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.