2 academic years, studentassociates have presented the results oftheir research in

• China• Japan• England• Sweden

• Arizona• Arkansas• California• Connecticut• Florida• Massachusetts• Rhode Island• Texas

Additional Additional RecognitionsRecognitions• Featured several times in Mass High Tech,

OR/MS Today, and CNN/Money.

• Subject of a documentary out of Boston.

• Associates awarded numerous fellowships,prizes, etc., including a Chow Fellowship,AT&T Industrial Ecology Fellowships, aDistinguished Chaired Fulbright, aPresident’s and two Provost’s Awards, andtwo UMASS Leaders for the 21st Century.

Visit the Virtual Center forVisit the Virtual Center forSupernetworksSupernetworks

http://supernet.som.umass.edu

Thank you!Thank you!

The Virtual Center for Supernetworks