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Multi-agent framework for third party logistics in E-commerce


Expert Systems with Applications 29 (2005) 431–436 www.elsevier.com/locate/eswa

Multi-agent framework for third party logistics in E-commerce*
Wang Ying*, Sang Dayong
Tsinghua University-Hongta Group Postdoctoral Station, Yunnan, 653100 China

Abstract In an e-commerce environment, the third party logistics (3PL) takes charge of the logistics design, delivery, storage and transportation in a supply chain with its professional and complete value-added services. Beginning with an analysis of the relationships between the 3PL and supply chain members, the authors suggest that only when the 3PL reengineers its logistics business process to accommodate the customer could it maximize the value of the customer. Finally, ?ve intelligent agents, order management agent, logistics process reengineering agent, resource scheduling agent, dynamic union management agent and simulating and evaluating agent are designed to form an e-commerce based 3PL system which, with the collaboration of the ?ve agents, could construct a virtual private logistics teamwork suitable for a certain customer’s need and furthermore, realize the win–win between the customer and the logistics service vendor. q 2005 Published by Elsevier Ltd.
Keywords: Third party logistics (3PL); E-commerce; Business process reengineering; Multi-agent

1. Introduction The tendency of the global economic development makes the competition of the supply chains be the main and essential one between two individual enterprises. Only when its whole supply chain keeps high competitive could an enterprise survive for a long time. The rapid development of e-commerce makes it possible to integrate and improve the competitive advantages of the whole supply chain because the openness, globalization, low-cost and highef?ciency of e-commerce extend the internal information network of an enterprise and enable the business to business (B2B) e-business activities among several enterprises. The involved enterprises are connected to be a larger and more interactive supply chain network system in which exist four ?ows, i.e. ?ow of goods, ?ow of information, ?ow of ?nancing and ?ow of trading. Integration of four ?ows is one of the characteristics of e-commerce supply chain even though they are running in different velocities. For the velocity of goods ?ow is far slower than that of other three ones, the goods ?ow has been the bottleneck of the supply
* Supported by National Natural Science Foundation of China (59990470-4). * Corresponding author. Tel./fax: C86 1082135511. E-mail address: yingwangsang@yahoo.com (W. Ying).

chain. To increase the ?ow rate of goods, enterprise are looking for more professional logistics service vendors in succession. 3PL is selected in place of the private logistics systems of enterprises to take charge of part or whole of the supply chain logistics for it is informational, professional, networked and systemized. Therefore, the ef?ciency of the supply chain logistics is determined by the ef?ciency of the 3PL’s logistics service. On the other hand, the logistic customer needs to know more, various information of the logistics since there exists venture of route as well as the ownership of the goods and the goods itself are separated. All of these bring several new requirements both on the 3PL service and on its logistics business process. How can a 3PL provide customized services according to different customer requirements and meanwhile its logistics process could be stable enough for long period of development is the main researching topic of this paper.

2. Characteristics of 3PL in e-commerce environment 3PL vendor is de?ned as a special middleman of logistics in channel who provides other enterprises with whole or part logistics business service, from generic transportation to design, execute and operation whole system of distribution and logistics in certain period by contract form (Duo Zhang, 2000).

0957-4174/$ - see front matter q 2005 Published by Elsevier Ltd. doi:10.1016/j.eswa.2005.04.039

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A 3PL vendor is a professional logistics company getting pro?t by taking charge of part or whole logistics in the supply chain of a focal enterprise. Nodes including supply chain are joined together by business process (Lambert and Cooper, 2000). As non-supply chain member nodes, 3PL connect their conjoint nodes with logistics agent business services such as customer relation management (CRM), order ful?llment, structural network design, stock management, transportation management, returns management, etc. The 3PL appeared in advance of supply chain management and developed ?rstly within a very slow speed. In spite of its history of several decades, up to now 3PL still occupies a rather low fraction of logistics markets. Even in U.S.A, 3PL only contributes to 6% of related industries (Jian-me, 1999). The 3PL is in the initial stage of development in China and according to the interview of China Storage Association, only 5.9% of commerce enterprises and 18% of production enterprises outsource their logistics to 3PL vendors while the 3PL vendors haven’t taken part in inner production logistics business of the production enterprises (Shao-ji Shen, 2000). At the same time, the popularization of supply chain management provides a good developing environment and a huge required market for 3PL industry. In the ?erce global competition an enterprise is faced with a buyer’s market which is ever rapid changing and dif?cult to be forecasted. The consumers are also becoming more and more dominant in presenting their personalized and customized requirements. Internet-based collaboration used in e-commerce enables the integration of logistics ?ow, ?nancing ?ow, information ?ow, work?ow and value-added ?ow. With the utilization of e-commerce, the 3PL company could frequently reengineer its logistics business process ?ow and thus improve the customer responding ability and service quality. The focal enterprise outsourcing its logistics to 3PL will decrease its logistics cost and the whole supply chain product stock and therefore, has more ability to accommodate the market’s variation. Developing and improving of e-commerce based 3PL will turn the focal enterprises’ logistics into a socialized, professional one. The professional logistics management of 3PL realizes the fast moving of products among valid supply chains and shortens both the distances from the producers to the consumers and from the supplying markets to the requiring markets. The 3PL companies and all the supply chain node enterprises will win for the improvement of the whole supply chain ef?ciency and the decreasing of its cost.

i.e. shared goals and objectives, trust, mutual dependence, concern for others pro?tability, open lines of communication, mutual commitment to customer satisfaction (Daniel H. McQuiston, 2001). As the appurtenant of the supply chain, the 3PL must regard the target of the supply chain members, the maximization of the customers’ interest, as one of its main goals and takes its tenet as helping the customers realize their values-added. Therefore, whether the logistics business process or the management of the 3PL vender should be adapted to the needs of business process and management of the supply chain members. From the 3PL vendor’s view, all the business processes of the logistics customers (the focal enterprise) are different and it must build a dynamic logistics business process to make it be able to be integrated with various supply chain business processes. 3.1. Reengineering of logistics business process The most important steps in the inner 3PL logistics business process include management of customer services, product storage and product transportation. Compared with the supply chain business process, 3PL logistics business process has fewer and more stable customers and no supplier involved. The core competition ability of a 3PL vendor is its ability of integrated services to help its customers to optimize their logistics management strategies, build up and operate their logistics systems and even manage their whole distribution systems. Only by providing customized logistics services to various customers as an agency, a 3PL vendor could establish a long-term union relationship with its customers and enhance it continuously. Therefore, logistics agency allowing customization is an available 3PL mode suitable for being integrated with supply chains. In the running of a supply chain, the 3PL vendor is charged with several logistics activities in procurement, transportation and storage of raw materials and machining, packaging and delivering of products. 3PL should take the advantage of its professional logistics ability and reengineer above logistics activities so that to be able to deliver given products to the receiver in a certain period and minimize the logistics cost as well. 3PL will connect the suppliers, the manufacturers and the distributors in supply chains and provide the substance movement and logistics information ?ow. The logistics value-added services are realized by the changes of the products’ time and value states. Available 3PL logistics business processes suitable for supply chain management include processes of customer relation management, customer service management, customer order ful?llment, structural logistics network design, stock management, transportation management, returns management, etc. (1) Customer relation management. Its main purpose is to recognize the core customers and customer groups.

3. Integration of 3PL with the supply chain process Being an associating node in a supply chain, 3PL vendor has a consignment-agency relationship with supply chain member enterprises. The building and maintenance of this relationship depends upon the realization of six core values,

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(2)

(3)

(4)

(5)

(6)

(7)

The level of outstanding achievement provided to the core customers is demonstrated in detail by products and services protocols. A customer service team will work together with the customer to ?nd the source of customer requirement variation. The actual level of customer service will also be evaluated by a service performance analysis system. Customer service management. It provides the customers with real time information from a unique source, e.g. information about the consigning date of the products, the current states of the products including their location and completeness, the arriving date of the products, etc. Customer order ful?llment. It tries to increase the ful?llment rate of customer orders to meet the customer’s needs better. The key problems are how to optimize the order ful?lling process, decrease the total logistics cost of the customer and seamlessly integrate its process with the whole supply chain. Structural logistics network design. The customer allocation strategy and the location of the logistics center are determined after several different logistics network topologies having been compared and the in?uence of the mediating storage and transportation on the logistics cost and delivery period is analyzed. Stock management. The transferred products and the destined ones are distinguished to meet the requirement of the products and services protocol. Both the expected and unexpected policies are evaluated by a performance system and the relative decision parameters are optimized as well. Transportation management. Its task is to arrange the schedule of transportation, manage the motorcade and the vehicles, optimize the frequency of transportation and select the transporting route, etc. Returns management. The opportunity of productivity improving and the break points of the focal enterprise could be recognized when the returns is effectively managed and therefore the focal enterprise’s lasting competition ability is also available.

according to the dynamic change of the supply chain and thus the chain’s competition ability is also enhanced. 3.2. Customized logistics information services To realize the integration of the whole supply chain business process, the logistics information provided by the 3PL vendor should be able to meet the information needs of the supply chain management system. The logistics information services are also the preconditions for the 3PL vendor to achieve its concrete target, i.e. delivering the right products commonly at a certain quality level at a right time and a right place. An e-commerce based 3PL vendor utilizes the Internet as its data interchange path and send the logistics information concerned by the user. All the interaction between the customer and the 3PL vendor is conducted in a call center or a customer service center. The logistics information includes that of the states of the products on the way, e.g. their names, quantity, destination, current location, next location, completeness, etc. Customer could inform the receiver on time or even change the logistics order at any time if necessary. The barcode techniques, database techniques, electronic ordering system (EOS) and the electronic data interchange (EDI) techniques are used by the 3PL e-commerce system to collect and store the logistics data persistently, process the logistics information automatically, transform the logistics information in standardized form and real time and response to the customer’s requirement quickly. The e-commerce system of the 3PL vendor could provide the information services to various customers in different areas and under different communication conditions for it uses browser/client (B/S) architecture and distributed data collecting and central data managing strategy. Furthermore, the e-commerce system or the customer service center (CSC) could exchange logistics information with the supply chain management system (SCMS) in real time via an EDI component and meanwhile keeps the independence of the SCMS, the CSC and the inner logistics management system (ILMS) of the 3PL vendor. The non-functional requirement of security of the customer or the SCMS is met by this independence of several systems. The logistics information services provided by the CSC are listed in Fig. 1 where the relationships between the customers or the SCMSs and that between the CSC and the ILMS of the 3PL vendor are also represented. Supply chain management could transfer the market needs information from the end consumers to the raw material suppliers. 3PL vendor sends the logistics information precisely to the supply chain members in time and enable them to eliminate the unstable factor in the market needs so that all the chain members would decrease their stock and improve the precision of market forecasting and manufacturing planning.

The above logistics processes could be classi?ed into two styles, i.e. customer-faced processes and pro?t-faced ones. Customer relation management, customer service management and customer order ful?llment are customer-faced while structural logistics network design, stock management, transportation management and returns management are pro?t-faced. The customer-faced process varies greatly according to the individual customer’s requirement whereas the pro?t-faced one is relatively more stable. A 3PL vendor should customize the customer-faced processes and compose all the customer-faced and the pro?t-faced processes to provide individual logistics services to a customer. The pro?t of the 3PL vendor is maximized when and only when the value-added logistics services are provided to the customer. Finally, the logistics process is reengineered

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Customer (an SCMS) Internet

Customer (an SCMS)

Customer (an SCMS)

EDI / XML

CSC

Logistic Information Services Informing of consignment (EOS) States of products on the way Destination of products Current transporting station Next transporting station Logistics order variation Check result of products received Delivering information Basic material (introduction of 3PL vendor, customers / services protocol, etc.)

Fig. 1. Logistics information services provided by 3PL vendor.

3.3. Establishment of dynamic union of multiple logistics companies On account of the limitation of its resources and location, a 3PL vendor often needs to search for other logistics companies as its collaboration partners dynamically when it operates an actual logistics system. This sort of dynamic union could decrease the logistics cost effectively. There exist several problems in building a dynamic union, e.g. that of interest allocation, responsibilities and constraints, collaborating mechanism and credit system between each other. This is a game problem and the solution could be obtained only after game for many times. A 3PL vendor having received a logistics order may look for union members in a loaning or deducting a certain percentage of pro?t forms. All union members collaborate and share their resources through the EDI among the several individual ecommerce systems of themselves. The performance of the union partners is recorded in detail and thus the 3PL vendor could evaluate the partners and build up its prepared union resource repository consisting of other logistics companies once collaborated and quali?ed. To provide a consistent logistics service to a customer, the 3PL should establish a logistics service teamwork or a virtual private logistics (VPL) subsystem for each customer which might include many resources from dynamic union partners. (Fig. 1).

correlated aspects, i.e. intelligent agent, multi-agent system and agent-faced programming (Liu et al., 2000). According to Wooldridge et al. (Wooldridge and Jennings, 1994), an agent has a weak notion and a stronger notion by different usage. The weak notion of an agent is that an agent is thus as a kind of UNIX-like software process, which exhibits the four fundamental properties such as autonomy, social ability, reactivity, pro-activeness. The stronger notion of an agent is that an agent is to be a computer system that, in addition to having the properties identi?ed in the weak notion, is either conceptualized or implemented using concepts that are more usually applied to humans. Other attributes of agency include mobility, veracity, benevolence, rationality, etc. From the systematic view, an agent is an open, dynamically self-adapted system which, driven by the system’s object, modi?es its structure to accommodate to the changes of the outer environment and evolves the system itself. The four fundamental properties of an agent make it show some intelligence, agility, steadiness and interoperability. In a multi-agent system, intelligent agents operate each other through conferring and collaborating as correlative subsystems. Multi-agent systems are especially suitable for dealing with complex, collaborative and hard to be forecasted problems. 4.2. Intelligent agents in the 3PL system The 3PL vendor provides logistics services for supply chain members according to their requests and keeps a incompact and independent relationship with the customers. The logistics business process of the 3PL is varying dynamically due to the movement of logistics and brings about more uncertainty and risks. More reactive and autonomic 3PL logistics services are required to avoid these uncertainty and risks. On the other hand, as an independent entity, 3PL vendors should obtain the maximum pro?t while providing helps and services to supply chain members. Therefore, the 3PL vendor will utilize all the resources available to ful?ll the logistics orders and meanwhile according to the feedback of its own system, adjust its own business process to accommodate to the complex and ever changing environment and keep its core competition ability. An agent itself is a commune and its four fundamental properties, i.e. autonomy, social ability, reactivity, proactiveness rightly meet the needs of the dynamic logistics process of a 3PL vendor. A 3PL system could be regarded as a multi-agent system in which each agent takes one or several responsibilities of the system and collaborates with other agents as well. 4.3. Structural analysis of the multi-agent 3PL system Three views, i.e. logical view, collaboration view and service view are used to analysis the same multi-agent 3PL

4. A 3PL system with multi-agents 4.1. Analysis of the characteristics of intelligent agents The theory of agents came of the researches on distributed arti?cial intelligence (DAI) in 1970s and had been used broadly in many other domains in 1980s. The studies of agents could be roughly classi?ed into three

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system. The logical view of the system focuses on depicting the logical structural relationships among the agents and that between the agents and the collection of logistics teamwork or VPL. The collaboration view of the system reveals the massage transferring among the agents and the VPLs in order to maintain the whole life cycle of each VPL (from its creation, its running to its destroying) and improve the ability of building and deleting VPLs. Finally, the service view of the system represents the roles or services each agent provides when the system ful?ll logistics orders. 4.3.1. Logical view of the multi-agent 3PL system Fig. 2 depicts the logical structural view of the multiagent 3PL system. There are three layers in the multi-agent 3PL system, i.e. customer layer, logistics teamwork layer (layer of VPLs) and VPL building layer (layer of agents) among which VPL building layer is consisted of ?ve agents including the order management agent (OMA), the logistics process reengineering agent (LPRA), the resources scheduling agent (RSA), the dynamic union management agent (DUA) and the teamwork evaluation agent (TEA). The stereotype Singleton of each agent in Fig. 2 means that each agent has only ONE instance at run-time of the system whereas stereotypes Teamwork and Supply Chain Member indicate the marked entities are instances of logistics teamwork (VPL) and supply chain member respectively. 4.3.2. Collaboration view of the multi-agent 3PL system The collaboration of the agents in the multi-agent 3PL system is mainly aimed to maintain the life cycles of the VPLs. The detail collaborating steps or activities are described as follows. (1) OMA receives a logistics order from the CSC and evaluates the order and the customer candidate. If the order passes the evaluation and needs to be split (e.g. with multiple receivers), OMA will split it into several orders. OMA passes the accepted order(s) to BPRA. All refused orders will be returned to the corresponding customers immediately via CSC and the order is refused.

(2) LPRA decomposes the logistics process and recomposes it in order to meet the business sequence required by the customer, according to the logistics order and the reengineering algorithm. The reengineered logistics business process is sent to RSA. (3) Having received the logistics business process, RSA ?rstly allocates logistics resources within the inner resource repository of the 3PL vendor. If the available inner resource is not enough, RSA will allocate resources in the prepared union resource repository. If there are still not enough resources, an application for new union resources will be sent to DUA. (4) DUA seeks new union partners through the e-commerce system and adds their resources into the prepared union logistics resource repository. The result of seeking dynamic union partners will be sent to RSA. If new union partners and resources have been found, RSA will reallocate the resources; otherwise RSA will send a message to OMA and OMA has to return the order back to the customer. Then the order is refused. (5) RSA creates a VPL according to the logistics process and the allocated resources and informs the CSC. The order is actually being executed. (6) VPL executes the logistics order and keeps close communication with OMA. (7) When the consigned products are received and checked by the receiver(s), RSA will free the allocated resources and destroy the corresponding VPL. The order is ful?lled. (8) TEA continuously supervises the running states of the active VPLs and evaluates them. (9) Each agent improves its structure and algorithms (if it has any). 4.3.3. Service view of the multi-agent 3PL system The services provided by the agents or other units in the multi-agent 3PL system include two aspects, i.e. the logistics services provided to the customers (the external services) and the roles they act to maintain the life cycles of the VPLs (the internal services).
<<Singleton>> Logistics Process Reengineering Agent

<<Singleton>> Dynamic Union Agent

<<Singleton>> Order Management Agent

<<Singleton>> Resource Scheduling Agent

<<Singleton>> Teamwork Evaluating Agent

<<Teamwork>> Virtual Private Logistics <<Supply Chain Member>> Customer

<<Teamwork>> Virtual Private Logistics <<Supply Chain Member>> Customer

<<Teamwork>> Virtual Private Logistics <<Supply Chain Member>> Customer

Fig. 2. The logical structural view of the multi-agent 3PL system.

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4.3.3.1. External services. All the following external services are realized by the interaction between the customers (via the CSC) and OMA. (1) (2) (3) (4) Receiving a logistics order. Splitting the logistics order if necessary. Returning the order unable to be ful?lled. Collecting the information of the products on the way and exchanging it with the customer via CSC. (5) Accepting the changing application of the logistics orders from customers and start the execution of the changes. (6) Informing the customer of the ful?llment of order. (7) Making a settlement with the customer. 4.3.3.2. Internal services. (1) OMA evaluates the logistics order and improves its order evaluation algorithm. (2) LPRA reengineers and designs the logistics process for each order and improves its logistics process reengineering algorithm. (3) SRA allocates and frees the logistics resources and improves the resource allocation algorithm. (4) DUA dynamically seeks logistics partners as new union members and evaluates existing partners. (5) VPL executes the order, feedback the real time information of the products on the way to OMA and informs SRA when an order is ful?lled. (6) TEA evaluates all the active VPLs and creates various performance reports and improves its VPL evaluation algorithm.

5. Conclusion The 3PL vendor provides logistics services to the supply chain as an associate object of the later. By building up a private logistics service unit, virtual private logistics subsystem (VPL) with a multi-agent system, a 3PL vendor could integrate its logistics business process with the business process of the supply chain members. Moreover, the logistics ?ow and the logistics information ?ow are seamlessly connected with the ?nancing ?ow and trading ?ow of the supply chain. The 3PL vendor would keep the stability of its own business process while providing customized services to the supply chain members.

References
Liu, Da-you, Yang, Kun, & Chen, Jian-zhong (2000). Agents: present status and trends. Journal of Software, 11(3), 315–321. McQuiston, Daniel H. (2001). A conceptual model for building and maintaining relationship between manufacturers’ representatives and their principals. Industrial Marketing, 30, 165–181. Lambert, Douglas M., & Cooper, Martha C. (2000). Issues in supply chain management. Industrial Marketing Management, 29(1), 65–83. Duo, Zhang (2000). E-commerce and the Logistics. Beijing: Tsinghua University Press pp. 14–18. Jian-me, Zhang (1999). The third partner logistics-new trend of the international logistics development. Logistics and Material Handling, 4(3), 4–8. Wooldridge, Michael J., Jennings, Nicholas R. (1994). Agent Theories, Architectures, and Languages: A survey, Intelligent agents: ECAI-94 Workshop on Agent Theories, Architectures, and Languages, 8–9 August, 1994, Amsterdam, the Netherlands: 1–39. Shen, Shao-ji (2000). The report of analysis of supply and demand in Chinese logistics market. Logistics Technology and application, 2, 5–11.


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