agent based b2b mkt place

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7Designing an Agent-Based B2B Market Place for Third PartyLogistics Service Providers (3PLs)

Designing an Agent-Based

B2B Market Place for Third-Party

Logistics Service Providers (3PLs)

Ashwin Kumar* and Sandeep Dulluri**

* MBA Student, Kakatiya Institute of Technology and Science (KITS) Warangal, AndhraPradesh, India. E-mail: [email protected]

** Consultant at IBM India Pvt. Ltd., Hyderabad, India; and is the corresponding author.E-mail: [email protected]

2011 IUP. All Rights Reserved.

Introduction

Logistics is one of the key components in supply chain network. Logistics is an

inseparable and ubiquitous part of any manufacturing or service supply chain (Simchi-

Levi and Philip, 1999). Logistics is defined as the broad range of activities concerned

with effective movement of semi-finished products or services from one business to

another or from distributor/retailer to the customer. The main goal of logistics is to

ensure the availability of the right product/service at the right spot, in the right time

and the right cost.

A B2B market place is a mechanism which coordinates the buyers (enterprise of

buyer) and sellers (enterprise of seller), and helps the buyer to get the details of

various goods and services that are offered by the sellers in the market. There is a

small entry fee for the registration of buyers and sellers in the market. The market

mechanism essentially keeps track of various logistics providers financial and non-

financial performance measures. Agent-based technology is used to dig the details ofvarious logistics service providers available. Further, the agent can also be used for

mapping of the right logistics provider to a buyer of the services, depending on the

buyers capacity.

Logistics is the primary building block of any manufacturing or service supply

chain and is a key factor for improving the performance and productivity of

manufacturing and service organization. A B2B market place for the logistics

service providers basically provides the infrastructure for matching the

requirements of the buyer with a right logistics service provider. In the current

paper, a Double Auction model is implemented for winner determination.


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The IUP Journal of Operations Management, Vol. X, No. 4, 20118

Relevant Literature

There is a rich treasure of literature on designing and development of agent-basedmarket places. For a detailed overview on logistics, one can refer to Bowersox and

David (1996). The design details of an agent-based market place named Kasbah are

provided in Chavez and Maes (1996). The authors also present the details of

implementation of the prototype for the agent-based (virtual) market place. Further,

Chavez et al. (1997) discuss agent behavior and real-time experimentation issues in

the agent-based market places with several users, while Tewari and Maes (2000) discuss

the design and implementation issues of agent-based market places.

The implementation of an agent-based system for order management is discussed

in Srinivasa et al. (2002). Further, Rothkopf and Park (2001) present an elementary

introduction to auctions, while Ledyard et al. (2002) provide the details of first use ofCombined Value Auctions (CVA) for transportation services.

Overview of Logistics Processes

Logistics is mainly divided into two categories:

1. B2B logistics; and

2. B2C logistics

The area of B2B logistics is very important and it forms about 80% of the total

logistical activity. B2B logistics is further divided into two distinct categories, viz.,

inbound logistics and outbound logistics (Zhang et al., 2001).

Inbound Logistics: It refers to the management of material movement and integration

from component suppliers to a manufacturer/assembler.

Outbound Logistics: It refers to the management of material movement from the

manufacturer/assembler to distributors and retailers.

Role of Logistics in Supply Chain

An integrated supply chain is a group of independent companies often located at

different geographical locations, forming a strategic alliance with a common goal of

designing, manufacturing, and delivering the right-quality products at right place to

the customer groups faster than other alliance groups and vertically integrated firms

(Viswanadham, 2000). A schematic representation of an integrated supply chain

network is shown in Figure 1.

Examples of integrated supply chain networks are automobile industry, apparel

industry, pharma industry, etc.

These integrated networks are not under a single ownership, rather it is a group

formation of independent companies in strategic alliance with some specific purpose.

A well-designed logistics network provides a streamlined material flow among the


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Figure 1: Schematic Representation of an Integrated Supply Chain Network

Internet

Information Network

LogisticsProvider

Customer

Assembler

Distributor

BankRetailer

Supplier

Supplier

LogisticsNetwork

Material FlowIntegration

LogisticsHub

partners of the integrated supply chain network cutting down the lead time and cost ofmoving raw materials, semi-finished and finished products to their destinations. A

customer order triggers several B2B and B2C logistics operations (Viswanadham and

Gaonkar, 2001).

e-Market Places for Logistics Service Providers

Internet and emergence of e-markets have had widespread impact on supply chain

execution by offering easy and convenient access to the business partners across the

world. Digital market places (e-market places) have emerged as a key information and

transaction node in the integrated supply chain network (Lau and Lo, 2000). There

are two major benefits for the logistics service providers with the digital markets. They

are:

1. They can align their processes to support the growing needs of the market;

and

2. It reduces their operation cost and transaction costs, identifies new business,

and improves their efficiency.

Electronic market places enable the sharing of information and provide transparency

through the supply chain (see Figure 2).


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Figure 2: Logistics Market Places

VerticalExchange

Sea Cargo3PLs

AgentsFreight

Air Cargo

LogisticsExchange Other Exchange

Sellers

Buyers

Problem Description

In the present study, the problem is to determine a logistics provider based on certain

performance criteria. This is a non-trivial task. In our current model, we focus on twomajor aspects for performance evaluation, viz., cost of service and lead time (mean

and variance of lead time).

Model

Objective: There are two objectives in this model of agent-based B2B market place

design for logistics service providers:

For Buyer: To find the logistics service provider (seller) with minimum service cost,

besides minimum lead time (i.e., less mean lead time and also less variance of lead

time). It is mathematically given as:

Minimize Z1

= (Cost, Lead Time) ...(1a)

Z1= (C,

l

l

l2) ...(A)

For Seller: To find the buyer who is offering maximum price (cost) for the service,

besides maximum lead time (i.e., high mean lead time and also high variance of lead

time). Mathematically, it is given as:

Maximize Z2

= g (Cost, Lead Time) ...(1b)

Z2= g(C,

l

l

l2) ...(B)


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Determining the objective functions is a complex task, and it is done through

statistical analysis. As per the literature, we fit the objective function as a linear function

of cost and mean lead time, and a nonlinear (quadratic function) of variance of lead

time.

This is written as:

Zj=C+

l

l

l2 ...(2)

where

= Weightage factor for the cost (= 0.75)

= Weightage factor for the lead time (= 0.15)

= Weightage factor for the standard deviation of lead time (= 0.07)

= Weightage factor for the variance of lead time (= 0.03)

l= Mean of lead time

2l= Variance of lead time

l

= Standard deviation of lead time

= Standard error (we assume that error is 0 in this casedeterministic)

Zj

= Objective function, wherej = 1 is the objective function of the buyer, and

j = 2 is the objective function of the seller

The objective functions of the buyers and sellers (logistics service providers) can

be treated as the matching criteria to select their choice of seller or buyer respectively).

In our current model, the cost of service forms a major aspect for the selection of

logistics service providers and hence in the matching of buyers with sellers. Thus, we

assign maximum weightage to the cost factor. The second major factor in the partner

selection in the market place is the lead time (l, mean of lead time in specific). The

final factor incorporated into the objective function is the standard deviation of lead

time (l), and variance of the lead time (2

l).

Solution Architecture

We give a detailed solution architecture for agent-based B2B market place using Unified

Modeling Language (UML) framework.

UML Modeling for the Agent-Based B2B Market Place for Logistics

Service Providers

For the basics of UML modeling one can refer to Booch et al. (2000) and

Narahari (2002).

Requirements

The agent registers the buyers in the market place.

The agent also registers the sellers in the market place.


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The agent maintains the database of both buyers and sellers.

The agent can update/delete (unregister) details of a buyer. The agent can update/delete (unregister) details of a seller.

The agent evaluates the requirements of buyers.

The agent evaluates the performance of sellers.

The agent generates the reports of buyers and allows its access to sellers

(logistics service providers) upon request.

The agent generates the reports of sellers (logistics service providers) and

allows its access to the buyers upon request.

The agent does the task of efficient matching of the buyers with the sellers

(logistics service providers).

Analysis

The analysis is intended to capture and describe all the requirements of the system

developed, and to make a model that defines the key domain classes in the system

(i.e., what is handled in the system, by the system, etc.).

The purpose of analysis is to provide an understanding and enable a communication

about the system between the developers and the people establishing the requirements

(i.e., users of the system).

Analysis is not restricted to the technical solutions or details. It is the first step of

really understanding the requirements and the reality of the system under design.

Requirements Analysis

The first step in the analysis is to define the use cases, which describe what the agent-

based B2B market place provides in terms of functionalitythe functional requirements

of the system.

Use case analysis involves reading and analyzing the specifications, as well as

discussing the system with potential usersbuyers and sellers (logistics service

providers).

Identifying the Actors in the System

There are three actors in the system:

1. Agent2. Buyer; and

3. Seller

Key Use Cases of Each Actor

Agent:

Updating the database of buyers.


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Updating the database of sellers (logistics service providers).

Registering new users (buyer/seller) in the market place.

Deleting the users (buyer/seller) from the market place.

Generating the reports of users (buyers/sellers) registered in the market place.

Evaluating the performance of sellers (logistics service providers).

Considering the requests of buyers.

Buyer:

Registering with the market place.

Unregistering with the market place.

Updating the details in the market place.

Requesting for the reports of sellers from agent.

Finding the logistics service provider who matches the requirements.

Seller (Logistics Service Provider):

Registering with the market place.

Unregistering with the market place.

Updating the details in the market place.

Requesting for the reports of buyers from agent.

Finding the potential buyer who matches the requirements.

Based on the above-mentioned key use cases, the use case diagram is given in

Figure 3. It is evident from the use case diagram that both buyer and seller (logistics

service provider) depend on the agent for the transactions in the market place. In this

context agent can be treated as the administrator of the system, who does the

maintenance of the system, updates databases of both buyers and sellers, deletes

databases if required, appends new buyers or sellers to databases.

An On-Line Analytical Processing (OLAP) system can be employed in conjunction

with the agent, which facilitates the agent to surf the net and search for potential users

(both buyers and sellers).

Analysis of the System Designed and the Domain

To conduct domain analysis, the specification of the system and the use cases should

be thoroughly understood. The aspects on which the system should focus should be

made clear.

The domain classes in the system are identified as: agent, buyer, seller (logistics

service provider). These domain classes are defined with a stereotype , which is user-defined stereotype specifying that objects of the class are


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part of the key domain and should be stored persistently in the system. The class

diagram of the system is presented in Figure 4.

The class diagram is a more general case of the B2B market place with multiple

agents for a single market. In the present model, we focus on single-agent model.

The state transition diagram for matching of buyers with logistics service providers

is given in Figure 5.

Figure 3: Use Case Diagram for Design of Agent-Based B2B Market Place

for Logistics Service Provider


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Design

The design phase expands and details the analysis model by taking into account all

technical implications and restrictions.

The main purpose of design phase is to specify a working solution that can be

easily translated into programming code. The classes defined in the analysis are

detailed in this phase, and new classes are added to handle technical areas, such as adatabase, Graphical User Interfaces (GUIs), etc.

The design can be divided into two segments:

1. Architectural Design: This is a high-level design where the packages

(subsystems) are defined, including the dependencies and primary

communication mechanisms between the packages. The goal of architectural

design is to come up with a clear and simple architecture.

Figure 4: Class Diagram for Agent-Based B2B Market Place

for Logistics Service Provider

Agent

code: Code

addbuyer()

deletebuyer()

modifybuyer()

addlsp()

deleteseller()

modifyseller()

rep_buyer()

rep_seller()

matchbuyers()

matchsellers()

HasHasHas

1..n 1..n

LSP(Seller)

Integer:

name:

lsp_register()

lsp_unregister()

lsp_update()

lsp_req_report()

lsp_match_buyer()

buy_register()

buy_unregister()

buy_update()

buy_req_report()

buy_match_seller()

Integer:

name:

Buyers

1..n

Has

1..n

Integer:

name: Market

Market

addagent()

deleteagent()

updateagent()

generatereports()


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In the current model, we have used Visual Basic as the front end (since it has the

features of object orientation). Besides, it forms a good choice for interface design with

good GUI features. The database such as DB2 can be used to link the JAVA code via

JDBC.

A well-designed architecture is the foundation for an extensible and changeable

system. The packages can concern either handling of a specific functional area or a

specific technical area. It is vital to separate the application logic (i.e., the domain

classes) from the technical logic so that changes in either of these segments can be

done easily without much impact on the other part. The internal design of package

with architectural overview of application packages, database, and their dependencies

is shown in Figure 6.

2. Detailed Design: This part details the contents in the package, so that all

classes are described in detail to give clear specifications to the programmer

for coding the class. The purpose of detailed design phase is to describe the

new technical classes (classes in the GUIs) and database packages to expand

Figure 5: State Transition Diagram for Matching Buyers

and Logistics Service Providers

Not Matched

Entry: No. of Matches= 0

Buyer/Seller registry/No. of matches ++

Matches removed (if an LSPis chosen by buyer)

[No. of matches = 1]/No. ofmatches

Matched

Matching Buyer and LSP/No. of matches ++

Match chosen [No. ofmatches >1]/ No. of

matches


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and detail the descriptions of

the business object class,

which is already done in the

analysis phase.

Database Package

This application of the design of

agent-based market place for logistics

service provider must have the

objects to be stored persistently,

therefore a database layer must be

added to provide this service. The

natural solution in a full-fledged

application is to use a commercial

database such as IBM-DB2 for this

purpose. The application layer does

not expose details of data storage to

either parties (buyers and suppliers).

The details of storage in the database

is hidden from the user and is

accessible through web browser via

Java code, as insert (), delete (),

update () are facilitated via the Java

database code.

Activity Diagrams

The activity diagrams give a pictorial view of the various functionalities of the system

designed. The activity diagrams of buyer and seller (logistics service provider) are

shown in Figures 7 and 8 respectively.

Sequence Diagrams

A sequence diagram for matching buyers and sellers is shown in Figure 9. These are

helpful in designing the user interfaces for the system.

Market Negotiation Mechanism

The current model, works on the principle of Double Auction for winner determination(refer Kameshwaran and Narahari, 2001, for a detailed survey on various auction

mechanisms in market place design), i.e., each buyer checks the reports of the price

quotes, mean lead times of delivery and variance of lead times of the logistics service

providers, and depending on the quotes of sellers (logistics service providers), she

can update her quote for price, mean delivery time and also the variance of the lead

time. Similarly, the logistics service provider can see the reports of the quotes of the

buyers of the service and accordingly they can modify (increase or decrease) their

Figure 6: Internal Design of Package

GUI (Browser)

Business Objects

(Java)

Database Package(DB2)

Utility Package(Agent-BasedB2B MarketApplication)


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Figure 8: Activity Diagram for Logistics Service Provider (Seller)

Seller

AgentRegister in

Market place

Add detailsof seller

Generate reportsof buyer

Request forbuyers

Select buyer

Figure 7: Activity Diagram for Buyer

Register inMarket place

Buyer

Agent

Add details ofbuyer

Generate reportsof seller

Request forseller reports

SelectLSP (Seller)


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price quotes. Thus, the market mechanism functions and results in maximizing the

overall satisfaction of the market stakeholders.

Conclusion and Future Work

In this paper, we have proposed a solution framework for B2B market for Third-Party

Logistics Service Providers (3PLs). We have employed UML for architecting this

framework. We use a double auction mechanism that would maximize the overall

satisfaction of the market stakeholders.

Some areas for future work include:

Extending our model and framework specifically to capture the interactionbetween price bundles and service quality.

Extending to other auction models.

Considering the B2C market: the requirement in this case would be to enhance

the scalability of the model.

Enhancing the features and mobile enablement for agile decision making.

Figure 9: Sequence Diagram for the Use Case of Matching LSP for a Buyer

Add BuyerWindow

BuyerDetails

GenerateReports of

Seller

Match LSPto Buyer

Agent

1. Find Buyer 2. Find(String)

3. Add Buyer()

4. GenerateReports of LSP

5. Match LSP()


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References

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2. Bowersox Donald J and David J Closs (1996), Logistical Management: The

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3. Chavez Anthony and Maes Pattie (1996), Kasbah: An Agent Marketplace for

Buying and Selling Goods, MIT Media Lab.

4. Chavez Anthony, Dreilinger Daniel, Guttman Robert and Maes Pattie (1997),

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5. Garg Dinesh (2002), Design of Six Sigma Supply Chains, M.Sc. (Engg.) Thesis,

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6. Hopp W J and Spearman M L (1996), Factory Physics, Irwin.

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14. Tewari Gaurav and Maes Pattie (2000), Design and Implementation of an Agent-

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Reference # 07J-2011-11-01-01


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