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www.elsevier.com/locate/ins

integrated manufacturing systems using

fuzzy cash ow analysis

Cengiz Kahraman a, Ahmet Beskese b,*

, Da Ruan c

a

Department of Industrial Engineering, Istanbul Technical University, 34367 Macka,

Istanbul, Turkey

b

Department of Industrial Engineering, University of Bahcesehir, 34538,

Bahcesehir, Istanbul, Turkey

c

Fuel Research Unit, Belgian Nuclear Research Centre (SCK CEN), Boeretang 200,

2400 Mol, Belgium

Received 16 June 2003; received in revised form 29 August 2003; accepted 10 November 2003

Abstract

There exist a number of methods proposed in the literature to quantify manufac-

turing exibility in monetary terms and to use a nancial evaluation model with a

decision criterion based on present worth. However, most of these methods are unable

to handle problems with incomplete and uncertain data. To obtain a sensible result in

quantifying the manufacturing exibility in computer integrated manufacturing sys-

tems, this paper proposes some fuzzy models based on fuzzy present worth. The fuzzy

models based on present worth are basically engineering economics decision models in

which the uncertain cash ows and discount rates are specied as triangular fuzzy

numbers. To build such a model, fuzzy present worth formulas of the manufacturing

exibility elements are formed. Flexibility for continuous improvement, exibility for

trouble control, exibility for work force control, and exibility for work-in-process

control are quantied by using fuzzy present worth analysis. Formulas for both ina-

tionary and non-inationary conditions are derived. Using these formulas, more reliable

results can be obtained especially for such a concept like exibility that is described in

many intangible dimensions. These models allow experts linguistic predicates about

computer integrated manufacturing systems.

2003 Elsevier Inc. All rights reserved.

*

Corresponding author. Tel.: +90-212-669-6523/1251; fax: +90-212-669-4398.

E-mail address: beskese@bahcesehir.edu.tr (A. Beskese).

0020-0255/$ - see front matter 2003 Elsevier Inc. All rights reserved.

doi:10.1016/j.ins.2003.11.004

78 C. Kahraman et al. / Information Sciences 168 (2004) 7794

Fuzzy numbers; Fuzzy intervals; Manufacturing exibility

1. Introduction

system, which provides an automatic link between product design, manufac-

turing engineering, and the factory oor. Eective implementation of advanced

manufacturing technologies through a CIM system is the cornerstone of fac-

tory modernization. CIM systems provide many important benets such as

greater process exibility, reduced inventory, reduced oor space, faster re-

sponse to shifts in market demand, lower lead times, and a longer useful life of

equipment over successive generations of products. Manufacturing exibility

may be dened as the ability to cope with changing circumstances or instability

caused by the environment. Flexibility is emerging as one of the key compet-

itive strengths in todays manufacturing systems, since it provides a critical

measure of total manufacturing performance. Hence, measuring the exibility

of manufacturing systems is important to operations managers engaged in

decision making on strategic issues related to exibility. Flexibility is widely

recognized as a multidimensional attribute. Most of the studies reported in the

literature have focused on measuring separate dimensions independently and

also have tended to be non-nancial in nature. As a result, many of these

measures have only limited application in strategic decision making.

There exist various methods to measure the value of exibility by using

surrogate measures to represent the intangible parts. However, managers still

prefer the methods by which all intangible parts of exibility can be quantied

as far as it is possible in monetary terms. This preference leads the decision-

makers into an uncertain economic decision environment of the contemporary

business world, where an experts knowledge about the cash ow information

usually consists of a lot of vagueness instead of randomness. For example, to

describe a sales prot that may be implicitly forecasted from past incomplete

information, linguistic descriptions like around one million are often used.

The major contribution of the fuzzy approach used in this paper is its capa-

bility of representing vague knowledge in such an economic environment. In

real word applications, precise data concerning exibility factors of CIMs are

not available or very hard to be extracted. In addition, decision-makers prefer

natural language expressions rather than sharp numerical values in assessing

exibility parameters. So, manufacturing exibility is an inherently fuzzy no-

tion, which can be measured by the synthesis of its constituents. Fuzzy logic

oers a systematic base in dealing with situations, which are ambiguous or not

well dened. Indeed, the uncertainty in expressions such as low exibility or

C. Kahraman et al. / Information Sciences 168 (2004) 7794 79

is fuzziness.

Tsourveloudis and Phillis [29] are the only researchers using a fuzzy logic

framework to measure manufacturing exibility. They propose a fuzzy rule-

based method that handles imprecise data and knowledge about a production

system. However, there is no paper published in refereed international journals

aimed at measuring exibility in terms of fuzzy cash ows.

With the rapid expansion of CIM and exible manufacturing systems

(FMS), there are hundreds of studies on the denition, classication, and

quantication of manufacturing exibility and on decision-making tools for

investment analysis of exible automation. Nonetheless production managers

of many rms, under pressure to make automated manufacturing systems more

exible, are nding that there is still a considerable gap between the benets

promised by the nancial evaluation tools and the benets realized in practice.

As a value-added to the literature on the topic, this paper aims at providing

practitioners with a fuzzy point of view to the traditional cash ow analysis

method for dealing quantitatively with imprecision or uncertainty and at

obtaining a fuzzy exibility quantication from this point of view which will

close this gap considerably. Fuzzy intervals will be used to represent the cash

ows and the other non-monetary parameters of exibility. Beskese et al. [1,2]

provide a basis for this study.

The paper is organized as follows: Section 2 gives a literature review for the

quantication of manufacturing exibility. Section 3 includes a general

knowledge about fuzzy present worth analysis, two applications of this analysis

for measuring manufacturing exibility, and a numerical example. Section 4

concludes the current research results and future plan of the study reported

in the paper.

years. Arbitrarily high hurdle rates, comparison with the status quo, and

insucient benet analysis are cited as major eorts in application. However,

traditional methods for the economic justication of new manufacturing

technologies fail to include benets such as better quality, greater exibility and

reduced work-in-process, since these benets are dicult to measure and

therefore hard to quantify. Application of traditional capital budgeting

methods, for example, does not fully account for the benets arising from

increased exibility. Some special tools must be used to facilitate a thorough

analysis of tangible and intangible benets.

In the literature, many researchers have tried to quantify the manufacturing

exibility and to integrate it with decision-making tools. Their methods of

80 C. Kahraman et al. / Information Sciences 168 (2004) 7794

quantifying the exibility can be classied into three groups: (1) there are many

intangible parts of exibility, so it should be considered as blackbox [11,18,21];

(2) the intangible parts of exibility that cannot be quantied in monetary

terms can be measured by a surrogate value [8,27,30,32]; and (3) all intangible

parts of exibility can be quantied as far as it is possible in monetary terms

[12,25,26,28].

Pyoun and Choi [25] distinguish the exibility that is inherent in the man-

ufacturing system from the exibility that the user can attain after imple-

mentation. They introduce the concepts of potential exibility and realizable

exibility to obtain a deeper insight into exibility and to give consideration to

all possible aspects of user experience and capability. Potential exibility is the

exibility inherent in a manufacturing system from the system manufacturers

point of view, before it is implemented and operated by the user. Realizable

exibility is the exibility that will be realized by operating the manufactur-

ing system using both potential exibility and the users engineering and

management capability. Pyoun and Choi [25] classify potential exibility into

four elements and realizable exibility into 11 elements. They propose a sys-

tematic procedure for quantifying realizable exibility in monetary terms and

use a nancial evaluation model with a decision criterion based on present

worth.

Although such eorts are highly appreciated, one should be aware that there

are some diculties to quantify manufacturing exibility by only using crisp

methodologies. Some of them can be mentioned as: there is no eective

method for the synthesis of the functional parameters aecting each type of

exibility and the exibility types, which are observed on dierent hierarchical

levels and are crucial in the determination of manufacturing exibility, there

is no correspondence between exibility and the physical characteristics of the

production system, and certain operational characteristics have contradictory

eects on exibility. To overcome such diculties, this paper proposes a fuzzy

exibility quantication method using fuzzy present worth analysis based on

fuzzy interval arithmetic.

ow modeling. If sucient objective data is available, probability theory is

commonly used in modeling cash ows and performing decision analysis.

Unfortunately, decision-makers rarely have enough information to perform

the decision analysis, since probabilities can never be known with certainty and

the economic decision is attributable to many uncertain derivations. In this

C. Kahraman et al. / Information Sciences 168 (2004) 7794 81

p (x)

1.0

f1 (.) f2 (.)

y

0.0 a b c X

a+(b-a) y c+(b-c) y

Fig. 1. A triangular fuzzy number, Pe a; b; c.

ows.

In the literature, triangular and trapezoidal fuzzy numbers that are the

special forms of LR-type fuzzy numbers are usually used to capture the

vagueness of the parameters related to the topic. The arithmetic operations of

these types of fuzzy numbers can be found in [33]. In this paper, triangular

fuzzy numbers (TFNs) will be used to consider the fuzziness of the exibility

parameters. A TFN is designated as Pe a; b; c. It is graphically depicted in

Fig. 1 in which f1 is the left side, and f2 is the right side representation of

the TFN.

To deal quantitatively with imprecision or uncertainty, fuzzy set theory is

primarily concerned with vagueness in human thoughts and perceptions. As an

alternative to conventional cash ow models where cash ows are dened as

either crisp numbers or risky probability distributions, Chiu and Park [7]

propose an engineering economics decision model in which the uncertain cash

ows and discount rates are specied as triangular fuzzy numbers. They

examine deviation between exact present worth (PW) and its approximate form

(PWA) and perform the fuzzy project selection by applying dierent domi-

nance rules as shown in Eqs. (1) and (2) respectively. The result of the exact

present worth is also a fuzzy number with a non-linear membership function. It

is in complex non-linear representations that require tedious computational

eort [7]. For the reason of simplicity, a TFN can be used as an approximate

form of the complex (exact) present worth formula in Eq. (1).

" !

X N

maxfFt ; 0g

ly ly

minfFt ; 0g

PW Qt ry

Qt ly

;

t0 t0 0 1 Rt0 t0 0 1 Rt0

!#

X N

maxfFt ; 0g

ry ry

minfFt ; 0g

Qt ly

Qt ry

1

t0 t0 0 1 Rt0 t0 0 1 Rt0

ly ry

where Ft is the left side representation, Ft is the right side representation of

the fuzzy cash ow Fe at time t, and Rt0 is the left side representation, Rt0 is

ly ry

82 C. Kahraman et al. / Information Sciences 168 (2004) 7794

the right side representation of the fuzzy interest rate R e at time t0 . N is a crisp

number denoting the project life.

ly

When the degree of membership (y) in Eq. (1) is equal to 0, Ft ft0 ,

ry ly ry

Ft ft2 , Rt0 rt0 , and Rt0 rt2 . When the degree of membership (y) in Eq.

ly ry ly ry

(1) is equal to 1, Ft Ft ft1 , and Rt0 Rt0 rt1 . Substituting these to

the exact present worth formula, the approximate form of the present worth

formula can be derived as in Eq. (2). PWA is represented using its three

parameters and it is easier to implement because they are in linear represen-

tations.

X N X N

maxfft0 ; 0g minfft0 ; 0g ft1

PWA Qt Qt ; Qt ;

t0 t0 0 1 r 0

t2 t0 0 1 r 0

t0 t0 t0 0 1 rt 0 1

X N !

maxfft2 ; 0g minfft2 ; 0g

Qt Qt 2

t0 t0 0 1 rt0 0 t0 0 1 rt0 2

Chiu and Park [7] compute the maximum deviation as a measure of the tness

between PW and PWA. They use very small increments of y as the measure-

ment method instead of derivative method since the latter is dicult to cal-

culate. Using a simulation software, they calculate the deviations for dierent

ranges of cash ows and discount rates, and nd out that the deviations are not

signicant unless the condent width of discount rate is larger than an absolute

range of 4%. In the real world applications, when the discount rates are

usually estimated within the width of 4%, PWA can be used in project

analysis. The deviations of PW and PWA are depicted in Fig. 2.

In literature, some other approaches to calculate fuzzy PW can be found.

For instance, Buckley [4] forms the membership function for the fuzzy present

worth, P fW N , as in Eq. (3)

h i

W N pwN 1 ; fN 1 yjP f

lxjP f W N =pwN 2 ; pwN 2 =fN 2 yjP f

W N ; pwN 3 3

where N is the crisp useful life of the project, pwNi is the least, the most, and the

largest possible values of P f W N respectively for i 1; 2; 3, pwN 1 < pwN 2 <

pwN 3 , f1 yjP fW N is a continuous monotone increasing function of y

lxjP fW N for 0 6 y 6 1 with f1 0jP f W N pwN 1 and f1 1jP f

W N pwN 2 , and

f

f2 0jP W N is a continuous monotone decreasing function of y for 0 6 y 6 1

with f2 0jP fW N pwN 3 and f2 1jP f W N pwN 2 .

lxjP fW N is determined by

h i

fNi yjP f

W N fi yj Fe 1 fk yj~rN 4

worth, Fe [4]. In Eq. (4), the fuzzy interest rate (~r) is assumed to be kept con-

C. Kahraman et al. / Information Sciences 168 (2004) 7794 83

PW

(PW)

PWA

1.0

dl dr

y

l

0.0 a c PW

b

stant whereas it is a parameter changing from year to year in Chiu and Parks

[7] formula in Eq. (1). In other words, ~r in Eq. (4) represents the average annual

fuzzy interest rate along N years.

Assume that the project life N e is fuzzy. If Fe is the nal amount in the

account, then its membership function is dened by [4]

lxj Fe suph; 5

Cx

where

e ; lvj~r; lwj N

h minlujP W e 6

w

Cx fu; v; w j u1 v xg 7

The denition of Fe is simply the extension principle applied to Eq. (8) [4].

N

PW1 r F 8

For some relevant publications on fuzzy capital budgeting techniques, the

reader is referred to [3,5,9,13,1517,19,22].

using crisp present worth analysis. A signicant contribution to this research

area by Pyoun and Choi [25], and the fuzzication of this model are given in

the following sub-sections.

Pyoun and Choi [25] classify realizable exibility into three categories: (1)

the internal control group, (2) the investment policy group, and (3) the mar-

keting adaptation group. The exibility value is the sum of the values in these

three categories. All of the formulas of the elements of these three groups

are based on present worth. Therefore, we have decided to develop fuzzy

present worth formulas for the elements of the internal control group only, to

84 C. Kahraman et al. / Information Sciences 168 (2004) 7794

elements of the other two groups. The exibility formulas of the internal

control group are given in Table 1. In the formulas in Table 1, t is the annual

income tax rate, r is the interest rate and N is the project life. Pyoun and Choi

[25] use the exibility value (FV) in their nancial evaluation model as shown

in Eq. (9).

( )

X

N

1 tRn In 1 tOn tDn

PWr n n n

n1

1 r 1 rn1 1 r 1 r

tBN 1 tS

FV 9

1 rN 1 rN

where t is the income tax rate, N is the project life, R revenue, I investment

cost, O operating cost, D depreciation cost, B book value, and S salvage

value.

In this paper, only the fuzzy exibility formulas in the internal control group

are obtained since the other modications are similar. The internal control

group is categorized by the users integrated operational capability to cope with

their internal changes and is calculated as the sum of four elements, exibility

Table 1

Flexibility formulas of internal control group

Internal control group Flexibility formula

P

Flexibility for continuous CI 1 t Nn1 1r

sn cn

n

improvement (CI) where sn is the average number of parts revisions, and cn is the

average cost required for alteration of tooling and software in

the nth year P

Flexibility for trouble control TC 1 t Nn1 1r

Tn bn

n

the average increased production revenue per breakdown in the

nth year, after subtracting o the rescheduling cost, bn is the

average number of breakdowns in the nth year, e is the average

revenue per item, d is the average period required for repair per

breakdown, Ca is the average manufacturing capacity available

during breakdown (% of Mn ), Mn is the maximum manufac-

turing capacity at the beginning of the nth year, Qn is the fuzzy

average demand in the nth year, and c2 is the rescheduling cost

P /Jn Wn

Flexibility for workforce WC 1 t Nn1 1r n

control (WC) where / is the average benet per job, Jn is the average number

of dierent jobs, Wn is the average number of operators

P

Work-in-process control (IP) IP 1 t Nn1 1r

ucv Vn

n

carrying-cost rate, and Vn is the average work in process in the

N th year

C. Kahraman et al. / Information Sciences 168 (2004) 7794 85

workforce control, and exibility for work-in-process control [25].

Pyoun and Choi [25] do not consider that some deviations in the estimates of

exibility parameters, such as the average number of parts revisions in the nth

year (sn ), may occur. Our aim in this paper is to adapt their formulation of

realizable exibility to the uncertainty of real-world conditions by applying

Fuzzy Sets Theory. So here, in this paper, the terms sn , cn , and r are assumed to

be fuzzy parameters because in a CIM environment, the decision-makers

usually have imprecise data about these three. The income tax rate, t, is dened

by the government and usually is a xed value (kept unchanged) for a very long

time. So, it is assumed to be a crisp value. The project life, N , is also assumed to

be a crisp number here in the formulation. However, the fuzziness for this

parameter will be incorporated in the numerical example for the practical

purposes.

We may dene the parameters that Pyoun and Choi used in their paper [25]

as triangular fuzzy numbers such as ~sn sn0 ; sn1 ; sn2 . We may also dene the

discount rate during time n such as ~rn rn0 ; rn1 ; rn2 . The indices 0, 1, and 2 in

the representations of ~sn and ~rn stand for the smallest possible value, the most

possible value, and the largest possible value, respectively. The exact form of

the fuzzy present worth of the exibility for continuous improvement (P f WoCI)

under non-inationary conditions can be calculated as follows:

" #

XN

sly ly XN

sry ry

f n cn n cn

P WoCI 1 t Qn ry

; 1 t Qn ly

n1 n0 1 1 Rn0 n1 n0 1 1 Rn0

10

Under inationary conditions, it is very important to take the ination rate

into consideration. Hence, the average cost required for alteration of tooling

and software (cn ), which is the only monetary parameter in Eq. (10) changes

from year to year. In this case, the present worth formula for geometric cash

ows, which is frequently used in Engineering Economics, can be used [23].

Using Buckleys notation and assuming that c1 will increase at a fuzzy constant

rate (~

g), and ~s is xed along N years, Eq. (10) will change to,

" #

N N

1 f yj~

r f yj~

g

fNi yjP f

k k

W N 1 tfi yj~sc1 11

fk yj~r fk yj~ g

internal control group are Tn for trouble control, / for workforce control, and

u for work-in-process control. Similar modications derived by inationary

conditions are applied to Pyoun and Chois formulas in Eqs. (12), (19) and (21)

to yield with formulas in Buckleys notations in Eqs. (18), (20) and (22),

respectively. Please note that, to achieve a more precise present worth under

86 C. Kahraman et al. / Information Sciences 168 (2004) 7794

substitute the arithmetic average values / with /n , and u with un for

n 1; 2; . . . ; N , in Eqs. (20) and (22), respectively.

The second element of the internal control group is exibility for trouble

control (TC). It is the users capability to adapt the manufacturing system to

handle a breakdown of the system. This exibility is applicable only when the

breakdown period is long enough to reschedule the manufacturing system and

the user also needs to keep producing during this period with reduced capacity.

The terms Tn , bn , r, e, d, Ca , Mn , Qn , and c2 are assumed to be fuzzy

parameters. Only t and N are assumed to be crisp numbers for the reasons

mentioned in the fuzzication of CI above. Considering these, exibility for

trouble control P f WoTC is measured by

" #

XN

T la la

b XN

T ra ra

b

PfWoTC 1 t Qn

n n

ra

; 1 t Qn

n n

la

n1 0

n 1 1 R n0 n1 0

n 1 1 Rn0

12

where Ten is obtained by using the following equation:

ea M

Ten ~e d~ min C e n ~c2

e n; Q 13

In Eq. (13), it is necessary to use a ranking method to compare the fuzzy

numbers, C ea M

e n and Qe n . There are many ranking methods in the literature

and these methods may give dierent ranking results. Some of them are

Changs [6], Chiu and Parks [7], Dubois and Prades [10], Jains [14], Kauf-

mann and Guptas [20], Liou and Wangs [24], and Yagers [31] methods. For

example, Liou and Wang [24] propose the total integral value method with an

index of optimism x 2 0; 1. Let A e be a fuzzy number with left membership

function f L and right membership function f R . Then the total integral value is

eA eA

dened as

e xER A

Ex A e 1 xEL A

e 14

where

Z b

e

ER A R

xfe x dx 15

A

a

and

Z d

e

EL A L

xfe x dx 16

A

c

e a; b; c,

where 1 < a 6 b 6 c 6 d < 1. For a triangular fuzzy number, A

the total integral value is obtained by

e 1xa b 1 xb c

Ex A 17

2

C. Kahraman et al. / Information Sciences 168 (2004) 7794 87

stant rate (~g) and ~b is xed along N years, Eq. (12) becomes

" #

N N

1 f yj~

r f yj~

g

fNi yjP f ~ 1 k k

W N 1 tfi yjbT 18

fk yj~r fk yj~ g

The third element of the internal control group is exibility for workforce

control (WC). It is the users capability to manage the size and the technical

and managerial capability of the workforce required for operation of the

manufacturing system. This exibility is measured by the size and the technical

and managerial capability of the required workforce and by the average benet

that the user can attain per job.

The terms /, Jn , Wn , and r are assumed to be fuzzy parameters. Only t and N

are assumed to be crisp numbers for the reasons dened in the fuzzication of

CI above. Considering these, the fuzzy present worth of exibility for work-

force control (P f

WoWC) can be formulized as in Eq. (19).

" #

XN

/ la la

J W la XN

/ ra ra

J W ra

Pf

WoWC 1 t Qn

n n

ra

; 1 t Qn

n n

la

n1 0

n 1 1 R n0 n1 0

n 1 1 R n0

19

Under inationary conditions, assuming that /1 will increase at a fuzzy con-

stant rate (~g) and J~ and W e are xed along N years, Eq. (19) becomes

" #

N N

f 1 f yj~

r f yj~

g

fNi yjP W N 1 tfi yj e e /1 k k

J fi yj W 20

fk yj~r fk yj~ g

(IP). It is the users capability to minimize the work in process required for

operation of the manufacturing system. This exibility is measured by the

average amount of work in process required for operation of the manufac-

turing system and the inventory carrying-cost rate.

The terms u, Cv , Vn , and r are assumed to be fuzzy parameters. Only t and N

are assumed to be crisp numbers for the reasons dened in the fuzzication

of CI above. Considering these, the fuzzy present worth of exibility for work-

in-process control (P fWoIP) can be formulized as in Eq. (21).

" #

X N

u la la la

c V XN

u ra ra ra

c V

PfWoIP 1 t Qn

v n

ra

; 1 t Qn

v n

la

n1 n0 1 1 Rn0 n1 n0 1 1 Rn0

21

Under inationary conditions, assuming that u will increase at a fuzzy constant

g) and Ve and ~c are xed along N years, Eq. (21) becomes

rate (~

88 C. Kahraman et al. / Information Sciences 168 (2004) 7794

" #

N N

1 fk yj~r fk yj~g

fNi yjP f

W N 1 tfi yj Ve fi yj W

e u1 22

fk yj~r fk yj~

g

EGEY, a Turkish Motors Company, produces transmission gearboxes for

cars. The fuzzy average numbers of part revisions ~sn , the fuzzy maximum

manufacturing capacities M e n , the fuzzy average demand Q e n , and the fuzzy

~

average number of breakdowns bn in the years 20032008 are expected to be

as in Table 2. However, the analysis period is not certain since the company is

not sure that it will produce these products for the next six years. The pro-

duction will continue for N e years where lni j N

e is given in Table 3. The fuzzy

interest rate is expected to be xed as (8%, 10%, 12%) along this period while

the fuzzy average cost required for alteration of tooling and software is also

expected to be xed as (20, 30, 50) ($1000). The fuzzy average manufacturing

capacity available during breakdown is (85%, 90%, 95%), the fuzzy average

revenue per item is $(6.0, 6.5, 7.0) ($10), the fuzzy average period required for

repair per breakdown is (0.015, 0.032, 0.038) years, the fuzzy rescheduling cost

is $(180, 210, 240) and they are all assumed to be xed through N e years. The

crisp annual income tax rate is 35%.

Using Eq. (10), the exact fuzzy present worth of the exibility for continuous

improvement is calculated as follows:

8 2 1y 3

2y 2y

< 1:120:02y 2

1:120:02y 1:120:02y3

Pf

WoCI 0:65 20 10y 4 5;

: 3

1:120:02y 4

3y 3y

1:120:02y

1:120:02y5 6

2 4y

39

2 3

1:080:02y 2 =

1:080:02y 1:080:02y3

0:65 50 20y 4 5

4y

1:080:02y4

4 5y

1:080:02y ;

1:080:02y5 6

WA can be used

in the problem under consideration [7]. To obtain the approximate form of

Table 2

Fuzzy expected values for e e n , and ~bn

e n, Q

Sn, M

Year, n e

Sn e

Mn en

Q ~bn

2003 (1, 2, 2) (3600, 3800, 4000) (3100, 3400, 3900) (3, 4, 5)

2004 (2, 3, 3) (3900, 4000, 4200) (3500, 3650, 3900) (4, 5, 6)

2005 (2, 3, 4) (4000, 4200, 4300) (3600, 3700, 4000) (4, 5, 7)

2006 (3, 3, 4) (4300, 4500, 4600) (3700, 3900, 4400) (5, 6, 7)

2007 (3, 4, 4) (4500, 4700, 4800) (4000, 4200, 4600) (6, 7, 7)

2008 (3, 4, 5) (4600, 4800, 4900) (4100, 4300, 4700) (7, 8, 8)

C. Kahraman et al. / Information Sciences 168 (2004) 7794 89

Table 3

Possibility table for the project life

Ni 4 5 6

e

lNi j N 0.7 1.0 0.8

PfWoCI, for n 4, 5, and 6, y will be assigned a value of 0 and 1 in the left side

representation, and then a value of 0 in the right side representation in the

equation above. Thus, the results in Table 4 are obtained.

After obtaining both the exact and approximate equations for P f WoCI, the

values of these two functions were calculated by using very small increments of

0.001 on y axis. Spearman correlation coecient was used to decide whether

the approximate form can be used instead of the exact form, or not. The

coecient was calculated as 0.9984 for the left sides, whereas it was 0.9993 for

the right sides. Since these coecients are close enough to 1.00, it was proven

for our example that the approximate form can be used instead of the exact

form.

In Fig. 3, the approximate fuzzy present worth of the exibility for con-

tinuous improvement is shown by its TFNs.

The numeric results of the fuzzy exibility for trouble control are given in

the following:

For the year 2003, C ea Me 1 3060; 3420; 3800 and Q e 1 3100;

3400; 3900. Using Liou and Wangs ranking method [24], for a moderately

optimistic decision-maker, x 0:5, the minimum of E0:5 C ea Me 1 3425 and

e 1 3450 is 3425. So we select C

E0:5 Q ea Me 1 value and use this value in Eq.

(13). By calculating all Ten s in the same way, we obtain

Te3 3000; 7486; 10460; Te4 3090; 8602; 11524

Te5 3203; 8588; 11950; Te6 3279; 8776; 12202

By using these values, the exact fuzzy present worth of exibility for trouble

control is obtained as

Table 4

Pf

WoCI values for n 4; 5; 6

Life, n fn;i yjP f

WoCIn

y 0 and i 1 y 1, i 1 or i 2 y 0 and i 2

4 $75,625.67 $167,709.86 $342,527.79

5 $97,755.32 $216,141.72 $431,003.61

6 $117,513.93 $260,170.69 $533,406.17

90 C. Kahraman et al. / Information Sciences 168 (2004) 7794

PW~ oCI

1.0

0.8

0.7

~

PWoCI

260,170.69

117,513.93

167,709.86

216,141.72

342,527.79

431,003.61

533,406.17

75,625.67

97,755.32

Fig. 3. The approximate fuzzy present worth of the exibility for continuous improvement shown

by its TFNs.

8 2 3 9

4390y25143y

>

>

> 4534y27444y >

>

7 >

1:120:02y 2

>

> 6 1:120:02y >

>

>

> 6 4486y30004y

5512y30905y 7 >

>

> 6

> 0:65 6 7 >

7 >

3 4

> 1:120:02y 1:120:02y ; >

>

> 4 5385y32036y 5497y32797y 5 >

>

>

> 1:120:02y5 1:120:02y6 >

>

>

< >

=

f

P WoTC 2 3

99283024y5y 104333155y6y

>

> 1:080:02y2 >

>

>

> 6 1:080:02y 7>>

>

>

> 0:65 6

> 1:080:02y4 7 >

104602974y72y 115242922y7y

> 6 1:080:023 7 >

>

>

> 6 7 >

>

>

> 4 119503362y7 112023426y8 5 >

>

> 5 >

>

> 1:080:02y 1:080:02y 6

>

>

: ;

1 in the left side representation, and then a value of 0 in the right side repre-

sentation in the equation above. Thus, the least possible value, the most pos-

sible value, and the largest possible value of the fuzzy present worth of the

exibility for trouble control are calculated as $33,844.19, $118,552.69, and

217,048.22 for n 4; $44,749, $155,880, and $273,979 for n 5, and 56,377.70,

190,994.79, and 330,452.28 for n 6, respectively. In Fig. 4, the approximate

fuzzy present worth of the exibility for trouble control is shown by its TFNs.

The FV in Eq. (9) will be the sum of the results which are obtained for the

internal control group, the investment policy group, and the marketing

adaptation group. Here, in this numerical example, we include only two of the

C. Kahraman et al. / Information Sciences 168 (2004) 7794 91

PW~oTC

1.0

0.8

0.7

273,979.00

118,552.69

190,994.79

217,048.22

330,452.28

44,749.00

56,377.70

155,880.00

~

33,844.19

PWoTC

Fig. 4. The approximate fuzzy present worth of the exibility for trouble control shown by its

TFNs.

elements of the internal control group, which are P fWoCI and P f WoTC, just to

show the way how the total FV amount is calculated. Thus, the result of the

summation of these two elements is shown in Fig. 5.

Using Fig. 5, the possibility of any FV can be found easily. In case of having

incomplete information, this possibility distribution provides the decision-

maker with a detailed information source. For example, the most possible

value in Fig. 5 is $372,021.72. If the decision-maker wants to know the interval

of exibility values having a possibility larger than 0.90, he/she should make

the calculations below:

1. Derive the functions for the area above the desired possibility value (0.90 for

our example) using the bold lines in Fig. 5.

x1 142; 504:32 229; 517:4y

x2 704; 982:61 332:960:89y

2. Substitute the desired possibility value into these equations and nd the

extreme points of the interval.

x1 142; 504:32 229; 517:4 0:90 349; 069:98

x2 704; 982:61 332:960:89 0:90 405; 317:81

According to the results of the calculations above, the interval of exibility

values having a possibility larger than 0.90 is (349,069.98; 405,317.81).

92 C. Kahraman et al. / Information Sciences 168 (2004) 7794

PW~oFV

1.0

0.8

0.7

559,576.01

704,982.61

P W oFV

142,504.32

109,469.86

173,891.63

286,262.55

372,021.72

451,165.48

863,858.45

Fig. 5. The approximate fuzzy present worth of the exibility value shown by its TFNs.

4. Conclusion

In this paper, the fuzzy present worth formulas for optimal level of exibility

and the exibility elements in the internal control group, which is categorized

by the users integrated operational capability to cope with their internal

changes, are obtained. Using these formulas, as shown in the given numeric

example, more informative results of exibility measures can be achieved. The

exibility modeling using triangular fuzzy numbers allows experts linguistic

predicate about computer integrated manufacturing systems. When there are

more than one alternative of CIM systems to compare in terms of exibility,

using the fuzzy present worth formulas of several types of exibility and

applying some dominance rules on triangular fuzzy numbers, the fuzzy exi-

bility evaluation process is completed. This study involves discrete com-

pounding for calculating the fuzzy present worth of exibility. Further research

can be aimed at including continuous compounding for the same calculation.

Also, trapezoidal fuzzy numbers can be used instead of TFNs when the deci-

sion-maker uses between instead of around to express his/her estimations

about the exibility parameters.

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