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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
1. Introduction
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.
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.
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
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].
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
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
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
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
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
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
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
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
>
>
: ;
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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