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
Date: 7/29/04
By RVD

Job #: 47589
Job Name: Fictus
Quantity: 32,000

Matrl: $1,246
Avg. Mtrls: 36.00%
Avg. Price: $3,461


Item Gut
Feeling
Assigned
Value
Pricing
Weight
Weight
Ext.
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
Supplies paper Yes 0.999 0.020 0.020
New account No 0.000 0.000 0.000
Budget bid No 0.000 0.000 0.000
Press approval Yes 0.900 0.002 0.003
Price bargaining At times 0.400 0.003 0.002
Second look Probably 0.650 0.001 0.003
Significance to customer Very high 0.900 0.025 0.023
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
Totals 7.979 0.191 0.137
Weighted/Weight Ratio 0.717
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.

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