Webinar: Enterprise Wide Optimization: The Hypothalamus of the Enterprise

Webinar-Video: https://www.dhirubhai.net/pulse/enterprise-wide-optimization-industry-40-webinar-jesus-velasquez/

?Draft Chapter IV-1 - Enterprise Wide Optimization. Traditional & State-of-The-Art Models. Book: "Mathematical Programing 4.0 for Industry 4.0 Cyber-Physical Systems".

https://www.doanalytics.net/Documents/Chapter-IV-1-Enterprise-Wide-Optimization-Traditional-&-State-of-The-Art-Models.pdf

Presentation PDF: https://www.doanalytics.net/Documents/DW-S&OP-EWO-webinar-2020.pdf

Book: Mathematical Programing 4.0 for Industry 4.0 Cyber-Physical Systems

https://www.dhirubhai.net/pulse/mathematical-programing-40-industry-cyber-physical-book-velasquez/

Book PDF presentation: https://www.doanalytics.net/Documents/DW-Mathematical-Programing-Industry-Cyber-Physical-Systems.pdf 

1.      INTRODUCTION

1.1.             The Hypothalamus

1.1.1.        Human Hypothalamus

The hypothalamus is a portion of the brain that contains a number of small nuclei with a variety of functions. One of the most important functions of the hypothalamus is to link the nervous system to the endocrine system via the pituitary gland. The hypothalamus is located below the thalamus and is part of the limbic system that it is set of structures of the brain. These structures cover both sides of the thalamus, right under the cerebrum. It is not a separate system, but a collection of structures from the cerebrum, diencephalon, and midbrain. It supports many different functions, including emotion, behavior, motivation, long-term memory, and olfaction.

All vertebrate brains contain a hypothalamus. In humans, it is the size of an almond. The hypothalamus is responsible for the regulation of certain metabolic processes and other activities of the autonomic nervous system. It synthesizes and secretes certain neurohormones, called releasing hormones or hypothalamic hormones, and these in turn stimulate or inhibit the secretion of hormones from the pituitary gland. The hypothalamus controls body temperature, hunger, important aspects of parenting and attachment behaviors, thirst, fatigue, sleep, and circadian rhythms”.

The hypothalamus is highly interconnected with other parts of the central nervous system, in particular the brainstem and its reticular formation. As part of the limbic system, it has connections to other limbic structures including the amygdala and septum and is also connected with areas of the autonomous nervous system. The hypothalamus receives many inputs from the brainstem, the most notable from the nucleus of the solitary tract, the locus coeruleus, and the ventrolateral medulla. It is the central regulator of several autonomous and endocrine visceral functions and acts as a relay point in the information that starts from the brain reaching the spinal cord.

Each of the target systems influenced by the hypothalamus return feedback controls onto the hypothalamus completing a circuit and so establishing a homeostasis system. The role of the hypothalamus in regulation of homeostasis is essential for survival and reproduction of the species.

The hypothalamus is one of those organs that we can't live without.

This resume was built having as reference Wikipedia.

1.1.2.        Enterprise Hypothalamus

Like anything intelligent, private and public organizations to be smart require a hypothalamus to coordinate all the activities they carry out in such a way as to maintain the short/long-term balance and to ensure viability of the multifunctional structure involved in a human organization.

Unlike the human being where the hypothalamus, and all the functions required to survive and evolve, is created by "life", in the business organization the humans (directives and executives) are responsible for creating the hypothalamus that and the executing devices (departments) of productive and administrative functions.

In the industrial environment, the hypothalamus of the enterprise must be based on the knowledge of the process of serving the final services/ products of its end customers from the supply of raw materials and inputs that are required for this transformation. The construction of the hypothalamus, such as the construction of any product/service, must be the result of a design process and its subsequent implementation that is supported in a coherent guide whose purpose is to produce the hypothalamus according to the needs of the organization.

The organizational hypothalamus ends up being the Decision Support System (DSS) of the organization that integrates through interconnected mathematical models, associated with the different business functions, all the knowledge that the organization had. In this chapter the organizational hypothalamus is associated with the integral management of the organization, which we will call Enterprise Wide Organization (EWO). Initially, sixty decades ago the hypothalamus would have been associated with the Supply Chain Management (SCM). Like any natural process, based on the theory of evolution by natural selection of Darwin, the hypothalamus must evolve as the environment permits and organizations require it.

The organizational hypothalamus must have an updated vision that leads to a set of action plans (sales, production, inventories, deliveries, new product development, financial, human resources, ... ) oriented to guarantee the survival of the organization.

For its functionality, we can talk about two types of knowledge that the company must capitalize on: i) the characterization of its demand, and ii) mastery in the production process. It could be said that these two aspects are the fundamental nuclei of the organizational hypothalamus. Technologically this focuses on mathematical models that formally represent such knowledge; i) the demand model contains all the organization knowledge about customers and markets, ii) the production model contains knowledge of the production system.

This chapter focuses on production modeling, referring to demand modelling when necessary.

Considering the current state of technology, the state of the art is that the S&OP is supported in a mathematical programming model that is based on evolution of the aggregate production programming specified in the fundamental work done by Holt, Modigliani, Muth, Simon, Bonini and Winters (1960), during the 1950s, published in the book "Production Planning, Inventories, and Work Force".

As discussed in previous chapters it is possible to conceive of the hypothalamus of a large system such as the union of multiple artificial neurons and a storage center, just as the brain does. The following figure shows the described.

Below it is the conceptual design of the hypothalamus of a decision support system oriented to epidemic control, which is conceived based on four basic functions, each associated with a mathematical model.

In practice, the computational implementation of the so-called enterprise hypothalamus is based on the coordination of multiple models (artificial neural networks) that deposit information in a central information system that store “all” the history about the enterprise optimization scenarios, as an expert system.

Most of the things and processes that the humans use have been totally affected by technology, which has opened up to the human imagination producing previously unsuspected results; mathematical modeling should not escape this process; starting from discovering the mathematical foundations that serve to establish the laws governing physical, industrial, economic, social processes and with them to build mathematical models and increasingly powerful calculation algorithms; today all the knowledge and the technology is available to develop a new artificial intelligence that emulates the human hypothalamus in any type of human organization, it may be call the organization mathematical hypothalamus.

This chapter focuses on analyzing the types of models, at the functional level, that integrate an Enterprise Wide Optimization Decision Support System (EWO-DSS). The mathematical foundations are presented in the chapter III.1.

1.2.             Supply Chain Management

At the end of the last century SCM was a relatively new term that brought together the concepts of integrated business planning that have been used for many years by logistics experts, strategists and experts in Operations Research. Today, integrated planning based on mathematical models of optimization is the standard possible due to advances in information technology (high and low-level parallel computing, optimization algorithms, data transmission capabilities, platforms for the development of mathematical models).

There are four dimensions of the optimal synchronization of a supply chain, namely:

• Functional associated with the purchase, manufacture, transport and storage of industrial supplies and products
• Space associated with activities through industrial facilities and the different forms of markets.
• Internal associated with the hierarchy of decisions: strategic, tactical and operational.
• Business that responds to the purposes of strategic and tactical planning within the organization. Business integration makes SCM one of the components of a broader vision of integrated planning.

 This improves the competitive advantage, reduce costs and increase profits, then managers seek to integrate planning activities of its value chain, which, originally, was understood as the sum of the Supply Chain Management (SCM) and Demand Chain Management (DCM). Today, this concept has expanded and covers all the functional areas of the organization including financial and human resources chains.

Traditionally, duo to its complexity, the problem has been divided into two: in the bottom of the added value chain, related to the transformation of raw materials into commercial products, is determined the best way to industrial production, focusing analysis in minimizing the costs of serving an aggregate market consumption centers; at the top, sale and delivery of commercial products to individual consumers, the analysis focuses on the study of the end customer in a way to optimize the price and the place to sold the products. The methodologies and technologies used in each case differ in their details, but they are always supported in the fundamental concepts of operations research: optimizing decisions once studied and characterized the random behavior of the environment of decisions.

From the point of view of mathematical modeling, SCM is a system of planning and technical-economic programming that must exploit the latest computer technologies together with the advanced mathematical modeling of supply and demand chains, integrated horizontally and vertically. The scientific management of a supply chain is supported by a set of mathematical models that cover all the space-time in which the supply chain operates. Given the scope of such modeling, it is utopian to expect that with a single mathematical model it can be covered: i) long and medium/short-term planning, ii) all functions to be planned and iii) all locations where the supply chain operates. SCM optimization models offer management not only smoother and more stable management, but a reduction in costs or an increase in company profits.

1.3.             Enterprise Wide Optimization

Enterprise Wide Optimization (EWO) is a dimension of the integration is related to the natural evolution of the business planning models that are link to the administrative functions of the organization. EWO involves dynamic mathematical models that must evolve in the same way how the company evolves. These models can be built as a union of existing models that are associated, each of them, with a main function within the organization; conventionally these models are:

1. Demand Chain Management (DCM), isolated planning of demand chain
2. Supply Chain Management (SCM), isolated planning of supply chain, the demand is read as a fixed parameter
3. Sales & Operations Planning (S&OP) integrates two pillars of an enterprise: production and sales.

1. Integrated Business Planning (IBP) integrates three pillars: finance, production and sales

The figures adapted from a diagram included in the digital paper "Beyond Supply Chain Optimization to Enterprise Optimization" (Shapiro J., 2006) allows to visualize the concepts expressed.

 SCM, DCM and S&OP only considered the production cost associate with raw materials, production, transport and distribution; while the levels of customer service are met, in many cases they are exceeded, achieving expand market share and growth sustained over time. EWO allows people to study the behavior of the supply chain into a multi-sectoral/multi-business/multi-function value chain, in which the objectives are to design and operate industrial infrastructure and relationships with their environment in ways that minimize the sum of the total investment and the costs of the organization. EWO was thought to many years ago (Grossmann, ... ) and its implementation has been slow, but the dynamics of INDUSTRY 4.0 make it a necessary approach leaving the field of research.

 In the remainder of this chapter, the S&OP function will be analyzed through the models that support it. The presentation is divided into two conceptualizations:

• Traditional: representing the result of nearly seventy years of the evolution of the concepts of aggregate tactical production planning formulated by Holt et. (1960) and is embodied in academic research and most commercial applications/solutions available today (2020)
• State-of-the-Art: new vision of the models involved in the S&OP function, taking as reference the power of computing, the power of new algorithms, the conceptualization of Industry 4.0 and the Mathematical Programming 4.0.

In companies committed to analytics as a support for decisions, mathematical modeling has been extended to EWO to cover the increasingly large and globalized holistic vision of the organization. It has gone from a coordinated view of decisions: one model feeding to another model, to the integrated vision, multiple models assembled into a single large model. This is allowed by the computing power to which we have access.

2. TRADITIONAL S&OP FRAMEWORK

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Draft Chapter IV-1 - Enterprise Wide Optimization. Traditional & State-of-The-Art Models. Book: "Mathematical Programing 4.0 for Industry 4.0 Cyber-Physical Systems".

https://www.doanalytics.net/Documents/Chapter-IV-1-Enterprise-Wide-Optimization-Traditional-&-State-of-The-Art-Models.pdf