Some Fuzzy Logic –Dickeson
Lotfi Zadeh, an electrical engineer in Southern California, calls this a “fuzzy” world we live in—a world where all the rules are “fuzzy logic.” It’s a gray, nebulous, world of shades and degrees.
We buy sophisticated computer systems to help us price our product. But when it comes to pricing a job, there’s no single “right” computer price. Our computers produce a nice, “crisp” number that we mark up and say, “This IS the price.” Then we say, “Yeah, right,” and proceed to bargain for some fuzzy value based on hunch and guess. We know that budgeted “costs” are just arbitrary fictions. We’re groping. As a result, we just give up on the computer for pricing.
Hang on a moment. Maybe all isn’t lost for computer pricing. Suppose we use Zadeh’s fuzzy logic to come up with a TSP—Target Selling Price. It would be an improvement over what we’re doing. Can we try it out without having to spend a bundle? Sure.
Let’s use that fuzzy logic to set a target price. It could look something like this table I’ve whomped up in Excel.
|AI Job Target Pricing|
Account ID: 22475
Job #: 47589
|Pays as agreed||Mostly||0.800||0.010||0.008|
|Keeps schedule||Not always||0.500||0.015||0.008|
|Accepts overs||Only 1%||0.330||0.002||0.001|
|Price bargaining||At times||0.400||0.003||0.002|
|Re-runs expected||Most Likely||0.750||0.003||0.002|
|Customer relationship||Very close||0.900||0.040||0.036|
|Core competence||Not quite||0.350||0.020||0.007|
|Very tight schedule||Average||0.500||0.050||0.025|
|Target Sell Price||$4,829|
At the top we have the header information about a job. Below that we have the fuzzy stuff. The Fuzzy Logic Target Sell Price is at the very bottom, all neat and crispy.