Agent Based b2b MKT Place

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

Designing an Agent-Based
B2B Market Place for Third-Party
Ashwin Kumar* and Sandeep Dulluri**
* MBA Student, Kakatiya Institute of Technology and Science (KITS) Warangal, Andhra
Pradesh, India. E-mail: ashwindulluri@gmail.com
** Consultant at IBM India Pvt. Ltd., Hyderabad, India; and is the corresponding author.
E-mail: dulluri@gmail.com
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 of
various 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.
The IUP Journal of Operations Management, Vol. X, No. 4, 2011 8
Relevant Literature
There is a rich treasure of literature on designing and development of agent-based
market 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 of
Combined 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
Figure 1: Schematic Representation of an Integrated Supply Chain Network
Internet
Information Network
Logistics
Provider
Customer
Assembler
Distributor
Bank Retailer
Supplier
Supplier
Logistics
Network
Material Flow
Integration
Logistics
Hub
partners of the integrated supply chain network cutting down the lead time and cost of
moving 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).
Figure 2: Logistics Market Places
Vertical
Exchange
Sea Cargo
3PLs
Agents
Freight
Air Cargo
Logistics
Exchange
Other Exchange
S
e
l
l
e
r
s
B
u
y
e
r
s
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 two
major 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 Z
1
= (Cost, Lead Time) ...(1a)
Z
1
= (C,
l
, o
l
, o
l
2
) ...(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 Z
2
= g (Cost, Lead Time) ...(1b)
Z
2
= g(C,
l
, o
l
, o
l
2
) ...(B)
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:
Z
j
= o C+|
l
o
l
o
l
2
c ...(2)
where
o = 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
o
2
l
= Variance of lead time
o
l
= Standard deviation of lead time
c = Standard error (we assume that error is 0 in this casedeterministic)
Z
j
= Objective function, where j = 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 o. 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 (o
l
), and variance of the lead time (o
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.
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. Agent
2. Buyer; and
3. Seller
Key Use Cases of Each Actor
Agent:
Updating the database of buyers.
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 <<Business
Object>>, which is user-defined stereotype specifying that objects of the class are
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
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 a
database, 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()
Has
Has Has
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()
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 LSP
is chosen by buyer)
[No. of matches = 1]/No. of
matches
Matched
Matching Buyer and LSP/
No. of matches ++
Match chosen [No. of
matches >1]/ No. of
matches
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-Based
B2B Market
Application)
Figure 8: Activity Diagram for Logistics Service Provider (Seller)
Seller
Agent
Register in
Market place
Add details
of seller
Generate reports
of buyer
Request for
buyers
Select buyer
Figure 7: Activity Diagram for Buyer
Register in
Market place
Buyer
Agent
Add details of
buyer
Generate reports
of seller
Request for
seller reports
Select
LSP (Seller)
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 interaction
between 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 Buyer
Window
Buyer
Details
Generate
Reports of
Seller
Match LSP
to Buyer
Agent
1. Find Buyer
2. Find
(String)
3. Add Buyer()
4. Generate
Reports of LSP
5. Match LSP()
References
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User Guide, Addison Wesley, Pearson Education Asia.
2. Bowersox Donald J and David J Closs (1996), Logistical Management: The
Integrated Supply Chain Process, AAAI Technical Report SS-96-02, McGraw Hill.
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),
A Real-Life Experiment in Creating an Agent Marketplace, MIT Media Lab.
5. Garg Dinesh (2002), Design of Six Sigma Supply Chains, M.Sc. (Engg.) Thesis,
Department of Computer Science and Automation, Indian Institute of Science,
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6. Hopp W J and Spearman M L (1996), Factory Physics, Irwin.
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nd
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Reference # 07J-2011-11-01-01
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7 Designing an Agent-Based B2B Market Place for Third Party

Logistics Service Providers (3PLs)

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