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Using entropy for quantitative measurement of operational complexity of supplier–customer system: case studies

Ladislav Lukáš
Organization: University of West Bohemia in Pilsen, Czech Republic
Department: Department of Economics and Quantitative Methods, Faculty of Economics
Miroslav Plevný
Journal / Anthology

Central European Journal of Operations Research
Year: 2016
Volume: 24
Issue: 2
Page range: 371-387

The paper concerns with analysis of operational complexity of company supplier–customer relations.Well-known approach for measuring of operational complexity is based upon entropy. However, there are several approaches thereon. In the first part, we discuss various general measures of uncertainty of states, the power entropies in particular. In the second part, we use Shannon entropy as a base framework for our two case studies—the first, a supplier–customer systemwhich implements managerial thresholds for processing product delivery term deviations, the second, a supplier system of the most important commodity in brewery industry, the malted barley. In both cases, we assume an existence of problem-oriented databases, which contain detailed records of all product orders, deliveries and forecasts in quantity and time having been scheduled and realized. Our general procedure elaborated consists of three basic steps—pre-processing of data with consistency checks in Java, calculation of histograms and empirical distribution functions, and finally, evaluation of conditional entropy. The last two steps are realized by Mathematica modules. Illustrative results of operational complexity measurement using entropy are provided for both case studies.

*Business and Economics