Building An Expert System For Maritime Container Security Risk Management PDF

IJAL Editorial Board
Editor-in-Chief: Zongwei Luo, U. of Hong Kong, China
Associate Editors: Edgar E. Blanco, Massachusetts Institute of Technology, USA

Kevin Cullinane, Edinburgh Napier U., UK
Henry Fan, Nanyang Technological U., Singapore
Hans-Dietrich Haasis, U. of Bremen, Germany
Tobias Mettler, SAP Research, Switzerland
Frank Straube, TU Berlin, Germany
Chelsea C. White III, Georgia Institute of Technology, USA
Xiong Youlung, Huazhong U. of Science and Technology, China
IGI Editorial: Heather A. Probst, Director of Journal Publications

Jamie M. Wilson, Assistant Director of Journal Publications
Chris Hrobak, Journal Production Editor
Gregory Snader, Production and Graphics Assistant
Brittany Metzel, Production Assistant
International Editorial Review Board:
Jose Humberto Ablanedo Rosas, U. of Texas at El Paso, Danuta Kisperska-Moron, Karol Adamiecki U. of
USA Economics, Poland
Evon Abu-Taieh, Arab Academy for Banking and Senthil Kumar, CMS College of Science and
Financial Sciences, Jordan Commerce, India
Mohammad M Amini, The U. of Memphis, USA Andrew Lim, City U. of Hong Kong, Hong Kong
Frank Arendt, ISL Institute of Shipping Economics and Chad Lin, Curtin U. of Technology, Australia
Logistics, Germany Miao Lixing, Tsinghua U., China
Ezendu Ariwa, London Metropolitan U., UK Dubosson Magali, Haute Ecole de Gestion de Genève,
Gildas Avoine, Université catholique de Louvain, Belgium Switzerland
Indranil Bose, U. of Hong Kong, Hong Kong Sanjay Misra, Atilim U., Turkey
Miguel Gastón Cedillo-Campos, Supply Chain Research Shima Mohebbi, K.N.Toosi U. of Technology, Iran
and Development Center, Mexico Zhang Mun, Shenzhen-Jinan U., China
Naoufel Cheikhrouhou, Ecole Polytechnique Fedrale de Malgorzata Pankowska, U. of Economics, Poland
Lausanne, Switzerland Hennariina Pulli, U. of Turku, Finland
Weiping Chen, Virginia Tech, USA Jasenka Rakas, U. of California Berkley, USA
Paul Chou, IBM Thomas J. Watson Research Center, USA Venky N. Shankar, Pennsylvania State U., USA
Kim Seung Chul, Hanyang U., Korea Jun Shu, Pennsylvania State U., USA
Christophe Claramunt, Naval Academy Research Ulla Tapaninen, U. of Turku, Finland
Institute, France Amy J.C. Trappey, National Taipei U. of Technology,
Arianna D’Ulizia, IRPPS, Italy Taiwan
Fragniere Emmanuel, Haute Ecole de Gestion de Bikem Türkeli, Isik U., Turkey
Genève, Switzerland David Walters, U. of Sydney, Australia
Yulian Fei, Zhejiang Gongshang U., China John R. Williams, Massachusetts Institute of
Samuel Fosso Wamba, U. of Wollongong, Australia Technology, USA
GR Gangadharan, Novay, The Netherlands Farouk Yalaoui, UTT, France
Xin Guo, U. of California - Berkeley, USA Benjamin Yen, U. of Hong Kong, Hong Kong
Byung-In Kim, Pohang U. of Science and Technology Banu Yuksel Ozkaya, Hacettepe U., Turkey
(POSTECH), Korea Guoqing Zhang, U. of Windsor, Canada
Sheung-Kown Kim, Korea U., Korea Chen Zhou, Georgia Institute of Technology, USA
IGIP IGI Publishing

www.igi-global.com
cALL for ArtIcLES
International Journal of Applied Logistics

An official publication of the Information Resources Management Association
The Editor-in-Chief of the International Journal of Applied Logistics (IJAL) would like to invite you to consider submitting
a manuscript for inclusion in this scholarly journal. The following describes the mission, coverage, and guidelines for
submission to IJAL.
m iSSioN
The mission of the International Journal of Applied Logistics (IJAL) is to provide a prestigious
forum of innovative findings for applied research and development in logistics and supply
chain management. Providing researchers, practitioners, and academicians with insight into
a wide range of topics, this journal disseminates the theories and technological progressions
in applied research, advances in logistics and supply chains, and industry experiences in the
adoption of developed and emerging theories and technologies to enhance competitiveness
towards enabling efficient and sustainable knowledge-driven economy.
ToPicS oF iNTEREST (iNclUDE bUT aRE NoT limiTED To):

• Enabling technologies
• Business process automation and re-engineering ISSN 1947-9573
• Data engineering and decision support systems eISSN 1947-9581
• GPS, GIS, and location based systems Published quarterly
• Security, vulnerability, and risk management
• Service science and service oriented computing
• Impact and application domains
• Banking and financing • Agile, lean, and resilient supply chain
• Manufacturing • Computational logistics
• Marketing and advertisement • Inventory and materials management
• Public and communications • Metrics and performance measurements
• Tourism • Project management
• Innovation management and sustainable development • Organizational and economical issues
• Collaborative development of innovations • Business integrity and insurance
• Innovation process and methodologies in logistics and supply • E-business, internet-enabled logistics, and supply chain
chains practices
• Organizational innovations in logistics and supply chains • Enterprise interoperability, integration, and management
• Sustainable supply chain networks • ERP, CRM, SRM, and WFM
• Technology adoption and risk management • Integration of financial and physical flows
• Logistics and supply chain management • Knowledge and information management
All submissions should be e-mailed to:

Zongwei Luo
eic.jal@gmail.com
Ideas for Special theme Issues may be submitted to the Editor-in-chief.
Please recommend this publication to your librarian. For a convenient

easy-to-use library recommendation form, please visit: http://www.igi-
global.com/ijal and click on the "Library Recommendation Form" link along
the right margin.
International Journal of Applied
Logistics
January-March 2011, Vol. 2, No. 1
Table of Contents
Research Articles
1 Introducing Quality of Service Criteria into Supply Chain Management
for Excellence
Roman Gumzej, University of Maribor, Slovenia
Brigita Gajšek, University of Maribor, Slovenia

17 The Development of Synergy Model on Internal and External Suppliers for Asian
Airlines Industry
Yudi Fernando, Universiti Sains Malaysia, Malaysia
Norizan Mat Saad, Universiti Sains Malaysia, Malaysia
Mahmod Sabri Haron, Universiti Sains Malaysia, Malaysia
Suhaiza Zailani, Universiti Sains Malaysia, Malaysia
35 Building an Expert-System for Maritime Container Security Risk Management

Jaouad Boukachour, University of Le Havre, France
Charles-Henri Fredouet, University of Le Havre, France
Mame Bigue Gningue, University of Le Havre, France
57 The 2008 Survey of Indian Third-Party Logistics (3PL) Service Providers:

Comparisons with the 2004 Survey of Indian 3PLs and 2006 Survey of
North American 3PLs
Subrata Mitra, Indian Institute of Management Calcutta, India
75 An Improved Lightweight RFID Authentication Protocol

Xiaowen Zhang, College of Staten Island - CUNY, USA
Zhanyang Zhang, College of Staten Island - CUNY, USA
Xinzhou Wei, New York City College of Technology – CUNY, USA
84 Research of Supply Quality Control and Optimization Under Multi-Period

Dynamic Game
Jun Hu, Zhejiang Gongshang University, China
Yulian Fei, Zhejiang Gongshang University, China
Ertian Hua, Zhejiang Gongshang University, China
International Journal of Applied Logistics, 2(1), 1-16, January-March 2011 1
Introducing Quality of Service

Criteria into Supply Chain
Management for Excellence
Roman Gumzej, University of Maribor, Slovenia
Brigita Gajšek, University of Maribor, Slovenia
Abstract
This article is focused on a sub domain of quality, namely, quality of service. Considering supply chain man-
agement, the authors believe that it is important to distinguish between a quality of product (also service)
offered by producers and service providers and a quality of service which is achieved between any supplier
and customer, not only a consumer, along a supply chain. Quality of product represents producer’s/service
provider’s commitment and is subject of various quality certificates issued by inspection authorities. This
research examines the quality of service, which is provided by a supplier to its customer along the supply
chain, between any pair of chain elements fulfilling this relation, including the common retailer-consumer
relation. The authors introduce measurement points into a consumer-centric supply chain model for the defined
criteria and defined the method of their monitoring and overall supply chain quality of service evaluation.
Finally, the authors assess the envisaged impact of the results of their measurements on supply chain excel-
lence, providing management with an opportunity to identify weak spots.
Keywords: Customer-Centric Supply Chain, Information and Communication Technology Support,

Management, Measurement, Model, Quality of Service Criteria
Introduction and small-sized companies managed to live

up to their competitive edge. They could more
Linear supply chain structure (on left hand side quickly adapt to market changes because of
of Figure 1) was appropriate and sufficient in their smaller-sized production and logistics. It
times of great economical growth. However, became obvious that in times of quick market
its shortcomings became obvious, when the changes the linear supply chain model, which
growth stopped and adaptability to quick was aimed at large scale production, was no
market changes was sought. Since the sup- longer appropriate. One could speculate that the
ply overgrew demand on the global level, the secret of success in the demanding economical
economic situation of the companies involved situation lies within a different kind of supply
grew worse. At that time mainly the medium chain model and its management automation
by employing information and communication
technology. Evolution towards a consumer-
DOI: 10.4018/jal.2011010101
Copyright © 2011, IGI Global. Copying or distributing in print or electronic forms without written permission of IGI Global
is prohibited.
2 International Journal of Applied Logistics, 2(1), 1-16, January-March 2011
centric supply chain model (on right hand side We identified QoS among supply chain
of Figure 1) benefited from quicker adaption elements as vital for supply chain existence and
to reduced demand and easier adoption of source of trust between supply chain elements.
new kinds of products/services. Through its In literature we noticed plenty of contributions
introduction and the mentioned technological dealing with item quality management and
support capitalization of market changes was methods for assuring and improving their qual-
made possible. ity. On the other hand, we discovered a lack of
Different authors (Ketchen, Rebarich, Hult, research on QoS, which would monitor one or
& Meyer, 2008) emphasize the importance of more items’ handover between a supplier and a
delivering superior total value to the customer customer. Our research is focused on the QoS,
in terms of promptness, cost, quality and flex- which is provided by a supplier to its customer
ibility rather than focusing primarily on prompt- along the supply chain, between any pair of
ness and cost. The presented article is focused chain elements fulfilling this relation, includ-
on quality of service (QoS), which encom- ing the common retailer-consumer relation.
passes all listed terms in relation to the cus- We are convinced that most supply chains are
tomer. Considering supply chain management lacking a consistent method for keeping track
(hereinafter referred to as SCM), we believe of individual connection’s and total supply
that it is important to distinguish between a chain’s QoS.
quality of product or service offered (hereinaf- It is reasonably argued that satisfied cus-
ter referred to as “item”) that is produced by tomers will have positive influence on sale,
one or more suppliers and a QoS which is keeping trust and conducting advanced forms
achieved between any supplier and customer, of relations. Fact is that customer needs are
not only a consumer, along a supply chain. mostly multifaceted. Consequently, supply
Quality of an item represents producers’ com- chains have to provide their outcomes in terms
mitment and is the subject of various quality of overall customer satisfaction in every chain
certificates issued by inspection authorities. phase. We are focused on the service, which
Although the practice occasionally reports dif- is needed to establish the flow of items and
ficulties with given items’ quality, despite the their associated information. Like some other
adopted quality certificate, we understand these authors, Chowa et al. (2008) summarizes that
unpleasant cases as examples of unjustified in competitive environments customers, in need
trust of a supply chain towards a specific sub- for their own satisfaction, require from business
ordinated production/service element. enterprises better and cheaper items, shorter
Figure 1. General linear and customer-centric adaptable supply chains (Ballou, 2004).
is prohibited.
response times, more product lines, and higher introduced and their continuous observation
service levels. Consequently, to improve service should support managements in achieving it
level, it is important to measure current system by identifying and improving the phases which
performance on the level of the supply chain. diminish customer satisfaction. In the conclu-
Measuring it just on the level of any particular sions an outlook is given on where and how
company is insufficient. As mentioned in the the presented solutions may be put into use.
previous research (Chowa et al., 2008), business
executives and managers recognize that the
ultimate success of any enterprise is no longer SCM Performance
built around a firm’s capability and capacity, Measurement Overview
but on a supply chain’s capability and capacity.
In the constantly changing global economy
We discovered a few recent studies which begun
flexible production and services are sought.
to consider both the upstream and downstream
According to SCM approach, organizations
side of a supply chain simultaneously.
do not seek to achieve cost reductions or profit
Further more, traditional selling channels
improvements at the expense of their supply
are supplemented by e-commerce. Key to satis-
network partners, but rather strive to make the
fying customers that purchase over the internet
supply network more competitive as a whole
is an effective logistics system that successfully
(Romano, 2003). When considering improving
delivers the items and related information in
SCM and the fact whether it really pays (Otto
an efficient manner. Otherwise, customers will
& Kotzab, 2003) a holistic approach to supply
switch to other internet stores or switch back to
chain modeling (Chan & Qi, 2003) has been
more traditional channels (Moberg et al., 2000).
identified as the approach that enables its ap-
From previous research, we could also identify
propriate assessment. One wishes to reason on
the significance of observability and transpar-
the performance of SCM in order to determine
ency of availability. Consumers’ access to the
its efficiency, which ultimately leads to its
internet has greatly expanded their ability to
excellence (Krivda, 2005).
compare offers across a wide array of retailers
According to (Chan & Qi, 2003), the main
(Rabinovich, 2007). We found several published
reasons for employing a holistic approach in
works where authors study the relations between
its evaluation are represented by the otherwise
e-service quality and consumers’ perceptions
identified absence of connection with a strategy,
of performance, satisfaction, and loyalty. Here,
lack of system thinking, in which a supply chain
great emphasis is put on timeliness, correctness,
must be viewed as one whole entity, lack of a
security, safety, and, in very recent time, ecology
balanced approach integrating financial and
issues. This study will fill the research gap in
non-financial measures, as well as loss of supply
the field of supply chain QoS.
chain context, thus encouraging local optimiza-
The purpose of this article is to extend mod-
tion. A supply chain is not just a collection of
els of adaptable consumer-centric supply chains
independent, self-centered enterprises, nor is
by introducing key QoS criteria into them for
SCM the coordination of interfaces between the
their evaluation. The introduction of appropriate
fragmented functions of supply chain members.
measurement points into a consumer-centric
By its very initiatives, the supply chain should
supply chain model for the defined criteria is
be viewed as an integrated entity, and all the
discussed and the envisaged implementation of
members should be functionally coordinated
their monitoring and evaluation by employing
as an extended enterprise (Holmberg, 2000;
information and communication technology is
Lambert et al., 1998). The inward-looking
indicated. Adaptable SCM models for different
view neither promotes excellent management
lines of industry are investigated. Finally, the
of supply chains, nor results satisfactorily in
possible impacts of measurements’ results on
performance measurement.
SCM excellence will be assessed. The criteria
is prohibited.
Many metrics, used in supply chain per- to be considered by systematic examination and
formance evaluation, have been designed to evaluation of these and other relevant criteria. In
measure operational performance, evaluate order to support supply chain benchmarking and
improved effectiveness, and examine strategic supply chain element targeted decision-making
alignment of the whole SCM (Beamon, 1999). A based on them, a check-list of predominantly
metric is defined as a verifiable measure, stated quantitative performance measures needed to be
in either quantitative or qualitative terms and defined and, in the case of SCM, they could be
defined with respect to a reference point. Ideally, defined even for criteria, which by their nature
metrics are consistent with how an operation are qualitative.
delivers value to its customers as stated in mean-
ingful terms (Melnyk et al., 2004). Individual Introducing QoS Criteria into SCM
measures of supply chain performance have usu-
ally been classified into four categories: quality Companies have been measuring the perfor-
(Beamon, 1999; Shepherd & Günter, 2006), time mance of their operations for quite some time.
(Bolstorff, 2003; Shepherd & Günter, 2006), Extending this measurement into the realm of
cost (Bolstorff, 2003; Gunasekaran et al., 2004), collaborative, inter-enterprise operations is
flexibility (Angerhofer & Angelides, 2006; challenging because it is difficult to know, if
Beamon, 1999). They have been grouped by the right things are being measured and what
their attributes – quality and quantity, cost and the target performance should be (Rabin, 2002).
non-cost, strategic/operational/tactical focus, In recent years, a number of firms have realized
and supply chain processes (Gunasekaran et the potential of SCM in day-to-day operations
al., 2004; Shepherd & Günter, 2006). management (Sharma & Bhagwat, 2007). Since
Changed supply chains models and the en- the “performance criteria” concern different
couraged holistic approach to SCM are putting aspects of supply chain efficiency, although
the relevant quality criteria into a new perspec- they mainly measure customer satisfaction
tive. The quality of a product or service is not in supplier-customer relations throughout the
regarded solely from the producer-consumer chain, we introduce the term QoS as a common
perspective. Since customer-supplier relations denominator of all criteria under consideration.
exist throughout the entire supply chain and can In a linear SCM model they would mainly ad-
be established between any pair of elements, dress the retailer-buyer relation; on the other
quality depends not only on the quality policy of hand, customer-led supply chain organization
the producers but on quality of each link in the encourages QoS observations for every pair
supply chain and eventually, so does the price. of elements of the supply chain to which the
Hence, we talk about QoS from the customer supplier-customer relation applies. It is clear
perspective, regardless of the fact, whether it that for effective SCM, measurement goals must
is from the consumer’s or another element’s consider the overall method and the metrics to
standpoint in the supply chain. be used. A list of indispensable criteria and the
QoS criteria pertain to all phases in the method of their assessment will be elaborated
supply chain and mainly concern seamless sup- in more detail in the sequel.
ply, correctness of production and manipulation The main issues associated with outstand-
procedures, transportation processes, product ing QoS in a supply chain are for instance,
information up-to-datedness, dependability timely, correct, flexible, available services on
of supply, production and transport, liability available items, liability on items, observability
of producers and service providers, as well as and integrity of the supply chain (e.g. selling
security of financial transactions and sensitive channels and service locations), maintainability
information sharing. In order to assess these of supply chain links (production lines), inte-
criteria, clearly, all actors in a supply chain need grated inverse logistics services with managed
and transparent environmental impact, etc. In
is prohibited.
the sequel, the individual criteria are assessed Correctness at all levels on the other hand
in detail and their roles within the context of must be ensured regardless on the phase/stage
the supply chain are explained. and operation. Possible errors may have pre-set
fixed times for their elimination or correction.
Timeliness Timeliness and correctness must be assessed
separately, although they are interrelated, since
Timeliness is the ability to meet all deadlines. correcting faults always takes time and leads to
It terms of the element of a supply chain it delays that may compromise timeliness.
represents the ability of a supplier to meet all In a supply chain correctness applies to,
deadlines towards its customer(s) defined in e.g., correct amounts of supply or production,
a supply chain management strategy. Timeli- faultlessness of items, amounts and types of
ness on the supply chain level incurs meeting transport units, transport paths and target loca-
deadlines throughout the entire supply chain, tions, pricing, payments, etc. Correct perfor-
which means that transactions between all pairs mance in a supply chain is the sum of the listed
of actors (in a sequence) occur on time. Usually, and other relevant operations and transactions
there is no bonus for premature transactions, among the actors of the chain. It may include
since this could consequence in e.g. inventory also timeliness of operations in case temporal
stocking at customer-side, hence, producing dis- constraints are defined as prerequisite for the
satisfaction due to increased inventory cost. On correctness of an operation (e.g., payments,
the other side, however, the cost of a postponed delivery times, etc.).
transaction may be anything – from reasonably
low to unreasonably high. In both cases, meeting Dependability
deadlines ensures timely transactions, contrib-
uting substantially to QoS in the supply chain, Dependability is the collective notion of avail-
whereas not meeting them could increase the ability, reliability, safety, security, integrity, and
cost associated with SCM indefinitely. maintainability (Avizienis, Laprie, & Randell,
Timeliness is required between all pairs of 2001). A certain degree of dependability is
actors in a supply chain, although the restrictions expected of any business regardless of its
on the time are different for different phases and kind. Based on it, usually a liability assurance
may range from a few minutes (performing a is issued, especially for food and products and
payment) to a few months (for inverse logistics services that have longer life-cycles with the
and maintenance). It is crucial to enable Just in associated need for inverse logistics consider-
Time/Just in Sequence (JIT/JIS) performance. ation. The individual QoS criteria that constitute
dependability will be described in more detail
Correctness hereafter.
Correctness implies faultlessness and precise-

Availability is the proportion of time a system
ness. These two terms, being sometimes also
is in a functioning condition. In the case
used as synonyms to correctness, have different
of the supply chain this would mean the
meanings with respect to transactions in the sup-
proportion of time in which supplier is
ply chain. On one hand faultlessness represents
functionally available to its customers.
the absence of erroneous transactions, whose
Collectively they represent supply chain’s
correction would result in additional cost for
availability denoting the amount of sup-
their correction as well as extra time to perform,
ply chain’s “up-time” – the proportion
possibly diminishing timeliness. On the other
of time when all links in a supply chain
hand, preciseness adds the predicate of preci-
were available.
sion to faultless transactions, diminishing the
Reliability is the degree of a system’s ability
need for repeated transactions to achieve the
to perform its required functions under
desired performance.
is prohibited.
stated conditions for a specified period of sures for ensuring reliability, safety and
time. This holds and should be measured security apply to supply chain links, their
for all links of a supply chain separately, collective effect is meant to increase the
although an integral value could represent integrity of the supply chain as a whole.
the reliability of the entire supply chain. Maintainability represents the degree of the abil-
The measured values could consist of ity to undergo repairs and modification.
faults when performing foreseen trans- Maintainability of an actor in the supply
actions among links of a supply chain. chain is in part supported by flexibility to
When reasoning on the reliability of the support sustainable long-term operation,
supply chain the minimum value should hence supplementing its long term avail-
be chosen to represent its reliability – “it ability in the changing environment. The
is as reliable as its weakest link”. measures and mechanisms applied with
Safety represents the degree of protection maintenance should not diminish supply
against risks of errors. It is closely related chain integrity. Flexibility represents the
to reliability and robustness, which both degree of a system’s ability to adapt to a
support safety. Robustness is a degree of new environment. In case of the supply
a system’s resilience under stress or when chain we may also consider it as resil-
confronted with invalid input or changes ience of an actor in the supply chain in
in internal structure or external environ- recovering from a shock or disturbance
ment. In a supply chain the stress is rep- originating from (a change in/of) its sup-
resented by any irregularities or changes ply chain environment. Flexibility and
in its structure or demands. In the case maintainability are crucial for facilitating
of the supply chain safety represents the the changes, which occur within the life-
inherent mechanisms which prevent faults cycle of a company and supply chain to
from occurring. This includes any check- which it belongs. In response to market
ing mechanisms on actor level as well as changes fluent production/service line
any associated corrective measures. changes are necessary. Hence, a managed
Security is the degree of protection against production process is required to identify
consequences of failures being induced the phases and components, which need
from the environment of a system. In the to be exchanged in order to perform the
case of a supply chain, security represents requested change in the production line.
protection of the supply chain to outside
influences. As with safety it is increased Liability
by preventive and corrective measures
on actor-level. In law a person is said to be liable, if he/
Integrity represents the absence of improper she is financially and legally responsible for
system state alterations. It is prerequisite something. The liability of actors in a supply
for safety, availability, and reliability, and chain refers to their obligation to fulfill their
is rarely considered as a stand-alone at- responsibilities towards related actors (e.g.,
tribute. In supply chain context it should manufacturers providing faultless products on
be considered for the entire supply chain time in the agreed amount within and during
(the system), whereby any occurring an agreed period of time). Liability relies on
irregularities causing the reduction of verifiability of products and ability of getting
safety, availability and reliability would quality-certificates for them whereas with ser-
diminish it, whilst any actions improving vices it is considered the sole criterion of trust
them would increase it. While the mea- among the customer and its supplier.
is prohibited.
Observability Price
Observability is a measure for how well internal The bottom line of all considerations of QoS
states of a system can be inferred by knowledge in a supply chain is the associated cost of the
of its external outputs. The outputs of a supply measures applied. Of course management shall
chain are products and services, although ideally wish to minimize the financial impact of “over-
(considering inverse logistics and putting the head” measures; however, since these measures
consumers into the supply chain) there should constitute the operations in a supply chain, some
be none. With respect to the mentioned outputs, financial overhead with respect to “basic” pro-
observability represents transparency of the duction and distribution processes is inevitable
supply chain. This means that every product but should be constrained. The increased QoS
and service can be traced back to its origins among elements of the supply chain with es-
and even to its components’. tablished observability enables transparency for
Most important aspects of observability the planning as well as cost-prediction process
from the consumer perspective are the trans- and eases price-setting decisions.
parency of selling channels, service channels Price as a QoS criterion is still often a
and inverse logistics channels. Based on the key factor in the decision-making process of
first, the decision on the most suitable purchase an item-supplier selection as well as customer
location (e.g., closest, certain origin, certain satisfaction. For price-evaluation it is important
make, etc.) can be made. Based on the second, to collect reference prices (e.g., average market
the decision on the most suitable (e.g., nearest) prices, producers’ recommended prices) and
service station can be made. Based on the third, mutually compare them with planned cost of
the decision on where to dispose the product, transactions among links between supply chain
once it is worn-out or irreparable, can be made. elements. In case of perceptible differences it
From the perspectives of other actors in is important to clarify circumstances.
the supply chain, observability must be ensured
at least for their preliminaries and successors, QoS and Added Value
hence, forming a traceability chain for tracking Improvement
and tracing purposes. The absence or reduced
observability of (a portion of) supply chain may In the sequel the typical supply chain models for
diminish the relevance of previous assumptions three different lines-of-industry are considered
on (the part of) supply chain’s QoS. with their specifics. Finally, the impact of the
defined QoS criteria on a business process is
Ecology investigated.
In general, ecology studies the relationships Food Growth

of living organisms with their environment.
In our case the relationship applies to humans The food-growth supply chain is somewhat
running the actors of a supply chain. Today it specific, because the turnover time is typically
is becoming more and more important to assure more critical than with other disciplines. Hence
the transparency of the environmental impact we may wish to ponder timeliness, dependabil-
of supply chain performance. When reasoning ity and ecology higher than other QoS criteria,
on this aspect of a supply chain, the organized although the price criterion is also a key factor
disposal of worn-out or defective products is also here. To ensure quality of supply fresh food is
evaluated in connection with inverse logistics. partly delivered directly to retailers and con-
Here, especially the environmental impact of sumers, which is not so usual with other types
activities connected to items is considered to of supply chains. Although already the linear
facilitate regulations on the ecological suit- supply chain (on left hand side of Figure 2)
ability of the items offered. considers this fact, consumer orientation was
is prohibited.
made even more obvious by (Ngah, 2003), buying products buying services is hence more
putting them into the supply chain together demanding although their supply chain is much
with other actors in the process (on right hand simpler (no explicit input/output logistics). The
side of Figure 2). problem with services is that they rarely come
with an ISO certificate on quality, which puts
Production liability as a criterion into the front-line, besides
timeliness and correctness that are obvious.
In production by reorganizing SCM into a so Since services operate with a higher added
called “adaptive supply chain” in a similar fash- value, the insight into their supply chain and
ion as in food growth the greatest savings are that of their customers would be very beneficial
possible. Putting consumers into relation with for both parties – it would provide the service
all other actors in the supply chain (see Figure companies with the ability for cost optimiza-
3) enables greater flexibility of service and tion, while on the other side it would provide
their different roles in the supply chain, hence their customers with some insurance on the
influencing the development of a product from managed level of quality introduced by the
raw materials and components to its final form. services offered.
This again contributes to their quality and most
importantly increases their market value, since Impact of Supply Chain QoS
their coherence with the consumer’s expecta- on a Business Process
tions may be ensured in advance. Since our
model of customer-oriented supply chain was The introduction of QoS-aware SCM in the
derived from the production supply chain, an adaptable supply chain network emphasizes
equally balanced model of QoS criteria applies its value based on the offered QoS. As can
here, unless management decides otherwise. be seen in Table 1 this approach introduces
improvements throughout the entire supply
Services chain, as well as customers and employees
involved where added value improvements
By reorganizing the services supply chain pos- identified by (SAP, 2003) are aligned with
sibly even greater savings than in production can QoS criteria from our model. Besides general
be achieved, since the purchasing of services is customer-centric SCM properties, like the focus
typically less closely monitored and less tightly switch from the “factory and its product” to the
managed as the purchase of products (Tate, “product for the customer”, the relation among
Ellram, & Billington, 2008). As opposed to
Figure 2. Linear and customer-centric adaptable food-growth supply chains
is prohibited.
Figure 3. Linear and customer-centric adaptable production supply chains
“workers” and “leadership” being replaced by a considers any supply chain as a whole. Probes
“partner” relationship among employees, also, are inserted on every link among two elements
QoS criteria are emphasized – as opposed to of the supply chain. Every transaction on the
the hierarchical supply chain model the value link is monitored and evaluated based on the
of predictability is being replaced by the value provided reference values for the individual
of dependability, responsiveness/timeliness, and criteria. The results are logged and may be
flexibility. The importance of QoS-aware SCM used by any element of the supply chain to
is emphasized also by exchange of position determine weak spots or bottle-necks in the
power by information power, hence, making supply chain. The gathered data may be used
informed decisions becoming the initiator of for analysis of supply chain excellence. This
all business process actions. metrics is enabled by joining the results from the
The business process is best considered individual probes. In order for the benchmark
through a model, representing the virtual en- to be meaningful, all measured values must lie
terprise-network facilitating the decision mak- within a predefined threshold. It shall be used to
ing process. For this purpose a flexible supply enable quick diagnostics and comparison among
chain model has been defined with the QoS supply chains. By constructing a decision or
criteria evaluation built-in. The analytical simulation model based on the gathered data,
model for supply chain QoS evaluation and however, closed loop analysis and performing
quick diagnostics, presented in the sequel, shall “what-if” scenarios shall be possible.
form a basis of a later implementation of a
simulation model, which, based on the charac- Introducing Probes for
teristic data for every supply chain element and QoS Evaluation into the
the same previously defined QoS measurement, Supply Chain Model
would enable supply chain virtualization and
fine-tuning by performing “what-if” scenarios. The adaptive supply chain model and probe
placement is outlined in Figure 4. All possible in-
QoS Evaluation Method terconnections between supply chain members
are outlined in the figure. The probes, denoted
Our evaluation method is based on the adapt- by q, carry two indexes from index sets, marked
able (customer-led) supply chain model and by first letters of names of the interconnected
is prohibited.
Table 1. Increased value categories with the corresponding QoS criteria
Improved customer satisfaction (timeliness, correctness, dependability, liability)

Income raise
• Accurate strategic forecasts (correctness, observability)
• Efficient fulfillment of business goals (observability, maintainability)
Cost reduction
• Accurate tactical forecasts (correctness, observability)
• Efficient input supply (dependability, liability)
• Efficient output supply (dependability, liability)
• Work efficiency (dependability, observability)
• Planning efficiency (observability, maintainability, correctness)
• Materials costs (timeliness, correctness, liability)
Greater resource efficiency
• Accurate transaction-level forecasts (timeliness, correctness, observability)
• Temporal cycle optimization (timeliness, correctness, observability)
• Input supply interval optimization (timeliness, observability)
• Output supply interval optimization (timeliness, observability)
• Capacity efficiency optimization (timeliness, observability)
Employee satisfaction improvement (timeliness, correctness, dependability)
supply chain elements. The individual supply L – Liability (the proportion of transactions
chain elements carry the names of typical rep- for which liability could be established),
resentatives in singular; however, the names O – Observability (the proportion transparent
only denote the type of supply chain elements transactions – for which all measured
and not the number thereof. Hence, there may criteria could be identified),
be any number of, e.g., consumers, producers, E – Ecology (the proportion of transactions
service-providers, etc. cooperating to perform meeting all ecological normatives and
the same (kind of) transaction between supply for which also inverse logistics could be
chain elements. Because of this there may be established), and
a number of, e.g., qsp values, being associated P – Price (the ratio among the price and the
with the same supply chain. average market price for the business
The q is a 7-tuple (T, K, D, L, O, E, P) transaction, representing the overhead
representing the quality on a specific link be- for the link-logistics).
tween a pair of supply chain elements based on
the previously defined criteria, where the indi- The individual values from the q-tuple are
vidual values represent: limited to the (0, 1) ∈ R interval. Since dif-
ferent types of adaptable supply chains (e.g.,
T – Timeliness (the proportion of met deadlines for specific lines of industry) may have more
by lead times), severe demands on individual criteria concern-
K – Correctness (the proportion of correct ing dependability, their impact on it shall be
transactions), emphasized by pondering individual parameters
D – Dependability (an integral value comprising (see Eq. 1), where the values of ponders (a, r,
A (availability), R (reliability), S (safety), s, c, i, m) are limited to a fixed interval (e.g.,
C (security/confidentiality), I (integrity) (1, 10) ∈ R). For the sake of simplicity, the
and M (maintainability/flexibility), pref- authors of this work do not suggest any ponder-
erably calculated as a weighted average ing, meaning that initially ponders should all
value of these parameters), be the same and equal to 1.
is prohibited.
Figure 4. QoS probe placement in the adaptable supply chain model
to constrain deviations from reference values

(a ⋅ A + r ⋅ R + s ⋅ S + c ⋅ C + i ⋅ I + m ⋅ M )
D= defined for the individual criteria.
(a + r + s + c + i + m ) To determine overall supply chain QoS and
(1) obtain a benchmark for comparison the distribu-
tion of QoS criteria measurements around the
(s, p, c, sp, d, r∈Ν) given reference values are important. Hence, we
suggest calculating it as a sum of standard devia-
To determine overall supply chain QoS, tions from reference values of q-components
unfortunately, one cannot average or simply for every criterion (see Eq. 2 and 3):
sum-up the individual values of q. When do-
ing this, two supply chains could end up with Q = s T + s K + s D + s L + sO + s E + s P
the same overall QoS although their structure, (2)
strengths and weaknesses are very differ-
ent. More important for the reasoning on the where the individual summands are calculated
measured values are the values of individual based on the formula (equivalent to):
QoS parameters and the distribution of their
values across the supply chain. We shall set a
reference value and a threshold for any of the 1
measured criteria. If the measured values lie
sT =
N
∑ ∑ (t i,j
− ti, j )2 (3)
i j
near this value and within this range, we have
a fairly well functioning supply chain. How-
ever, if individual values lie beneath or above where ti,j denotes the value, ti, j the reference
the defined threshold this indicates problems value for timeliness and  N the respective
which require our attention (“weak links” in number of probes.
the supply chain). Hence, we must investigate A lower value of Q stands for more excellent
the sources of the deviate values and correct supply chain. At the same time the values of
them – herewith fine-tuning the supply chain individual summands indicate the supply chain
is prohibited.
quality from the respective aspects. Hence, Q the purpose of diagnosis and at the same time
represents the merit of supply chain excellence, appropriate to protect the privacy (confidenti-
based on which similar supply chains (from ality) of each pair of evaluated elements. Both
the same line-of-industry) can be compared. elements in a sequence are engaged in the mea-
Of course it is too soon to set some reference surement of QoS per link. For example, in SCM
values of excellence, which would then serve the gained information about timeliness is used
as a certification criterion, however in time for preventing/abolishing out of stock and too
and by working with a large enough sample, much stock situations as well as minimization of
also this would be possible. The model may the probability of early and late deliveries after
be broadened to model interconnected supply identification of weak connections.
chains in the same way – by simply adding nodes Information and communication technol-
and links with probes to form a larger supply ogy support is required for measuring and stor-
chain – however, because of possibly complex ing the data acquired from probes in the supply
(multiple) interconnections among the chains chain model for their analysis and fine tuning.
elements, it is unreasonable to expect that link- Spreadsheets are sufficient to process the as-
ing two “good” supply chains would result in a sembled QoS values. The associated tools also
“good” supply chain. Hence, the analysis would enable us to represent them visually by quality
have to be performed again for the new links (spider charts), which shall be used to present
and joined in the calculation with the existing the q’s values at individual probes. Visualization
results. In the global market and to perform should assist in the decision-making process of
macro-economical analysis, this scenario is very fine-tuning a supply chain. Building a simulation
likely. However, at this stage and for the sake model based on characteristic information on
of simplicity, our consideration of supply chain the nodes and incorporating the same probes,
excellence is focused on a single supply chain. shall enable “what-if” analysis and additionally
support and fasten the decision-making process.
The Role of Information Support To collect all required data no additional
in Supply Chain QoS Evaluation data inputs and/or additional activities of
employees without added value are need.
Customer-centric adaptable supply chains theo- Calculation includes exported data from sup-
retically allow any combination of processes, ply chain elements’ local databases, which are
functions, activities, relationships and pathways usually fed in by inputs through ERP software
along which items, related information and interfaces. Inputs are made either by hand, or
financial transactions move in and between by barcode scanning, or by the use of RFID.
individual elements of supply chain network. There are no interferences of existent processes
Satisfied consumer is aspired (required) on the manner, nothing is added or removed from sup-
end of any supply chain element combination and ply chain elements interactions on transaction
because of this customer satisfaction needs to be level. Changes in the information system are
established on every link in-between. Therefore needed in the context of the decision-making
it is very important to manage supply chain link- and strategic planning at both, at the level of
by-link and to have an effective measurement individual supply chain elements as well as the
system, as proposed, for weak link diagnostics. entire supply chain. A transparent and perfor-
Subsequent treatment must be done according mance oriented supply chain model may serve
to overall supply network strategy and minimal as a source of information for management
total cost per sold item to the consumer. information systems (MIS) (Laudon, 2003). A
In the proposed model we placed measuring MIS is then used as a switchboard (“electronic
points between supply chain elements, on the kanban”) when performing “what-if” analysis
output of the previous and on the input of the and for transferring the current supply chain
following one. This approach is sufficient for parameters from the model into the real world.
is prohibited.
In order to support the implementation of justifiably placed on them and companies li-
the required measures identified, SCM also ability can be established.
relies on information support. It is used to By employing information technology
facilitate timeliness and to minimize the prob- (e.g., RFID), also item tracking is ensured,
ability of errors. Order and delivery times are increasing observability. Herewith, not only
managed to accommodate the agreed-upon item tracking is enabled but also traceability
due times. On the other hand also production, of the sequence of supply chain elements on
service, maintenance intervals and inverse item-level is assured. These are prerequisite
logistics are handled by information systems. for accurate calculation of total supply chain
Tagging provides for tracking the products to QoS. This is important, since, as mentioned
the consumers. At the same time it ensures before, customer-centric adaptable supply
that the quality of the product delivered is in chains theoretically allow any combination of
correspondence with the companies’ quality processes, functions, activities, relationships
policy and that it is equal with equally labeled and pathways along which items, related in-
products delivered. It also enables tracing formation and financial transaction move in
products through the supply chain for inverse and between individual elements of supply
logistics or market interventions, when prod- chain network. On the other hand traceability
ucts of reduced quality have been identified of products and their components also eases
by customers and must hence be withdrawn their correct decommissioning and ecologi-
from the market. Finally, information support cally aware recycling with inverse logistics.
facilitates payments whose temporal constraints Hence, we may conclude that the information
also apply to their correctness. and communication technology is strongly
The same QoS criteria that were defined integrated with the adaptable customer-centric
as our supply chain QoS parameters also apply SCM providing it with increased QoS also
to the corresponding information systems used from the ecological aspect – thus sustaining
in it. Flexibility of the information system in the quality of life.
correspondence with the controlled production
process ensures that all changes applied during a
reconfiguration in the process are also accounted Conclusion
for in associated processes throughout the sup-
In the article the main characteristics of con-
ply chain. Besides production (re)configuration
temporary SCM have been outlined. With
information support is also utilized for ensuring
adaptive customer-orientation the efficiency
the dependability of machinery involved in
of SCM is substantially improved. However,
the production/service process with product/
the main emphasis should be on the provided
service quality in mind. Thus it is increasing
QoS, which should be continuously improved
its maintainability and integrity. It monitors
in response to constant observation of supply
their life-cycles and maintenance intervals
chain performance and of the market and the
to increase their availability. The sensor and
customers’ needs. The QoS criteria introduced
communication technology support the observ-
into the adaptive supply chain model provide
ability of the service/production processes. It
management with the needed information and
enables the monitoring and detection of relevant
handles to do so.
production states as well as final quality control.
By studying several proposed models for
By regular updates on the state of production,
measuring supply chain performance (Lai et
possibly with automated control allowing for
al., 2004; Agarwal et al., 2006; Li et al., 2005;
stopping and re-starting the process, errors can
Bhagwat et al., 2007) we found out about their
be removed early, preventing greater damage
similarities and differences. Although, we are
and/or financial losses, hence increasing safety
aware of the dual purpose of SCM: to improve
and security. At the same time confidence can
is prohibited.
the performance of an individual organization, the selected lines of industry. We shall also
and to improve the performance of the entire exclude the perception of individual organiza-
supply chain (Li et al., 2005), unlike other tions on their QoS.
authors, we also took the fact that relations Of course the introduction of the proposed
between the organizations in customer centric solution will require some time especially in
supply chains in reality are not always long- large enterprises with complex supply chains.
term (Li et al., 2005) into our consideration. However, the experience of the current global
From this point of view we proposed installing economical crisis shows that the introduction
diagnostics of weak supply chain elements be- of the mentioned concepts and associated
fore the renewal of internal business processes technological improvements is not only highly
in supply chain organizations. In contrast to recommended, but could be considered crucial
performance measurement, where internal and for the long term prosperity of companies acting
external criteria are measured simultaneously, in the global market.
consequently resulting in performing a large
amount of measurements yielding results of
varying importance, we proposed a compact References
measurement of crucial QoS criteria for possible
further investigation, if necessary. What also Agarwal, A., Shankar, R., & Tiwari, M. K. (2006).
makes our approach original is simultaneous Modeling the metrics of lean, agile and leagile supply
chain: An ANP-based approach. European Journal of
consideration of both the upstream and down- Operational Research, 173, 211–225. doi:10.1016/j.
stream sides of the supply chain. ejor.2004.12.005
Based on the exploration of our model QoS
Angerhofer, B. J., & Angelides, M. C. (2006). A
values are obtained for comparison with a pre-
model and a performance measurement system for
set target value for the supply chain. We have collaborative supply chains. Decision Support Sys-
established that in order for this comparison tems, 42, 283–301. doi:10.1016/j.dss.2004.12.005
to be meaningful, the distribution of q compo-
Avizienis, A., Laprie, J.-C., & Randell, B. (2001).
nents’ values should be small and constrained. Fundamental Concepts of Dependability (Tech. Rep.
The exploration of our model shall deliver the No. 1145). Toulouse, France: LAAS-CNRS.
allowed distributions of q components and the
foreseen mechanisms that should be applied in Ballou, R. H. (2004). Business Logistics/Supply
Chain Management – Planning, Organizing, and
order to equalize them around their reference Controlling the Supply Chain. Upper Saddle River,
values and consequently improve the overall NJ: Pearson, Prentice Hall.
supply chain QoS. With contemporary infor-
Beamon, B. M. (1999). Measuring supply chain
mation, communication and sensor technology performance. International Journal of Opera-
support the necessary changes in response to tions & Production Management, 19(3), 275–292.
the established supply chain QoS shall be ef- doi:10.1108/01443579910249714
ficiently integrated into SCM on corporate and
Bhagwat, R., & Sharma, M. K. (2007). Perfor-
global levels. mance measurement of supply chain management:
The advantage of our model also lies in the A balanced scorecard approach. Computers &
fact that results will not suffer from respondent Industrial Engineering, 53, 43–62. doi:10.1016/j.
bias within each firm and across partner firms cie.2007.04.001
in the supply chain. The empirical implication Bolstorff, P. (2003). Measuring the impact of supply
of the model will allow enterprises to evaluate chain performance. Chief Logistics Officers, 12, 5–11.
their QoS at any point in time and compare the
Chan, F. T. S., & Qi, H. J. (2003). An innova-
results with their competition. It is our goal to tive performance measurement method for sup-
asses QoS on long-term basis and track the ply chain management. International Journal
changes of QoS at specific points in time for of Supply Chain Management, 8(3), 209–223.
doi:10.1108/13598540310484618
is prohibited.
Chowa, W. S., Madub, C. N., Kueib, C., Luc, M. Moberg, C. R., Cutler, B. D., Gross, A., &
H., Lind, C., & Tsengd, H. (2008). Supply chain Speh, T. W. (2000). Identifying antecedents of
next term management in the US and Taiwan: An information exchange within supply chains. Re-
empirical study. Omega, 36, 665–679. doi:10.1016/j. trieved July 13, 2009, http://www.emeraldinsight.
omega.2006.01.001 com/10.1108/09600030210452431
Gunasekaran, A., Patel, C., & McGaughey, R. E. Ngah, A. B. M. (2003). Food Supply Chain Manage-
(2004). A framework for supply chain performance ment as the Platform For Sustainable Agricultural
measurement. International Journal of Produc- Growth in Malaysia. Retrieved February 2, 2003,
tion Economics, 87(3), 333–347. doi:10.1016/j. from http://www.agribdc.gov.my/html/themes/bdc/
ijpe.2003.08.003 pdf/SupplyChainManagementtosupportagritrabsfor-
mation.ppt
Holmberg, S. (2000). A system perspective in sup-
ply chain measurement. International Journal of Otto, A., & Kotzab, H. (2003). Does supply chain
Physical Distribution & Logistics Management, management really pay? Six perspectives to mea-
30(8), 847–868. doi:10.1108/09600030010351246 sure the performance of managing a supply chain.
European Journal of Operational Research, 144(2),
Ketchen, D. J., Rebarich, W., Hult, G. T. M., & 306–320. doi:10.1016/S0377-2217(02)00396-X
Meyer, D. (2008). Best value supply chains: A key
competitive weapon for the 21th century. Business Rabin, S. (2002). Collaborative initiatives: Service
Horizons, 51, 253–243. Level Management, Quality of Service (QoS), and
Performance Measurement, System development
Krivda, C. (2005). Supply Chain Excellence - Today’s management. New York, NY: Auerbach Publications.
best driver in bottom line performance. Retrieved
December 8, 2009, from http://www.businessweek. Rabinovich, E. (2007). Linking e-service quality and
com/adsections/2005/pdf/0515_supply.pdf markups: The role of imperfect information in the
supply chain. Journal of Operations Management,
Lai, K., Ngai, E. W. T., & Cheng, T. C. E. (2004). 25, 14–41. doi:10.1016/j.jom.2005.11.013
An empirical study of supply chain performance in
transport logistics. International Journal of Pro- Romano, P. (2003). Co-ordination and integration
duction Economics, 87, 321–331. doi:10.1016/j. mechanisms to manage logistics processes across
ijpe.2003.08.002 supply networks. Journal of Purchasing and Sup-
ply Management, 9, 119–134. doi:10.1016/S1478-
Lambert, D. M., Stock, J. R., & Ellram, L. M. (1998). 4092(03)00008-6
Fundamentals of Logistic Management (1st ed.).
Boston: Irwin McGraw Hill. Sap, A. G. (2003). Planning Best Practices in
Implementation. New York, NY: Sams Publishing.
Laudon, S. (2003). Management Information Sys-
tems – Organization and technology (8th ed.). Upper Sharma, M. K., & Bhagwat, R. (2007). An integrated
Saddle River, NJ: Prentice Hall. BSC-AHP approach for supply chain management
evaluation. Measuring Business Excellence, 11(3),
Li, S., Rao, S. S., Ragu-Nathan, T. S., & Ragu-Nathan, 57–68. doi:10.1108/13683040710820755
B. (2005). Development and validation of a measure-
ment instrument for studying supply chain manage- Shepherd, C., & Günter, H. (2006). Measuring sup-
ment practices. Journal of Operations Management, ply chain performance: current research and future
23, 618–641. doi:10.1016/j.jom.2005.01.002 directions. International Journal of Productivity
and Performance Management, 55(3-4), 242–258.
Melnyk, S. A., Stewart, D. M., & Swink, M. (2004). doi:10.1108/17410400610653219
Metrics and performance measurement in opera-
tions management: dealing with the metrics maze. Tate, W., Ellram, L. M., & Billington, C. (2008).
Journal of Operations Management, 22, 209–217. Services Supply Chain Management: An Un-
doi:10.1016/j.jom.2004.01.004 tapped Opportunity. Retrieved March 24, 2008,
from http://www.industryweek.com/ReadArticle.
aspx?ArticleID=15999
is prohibited.
Roman Gumzej, born 1970 in Maribor, Slovenia, received a doctorate in computer science
and informatics from University of Maribor in 1999. He worked both in industry (Institute of
Information Science, IZUM Maribor) and academia (University of Maribor), before he was
elected assistant professor at the Faculty of electrical engineering and computer science at
University of Maribor in 2004. He was a visiting researcher at ifak e.V. Magdeburg, Germany
in 2002 and at the Chair of Computer Engineering at Fernuniversität in Hagen, Germany in
2007. Currently he is assistant professor at the Faculty of logistics at the same university. His
research interests comprise all major areas of hard real-time computing with special emphasis
on operating systems, co-design and quality-of-service in embedded and logistics applications.
He has conducted a national and co-operated in several national and international research
projects. He has authored or co-authored several refereed book chapters, and about 40 journal
publications and conference contributions, and is involved in international professional orga-
nizations and program committees of several conferences.
Brigita Gajšek, born 1974 in Celje, Slovenia, graduated at the Faculty of mechanical engineering
in 1998 and received a master's degree in Organization and Management of Information Systems
from the Faculty of organizational science at the University of Maribor in 2003. For several
years she worked in metal processing industry as project manager before she was elected teach-
ing assistant at the Faculty of logistics at University of Maribor in 2007. Her research interests
comprise technique and technology in logistics. She is currently working towards her PhD thesis.
is prohibited.
The Development of
Synergy Model on Internal
and External Suppliers for
Asian Airlines Industry
Yudi Fernando, Universiti Sains Malaysia, Malaysia
Norizan Mat Saad, Universiti Sains Malaysia, Malaysia
Mahmod Sabri Haron, Universiti Sains Malaysia, Malaysia
Suhaiza Zailani, Universiti Sains Malaysia, Malaysia
Abstract
This paper examines the airline industry to develop a synergy model in internal and external suppliers for
Asian airlines industry. An extensive literature review is conducted to present a synergy model to develop Asian
airline competitiveness, safety and service quality. The literature review is highlighted to seek the relation-
ships between internal marketing and internal service quality and identify whether the relation of supplier can
moderate them. The review reveals that a synergy model based on internal marketing, internal service quality
and supplier relations can overcome the Asian industrial phenomenon, especially in maintaining the service
consistency and competitiveness. This model is needed for developing airline service and safety. Research
in airline business is critical, as the quality of the airline service is declining in contrast with this industry’s
growth. This paper provides insight into two important suppliers needed for the success of the airline industry.
Keywords: Airline Development Process, Business Model, Internal Marketing, Internal Service Quality,
Supplier Relations
Introduction models which demand a better service (Rhoades

& Waguespack, 2008), information system
In the age of mobility, the global economy is capabilities (Cunningham et al., 2005), and
driving the growth of air travel more than ever supplier relationship (Ahmed et al., 2006). The
before. There is a hyper competition in the airline future of the global airline business is expected
business. Markets have been fundamentally to be profitable. In addition, Asia Pacific will
transformed by the emergence of new business become the largest world aviation market over
next 20 years, since it has one-third of the world
air traffic (Boeing, 2010). In other words, Asian
DOI: 10.4018/jal.2011010102
is prohibited.
countries have the biggest potential to lead the pliers build a close relationship, these could
global airline growth in the near future. Ten to have far-reaching implications, not only for both
dozens of new air carriers have been popping parties, but also for the operations of the mar-
up across Asia to reach the demand of the in- ket. Strongly bonded relationships could form
dustry’s booming. an effective barrier to entry for new entrants,
In contrast with the growth, the Asian and switching partners may have all sorts of
airlines are facing an increasing risk of bank- repercussions, apart from purely financial ones.
ruptcy. This is probably due to the fact that the The real competition is not between a company
management spends a lot of time focusing on and a company but between a supply chain and
the airline infrastructure, soaring fuel costs, a supply chain (Christopher, 1992).
investments, competitor thus overlooking the It is hard to find a study on how internal
role of internal and external suppliers towards and external airline suppliers worked together
the success of an organization. Indeed, a string to improve competitiveness, safety, and service
of deadly accidents have raised fresh concerns quality. It is argued that the role of internal and
about service and safety, from board and ground external suppliers in an airline service qual-
crew, pilot shortages and the quality of budget ity must be studied. This is to construct the
airlines. Aircrafts of accidents in Asia have been competitiveness of Asia airlines and improve
increasing and have injured and killed people service and safety quality. This paper focuses
(e.g., Indonesia and Thailand). on the issue of the airline business and how they
Consequently, the airline service and safety can build a synergy relationship with suppliers
quality will suffer when the internal and ex- to enhance safety and service quality. Hence,
ternal suppliers give less attention towards the building a high quality long-term relationship
airline service process. Most of the international with internal and external suppliers is not an
airlines employ thousands of people (Frost & easy endeavor.
Kumar, 2000). As the airline expands, so does This study utilizes the literature review
their staff population. Generally, when this to find the link of the model based in internal
happens, employee matters somehow fall by and external suppliers. The model is necessary
the wayside and are replaced by more pressing to develop the Asian airline competitiveness.
issues such as company growth and maximizing In fact, the Asian region still consists of many
profits (Heskett et al., 1994). Subsequently, the developing countries that need strong partner-
organization loses touch with the individual ship to survive and compete in airline industry.
worker within the organization. Thus, in order This paper is organized as follows. First, it
to achieve the growth and profit objectives, gives a review of related literature on the airline
research into employee issues cannot be ignored industry, internal marketing, internal service
(Berry et al., 1994). Scholars have stated that quality and supplier relations. This approach
the delivery of high quality service becomes attempts to underpin the model based on the
a marketing requirement in tandem with the literature. The essence of this approach is to
increase of the competitive pressures on an air identify the research gap, contextualize the re-
carrier (Ostrowski et al., 1993). search agenda and build an understanding of the
Besides, the external supplier also plays theoretical concepts (Rowley & Slack, 2004).
considerable role in the success of an airline. The relationships between these constructs have
Air China for example assigns its employees conceptualized on synergy model. Based on
to work closely with supplier on various as- this model, the researchers then proposed two
pects. This effort is to meet the organization’s propositions for future research. The argument
economically and socially objectives (Ahmed and idea on the synergy model will be described
et al., 2006). Managing supplier relationship next. Finally, the method and directions for
gives many benefits. If many buyers and sup- future research are also provided.
is prohibited.
Literature Review This section explores the literature regard-

ing the effects of internal marketing on internal
A competitive advantage which comes from service quality and identifies whether the level
the service level is provided by the employees. of supplier relationship can moderate the rela-
Employee is internal supplier in an organiza- tionships between the internal marketing and
tion. Gummesson (1993) has presented a multi internal service quality in commercial airlines.
perspective approach that consists of four group The essence of this study is to build the Asia
models. Each model associates with four groups airline competitiveness, to change the traditional
of actors namely customers, contact staff, sup- airline management perspective which is more
port staff, and management. All of these perspec- service-marketing mindset, and to prevent
tives need to be taken into consideration since service and safety failures. At the end, a new
the four groups hold different perspectives. In synergy model between internal and external
addition, each model is relevant to the whole suppliers that can be used to provide a direc-
service experience. Actors possess their own tion for the improvement of the airline service
knowledge, logic, and objectives, and each quality is developed.
offers a different perspective. Although the
marketer and the organizational behaviorist Airline Service Quality
say that the relevance of internal customers
within the context of service delivery process The airline industry is a very competitive
is frequently referred to the literatures, there is industry which needs to establish strategic
a paucity of published research on the support competitive advantages through the supply of
staff’s perspective (Reynoso & Moores, 1995). chain relationship in today’s world. The chal-
Normally, what employees feel about the quality lenges in the airline business are recapitalization
of service is represented by the justification of to restructure, reengineer and outsource to the
the external customers. increasingly of complex business focus, person-
The management should also consider nel, e-commerce application, and cost reduction
employees as their internal customers. Manage- and alliance management. An Airline will find it
ment should create, continuously encourage, hard to compete against its competitors without
and enhance an understanding of employees in establishing long term relationships with the
the organization and develop an appreciation suppliers. To survive, an airline is expected to
for their roles in the organization. It will be deliver a high quality service with a reasonable
able to retain customer-conscious employees ticket price. For example, the Southwest (US)
(Keller, 2002). It is observed that not all kinds airlines experience one of the world’s leading
of behaviors and actions of customer-contact low fare, high frequency, point-to-point car-
employees can be directed and controlled by rier is also one of the most profitable. It has
the management during the service (Malhotra managed to build the supplier relationships
& Mukherjee, 2003). Hence, service quality especially in spare parts and maintenance op-
will suffer when employees are unwilling or erations. Southwest has created its next genera-
unable to perform a service at the required tion maintenance automation team to deliver a
level (Zeithaml et al., 1996). On top of that, well planned, comprehensive maintenance and
George (1990) also concurs with this premise; engineering solution that would provide opera-
if a management wants to make their employees tional improvements, significant cost savings,
to do a great job for the customers, the employ- and increased financial controls. According to
ers must be prepared to do a great job with the Rhoades (2006), the mission statement of South-
employees. Therefore, scholars have identified west did not mention profitability, market share
that internal marketing may contribute to the or superior returns to share holders. However, it
firm’s competency and success (Frost & Kumar, mentioned about people, namely customers and
2000; Keller, 2002; Ahmed et al., 2003). employees. They should be able to fulfill this
is prohibited.
mission since they are also committed to treat exist. However, the internal marketing litera-
their employees with the same care and respect ture has been growing rapidly in the hands of
that they expect to be received by the customer. marketing researchers (Sargeant & Asif, 1998;
Piercy, 1995; Varey, 1995; Piercy & Morgan,
Internal Marketing 1991; George, 1990; Barnes, 1989; Berry, 1981;
George, 1977).
The idea of internal marketing has first appeared Internal marketing has been defined by
in several articles which are written by classical several scholars in various perspectives. Internal
scholars (Sasser & Arbeit, 1976; Berry et al., marketing attracts, develops, motivates, and re-
1976; George, 1977; Thompson et al., 1978). tains qualified employees through job products
But the term internal marketing has not been that satisfy their needs. Internal marketing is
directly used by them. For instance, in the early also the philosophy of treating employees as
1980s, the concept of internal marketing had customers and it is the strategy of shaping job-
formerly emerged in the services marketing lit- products to fit human needs (Berry & Parasura-
erature (Grönroos, 1985, 1981; Berry, 1981) and man, 1991, p. 151). Internal marketing is a plan
was later adopted by the service management of effort that uses a marketing-like approach to
literature (Normann, 1984; Carlzon, 1987) and overcome organizational resistance to change
industrial and relationship marketing (Grönroos, and align, to motivate and inter-functionally
1985; Gummesson, 1987). The advantage of co-ordinate and integrates employees towards
internal marketing has been discussed in the the effective implementation of corporate and
academic literature for more than a decade functional strategies to deliver customer satis-
(Foreman & Money, 1995; Piercy, 1995; Bak faction through a process of creating motivation
et al., 1994; Azzolini & Shillaber, 1993; Harari, and customer orientation employees (Rafiq &
1991, 1993; Harrell & Fors, 1992; Davis, 1992; Ahmed, 2000). The scholars debated on where
Bhote, 1991; Piercy & Morgan, 1991; George, internal marketing should belong to, and what
1990; Piercy & Morgan, 1990). However, internal marketing is. We have argued that in-
Heskett (1987) observed that the shift towards ternal marketing is a wide-ranging strategy that
internal marketing was due to the high perfor- could be well applied in the service industry.
mance service companies that have gained their This is to enhance organization competitive-
status in large measure by turning the strategic ness and service orientation based on internal
service vision inward. capabilities.
The literature on internal marketing is
broad, complex, often contradictory, and con- Internal Service Quality
tains stimulating debates (Little et al., 2005).
Many definitions of internal marketing are found The concept of designing an internal service
within literatures in the past three decades. system was first introduced by IBM in the
Those definitions introduced the internal mar- 1960s (Davis, 1992) and it has led to a concept
keting in a broad conception (Varey & Lewis, called service blueprinting (Shostack, 1987).
1999), as management technology (Fisk, 1986; Hammer (2001) defined internal service qual-
Sweeney, 1972), a philosophy or a manage- ity process as an organization group of related
ment practice (Wilson, 1991; George, 1990), activities that together create a result of value
either relating to human resource management for customers. Internal service process includes
(Van-Haastrecht & Bekkers, 1995; Berry & simplifying standard operations, procedures,
Parasuraman, 1991; George, 1977, 1990; Berry, and activities that support the business functions
1981, 1984), service marketing (Gummesson, to interact with customers (Voss et al., 2005).
1987; Grönroos, 1985) or changing management Service quality is an outcome of the effort that
(Piercy, 1995). There has been a heated debate every member of the organization invests in
over whether internal marketing should even satisfying customers. The employees are the
is prohibited.
key in the delivery of a quality service, and It is fully applied in the airline business that
organizational success depends on the ability requires service supplier and maintenance
and the motivation that its employees bring logistic. Besides maintenance logistic, the
to their jobs (Sargeant & Asif, 1998). Service airline service suppliers also include bank
organizations can be described as open systems (credit card provider), insurance, hotels, car
with highly permeable boundaries in which the rentals, airports and travel agents. However,
perception of organizational practices is visible maintenance logistic is a function of strategic
both to employees and customers (Reynoso decision to build the competitive advantage
& Moores, 1995). The outstanding delivery of a company. Maintenance logistics involves
of an airline service to customers depends on the process of planning, implementing, and
the employees’ ability. For example, to make controlling the efficient, cost effective flow of
the organization fly its aircrafts, it needs high spare parts, in-process inventory and related
quality pilots, friendly flight attendants, and information from the point of consumption to
an excellent maintenance team. The service the point of origin for the purpose of recaptur-
production process as a system of systems is ing value or proper disposal (Tibben-Lembke
built up by interrelations and interdependence & Rogers, 1998).
between a number of sub processes. Every The airline industry is facing severe chal-
service operation comprises internal service lenges because of the effects arising from global
functions which support each other. If a poor competition to ensure the value of effective-
internal service exists then the final service ness. It is increasingly becoming essential as
received by the customers will be unsatisfactory the service process gets more complicated.
(Grönroos, 1990). Several handling problems confuse end-users:
inventory for returned products, unidentified or
Supplier Relations unauthorized return, and idle time during the
return process. It is suggested that the airlines
The supplier relationship is also discussed in the need to establish a long-term relationship with
marketing and operations studies. In the market- logistics service provider. The formulation of
ing literature, the original relationship has been good supplier relationships is the ability to
discussed generally in industrial and business- provide its customers with stable and reliable
to-business marketing. It is because industrial flights (Choy et al., 2007). An empirical sup-
firms spend over half of their sales revenues plier relationship studies have been done mostly
on industrial purchasing (Hutt & Speh, 1992). in a manufacturing context (Carr et al., 2008;
Industrial firm have recognized the supplier Wasti et al., 2006; Kannan & Tan, 2006; The-
management is crucial to the firm’s competi- odorakioglou et al., 2006), but now those are
tiveness. In the context of marketing relation- found to provide new insights in service studies
ship, there are two divergent views concerning (Field & Meile, 2008; Choy et al., 2007; Doran
supplier management that have been discussed et al., 2005). Therefore, supplier relations study
both in theory and practice. They are contractual in the service sector may not be generalizeded
(arms-length) view and the relational view. The from manufacturing; there is important a need
first view is for less dependence on suppliers to recognize the differences between manu-
with the object of maximizing bargaining power facturing and services. It is to develop models
(Provan & Gassenheimer, 1994), and avoiding and empirical studies that focus specifically on
commitment (Boyle et al., 1992). Second, the service supply chains (Baltacioglu et al., 2007).
relational view that supplier management is a The emerging literature on buyer sup-
key aspect of marketing relationship (Kim & plier relationship has recently been reported
Michell, 1999). in various industries (Saccani & Perona, 2007;
Nowadays, the industrial service sector Mukherji & Francis, 2007; Caniëls & Gelder-
is concerned with the supplier management. man, 2007; Hult et al., 2007; Barnes et al., 2007;
is prohibited.
Baglieri et al., 2007; Hawkins et al., 2007; Bha- flight covers a) representation, administration
radwaj & Matsuno, 2006; Emberson & Storey, and supervision, b) passenger services, c) ramp
2006; Large, 2005; Kamp, 2005; Bonner & services, d) load control communications and
Calantone, 2005; Gao et al., 2005; Prahinski & operations, e) cargo and mail services, f) support
Benton, 2004; Humphreys et al., 2004; Leek et services, g) security, and h) aircraft maintenance.
al., 2004; Hutt & Speh, 1992), yet there is less
report on how the role of suppliers in support
of internal service quality. The airline business The Synergy Between
needs several suppliers to support its service Internal and
process, for example aircraft manufacturing, External Supplier
maintenance, airport, government, IT provider,
The marketing concept is important to the entire
catering, insurance, travel agent and bank. To
departments of a company. Marketing works
become the winner in the airline competition,
in every management function and helps the
firms need to build a successful relationship
company to become more customer minded.
throughout the supply chain that has a potency
The marketing philosophy is one of the nec-
to render efficiency and profits or to create
essary guidelines for managerial level, flight
cost reduction (Bharadwaj & Matsuno, 2006).
attendants, flight engineers, pilots and ground
It will improve quality, continuity of supply,
engineers and all other employees in the airline
and human specialization (Burt et al., 2004).
industry. The airline service has to go through
Burt et al. (2004) have predicted the win-
a complicated process to deliver service qual-
ners in the future marketplace will be those
ity to the customers. To serve their customers
linked companies that can combine their in-
better, the airline needs to establish a long-term
ternal advantages into a powerful value chain
relationship with the suppliers to reduce the
which is faster, more efficient, more agile and
cost and improve the competitiveness, safety,
innovative, and ultimately more profitable than
and service quality.
other competing supply chains. Particularly, the
The airline business also has a three P’s
economic performance of an airline depends
component that needs management’s concern
on its achievement of the highest degree of
in order to be sustainable in the market. Figure
operational efficiency (McLean, 2006). In the
1 demonstrates the three airline development
airline industry, the role of the suppliers in
components which consist of people, process,
improving process of the internal service to
and performance. To achieve a superior per-
satisfy their external customers has yet to be
formance, an airline needs to develop the first
fully addressed. The supplier’s role is to offer
component. It stands for internal and external
a greater competition at the ground-handling
people, namely employees and suppliers. It
stage, provide the operating airlines with an
is argued that the success of an airline lies in
alternative in quality ground service, which
how they manage service oriented employees
encompasses ramp, cargo and warehousing, pas-
and maintain excellent relationships with the
senger and baggage handling, flight operations,
suppliers. There are at least five elements of
and aircraft servicing to serve the passengers.
internal marketing that are appropriate for the
Here, the role of supply chain relationship is
internal supplier. First, it is a senior leadership
required to support the airline industry in at-
with vision. The airline organization needs to
taining a possible lower cost and streamlining
have a senior leadership that can inspire all
operations and processes to make the air travel
stakeholders at all levels. The senior leader-
more affordable for travelers while at the same
ship should have a clear vision to achieve the
time making if more profitable for the airlines
organization’s goals. At the same time, it should
themselves. The role of the supplier in providing
have the ability to use direct and indirect influ-
support on the ground for schedule and charter
ence to build a service-oriented organization.
is prohibited.
Moreover, the airline management needs reward system to encourage high performance.
to ensure that all levels of employees can receive However, it has been argued that the addi-
all information regarding organization mission, tional source of Asian airline capability is
vision, strategic goals, activity, and achieve- supplier relations.
ment. Here, the role of internal communication The synergy between internal and external
will work trough meeting, intranet, report, supplier will produce high productivity and
employee handbook, periodically review em- cost saving. The process of selecting the right
ployee and department outcome, and so forth. supplier might be a time consuming. The right
The third element is training and development. supplier is external counterpart which can
The management of an airline should invest match and capable to work with an organiza-
money and time to train employees for con- tion to achieve goals. Once found, then the
tinuous improvement. Normally, the organiza- long-term relations should be maintained. The
tion’s expert will transfer knowledge and skills airline is advised to manage a high degree of
to improve the employees’ productivity. The coordination and communication between the
development of the employees will be seen activities of primary supplier and organization.
after the training. It aims to prepare the em- This is important to secure the cost, safety, and
ployee on the future challenge of the organiza- service quality.
tion. The fourth element is empowerment. Figure 2 shows how the synergy model is
Empowering the employees can give them more working between internal and external supplier.
control over their own decision during service There are two sides in this model. The first one
encounter. The final element for internal sup- is the internal side. The internal side explains
plier is a reward. It is a way for an organization how internal supplier works in the airline. The
retains and motivates the employees. Airline management sets up the airline system and pro-
management should consider a fair and effective cedures to deliver excellent service. The senior
Figure 1. The three airline development components
is prohibited.
manager has communicated the philosophy and to supplier. The management who is repre-
tactical strategy to middle managers. Thus, they sented by the organization has dealt with sup-
are interpreting, communicating and directing plier and communicate on how important
to the supervisors. Supervisor also guides the safety and service quality for the organization’s
employee to do their best on every process in- competitiveness. The supplier has supplied
volved. Here, the internal marketing approach various products or services to particular depart-
is working to motivate, communicate, maximize ment. The supplier performance also needs to
the use of employee’s skill and capabilities to be measured. The interdepartmental service
achieve the goal and rewards them. At the same evaluation is utilized.
time, the management also uses the internal The external supplier is divided into three:
service quality to maintain service consistency intermediate, independent, and dependent
prior service delivery. suppliers. Besides managing external supplier
The management has asked employee to relationship, management also needs to com-
evaluate interdepartmental service which served municate on how safety and service excellence
them. The feedbacks from employees are then are important for organization competitiveness.
used to improve the service process continu- The employee who has outsourced by supplier
ously. Some of airlines outsource service process also delivers service for particular department.
Figure 2. Synergy model between internal and external suppliers in the Asian airline business
is prohibited.
Some of them have service encounters with cus- Services for commercial airlines emphasize
tomers. Their service also needs to be evaluated the critical needs for coordination of the manage-
by other department in the organization. Two ment activities between airline processes such
sides of suppliers are contributing to internal as maintenance and engineering, purchasing,
service quality approach. The outcome of internal procurement, and material management. On top
service quality approach will deliver consistent of that, there is no existing research model that
service quality to the customer. The customer is able to discuss the synergy between internal
will enjoy the excellent service with affordable and external suppliers in order to improve Asian
price. Customer satisfaction is key to get customer airline competitiveness, safety and service qual-
loyalty and enhance organization performance. ity. Because of the gaps in the current literature
The loyal customer will come back and tells review, the agenda is to propose the examination
their friends and relatives about the superior of of the effect of both of them in service quality.
airline service. Thus, it is the reason why the Future research propositions include.
management has put customer in the first place
for company success. Proposition 1:
Figure 2 demonstrates the synergy between
internal and external suppliers. This model is Internal marketing becomes a fundamen-
based on the previous study. The researchers tal instrument of the maximize of the internal
have explored the important role of market- service quality in order to improve the airline
ing component for implementing supply chain service quality.
management (Min & Mentzer, 2000). Cooper Internal marketing agenda is to implement
et al. (1997) have posited the implementation the market to the internal supplier. Internal
of supply chain management, which involves marketing contributes to HR’s effectiveness.
reducing channel inventory, increasing channel Internal marketing has to be treated as a sepa-
cost efficiencies, maintaining long-term relation- rate construct, not merely as the representation
ships, encouraging inter-firm cooperation, and of a number of human resources management
sharing risks and rewarding among the partners. functions (Ewing & Caruana, 1999). Babba and
Lings (2000) has demonstrated a model of Koufteros (2008) found that the human element
service quality which is based on both internal in a service encounter has a significant effect on
and external customers and supplier groups in airline passenger satisfaction. The objective of
supply chain partnering. He has used internal internal marketing is to encourage, retain, and
marketing to encourage a firm to become truly to motivate the potential employees to enhance
market-oriented. Then, he argues that the internal the uniqueness of internal service quality. The
service quality will have the effect of increasing internal marketing is developed to reduce the
employees’ motivation to perform their tasks. inconsistency of service in an organization.
The overall service in supplier–customer rela- Internal marketing is streamed into all levels
tionship will then increase as the service quality and functions in an organization. The organi-
of departmental relationships which constitute zation of internal marketing in three distinct
the organizational relationship increase (Lings, interrelated functions are a) internal marketing
2000). Service quality study between internal to internal customers, b) internal marketing in
customers and internal suppliers was conducted internal market, and c) internal marketing as a
in an international airline. The results provide facilitator of strategy and change (Mahnert &
information on areas where more attention is Torres, 2007).
needed to enhance internal service quality (Frost Zampetakis and Moustakis (2007) have
& Kumar, 2001). Reynoso and Moores (1996) studied the implication of the changes in
have suggested that internal customers and sup- the public sector. They found that practicing
pliers will become more responsive to the wants internal marketing could produce positive
and the needs of the external customers. outcomes towards fostering public entrepre-
is prohibited.
neurship based on public service choices and Another reason for the word of people
attitudes. The empirical results demonstrated in this study is the importance of the external
that a significant relationship existed between relationships to the success of an organization
internal marketing and consumer satisfaction and at the inter-organizational level, and this will
between internal marketing and service quality be examined in terms of supplier connection.
(Bansal et al., 2001; Ewing & Caruana, 1999). This study also examines how airlines build
Prasad and Steffes (2002) argued that the internal external relationships with the suppliers. If they
marketing strategy was one of the secret recipes have a good relationship with the suppliers then,
of Continental Airlines. the material, maintenance and time consumed
Internal marketing is a strategy of the for bargaining will be reduced. Maloni and
marketing people to ensure the availability of Benton (2000) have shown empirically that
excellent service to serve customers and ensure a a stronger buyer-supplier relationship will
company’s sustainability in the competitive mar- enhance performance throughout the chain.
ket. Only happy employees can produce superb Benton and Maloni (2005) have emphasized
service quality to satisfy existing customers and a direct, long-term association, encouraging
attract new ones. Most airlines services provide mutual planning and problem-solving effort
similar products. However, they differ only in in supplying chain partnership.
the quality of safety and service provided by the A performance examination is valuable
employees. Internal marketing also reflects the for understanding successful quality practice.
internal supplier’s capability to work effectively Indeed, analysis of quality management and
with external supplier to enhance the airline ser- other processes implemented by an external
vice quality. This is because previous definitions supplier is equally important in explaining
have failed to explore the role of supplier that the process performance association (Forker,
contributes to the organization service. 1997). The service performance has been con-
ceptualized on two dimensions: (a) an internal
Proposition 2: or operations-oriented dimension of service
quality performance and (b) an external or
A higher degree of moderating role of sup- marketing-oriented dimension (Collier, 1991).
ply chain relationship will contribute to a higher This can be conceptualized on the relationship
level of relationship between internal marketing between internal and external relationships
and internal service quality that enable an organization deliver excellent
Malhotra and Mukherjee (2003) have sug- service to the external customer (Hart et al.,
gested that worldwide organizations achieved 1990). Worthington and Harbisher (1997)
their success if the organizations could provide found that service organization needs to have
excellent customer service through satisfying a strong relationship with supplier. The strong
their employees. Internal marketing is originally relationship is a tool to achieve a mutual benefit
proposed as an approach in service management, for both parties.
which entails the application of the traditional
marketing concept. The associated marketing Discussion
mix aims inwards within an internal market,
in which employees are treated as customers A firm’s supply chain consists of three major
of the organization as to improve the corporate parts, internal functions, upstream suppliers and
effectiveness through improving internal market downstream customers (Handfield & Nichols,
relationship (Helman & Payne, 1992). The high 1996). The internal functions include all of the
standard of internal service quality leads to em- different processes (procurement, production,
ployee’s satisfaction, enabling them to deliver and distribution) that are used to transform raw
higher service quality to external customers materials to the finish product. The coordination
(Hart et al., 1990).
is prohibited.
and schedule of these processes are essential. The c. Sales and distribution contribute to the
management of the upstream supplier network third-high operating cost in airline business
ensures that the right material is received at the (International Air Transport Association,
right time and at the right location. The focus is 2000). Commitment to the lowest distri-
on selecting a few good suppliers and maintaining bution costs channels is necessary to stay
good relationships with them. The management in such a competitive market. The airline
of downstream customer network ensures that information technology is a tool that con-
the customers receive the products they want nects directly to the airline’s reservation
on time. The ultimate goal is the achievement system to store passenger records, man-
of customer’s satisfaction through good pricing age information and book tickets. Today,
and timely delivery (Abdinnour-Helm, 1999). airline’s management captures attention
The idea of selecting and maintaining supplier in technology, including the Internet, the
relations from manufacturing counterparts also World Wide Web (WWW), broadband, and
would be well applied in an airline industry. The wireless technology. They have expanded
top three reasons why the airline business needs the scope of airline business. Advance in
to build long term relation with the suppliers are information technology will reduce the
as follows: sales and distribution cost.
a. For all airlines, after labor, jet fuel is the

second largest operating expense which Conclusion
constitutes 10 to 25 percent of their annual
operating costs. To optimize fuel levels, The model is an alternative way to enhance
airlines have turned to information tech- Asian airlines competitiveness, safety, and
nologies with sophisticated forecasting and service quality through people. The collabora-
auto replenishment capabilities. The fuel tion between internal and external suppliers
procurement supply chain is essentially a becomes a necessary tool to gain success. In-
network consisting of suppliers, distributors deed, the essence of the model is to maximize
and customers (Oppenheimer, 2007). the internal and external supplier capabilities to
b. Airline management needs to be current deliver excellent service to the customer. The
and accurate to ensure that planes are safe external supplier capabilities are important to
and reliable for flight. Here, the role of boosting airline service as well as performance.
Maintenance, Repair and Overhaul (MRO) Thus it will enable the company to survive in a
needs to be properly maintained to boost the hypercompetitive market. Perhaps this model
overall efficiency of their MRO operations. may work in supply chains against supply
The principal of MRO activities include chains era where company chains are compete
servicing, repairing, modification, overhaul, with competitor chains. Based on the review
inspection and determination of condition of the existing literature, the synergy model
(Knotts, 1999). MRO represents around is proposed.
10 to 15 per cent of an airline’s operational The operationalization of the synergy idea
costs. Establishing an airline MRO process is is employees in a company. They are included
therefore associated with a high investment as the team members who work closely with the
in capabilities. For many airlines, especially external supplier to deliver an excellent service
new entrants, this is not possible because a as well as the early customers who experience
large capital investment is required. Hence, the quality of service before it is ready for them.
the outsourcing is considered as an alterna- Hence, the employees will be able to judge their
tive to vertical integration (Al-kaabi et al., own company service, do evaluations and give
2007; Heikkila & Cordon, 2002). recommendations for improvement. Based on
is prohibited.
the schematic service quality process, it would with external suppliers is necessary. To maintain
be able to prevent service failure and enhance competitiveness airlines are outsourcing their
airline service performance because the sugges- service processes to other parties. The outsource
tions are given by employees who will improve strategy is implemented to reduce the costs and
the quality of service and safety. In this scenario, effects of poor airline service and safety. The
the employees represent the customers. airline management should create close relation-
This argument is supported by Schneider ships with those parties as the key suppliers
and Bowen’s (1985). They have reported that will improve their airline service. At the same
there is a strong correlation between internal time they have to keep communicating with
and external customers’ perceptions. Today, external supplier on how important the quality
in order to revamp the problem of an airline of service is for business competitiveness. If the
service quality, companies need to emphasize airline service quality suffers, it will affect the
the study of internal customers. Hence, the company’s image and its business performance.
only first customers to determine the quality Subsequently, the company also notices their
of company service are the employees. The importance in supporting the airline business
employees would be able to assess whether since high quality suppliers can be a competi-
the airline service quality is good or, otherwise, tive weapon in the industry.
needs efforts to improve. This article shows the synergy model be-
Research in airline business is very criti- tween internal and external supplier. Then, it
cal because the quality of an airline service is proposes the Asian airline competitiveness as
declining, in contrast with the growth of the in- well as the enhancement of airline safety and
dustry. Probably the airline business is required service. This article is written as an alternative
to deliver an excellent service with minimum to develop Asian airlines competitiveness and
cost in today’s world. This model may be ap- provides research propositions. The future
plicable for the Asian region where sources are winners in airline industry will be those who
limited. There are two important suppliers to be have lower operation costs and consider their
considered for the success of the airline indus- employees as the important assets to become
try. A higher level of employees’ capabilities customer oriented. This paper is conceptual in
is necessary to deliver excellent service to the nature and encourages future researchers to
customers. Hence, companies need to acquire, validate and test it. An area for future research
motivate, communicate, retain, empower, and is to examine the model in hybrid method
reward the skillful employees whenever they (qualitative and quantitative).
implement their business strategy (full-service
or low-cost carrier airline) because the airline
service value lies in the heart of happy employ- Acknowledgment
ees. If they are happy, then their performance
This study was supported by Universiti Sains
in serving the customers will be affective. They
Malaysia fellowship scheme and authors thank
will ensure excellence and show their concern
an anonymous reviewer for their helpful sug-
at every single stage of the airline service pro-
gestions.
cess. The second is the external supplier. In the
rapid growth of the airline business, it is highly
important to establish long-term relationships
References
with suppliers.
Airline service process is complex com- Abdinnour-Helm, S. (1999). Network design in
pared with other service industries. An airline supply chain management. International Jour-
will be hard to compete with others in the market nal of Agile Management Systems, 1, 99–106.
when it involves high investment and other doi:10.1108/14654659910280929
operational costs. Consequently, the synergy
is prohibited.
Ahmed, A. M., Zairi, M., & Almarri, K. S. (2006). Benton, W. C., & Maloni, M. (2005). The influence
SWOT analysis for Air China performance and of power driven buyer/seller relationships on supply
its experience with quality. Benchmarking: chain satisfaction. Journal of Operations Manage-
An International Journal, 13(1-2), 160–173. ment, 23, 1–22. doi:10.1016/j.jom.2004.09.002
doi:10.1108/14635770610644655
Berry, L. L. (1981). The employee as customer.
Ahmed, P. K., Rafiq, M., & Saad, N. M. (2003). Inter- Journal of Retail Banking, 3, 25–28.
nal Marketing and the Mediating Role of Organiza-
tional Competencies. European Journal of Marketing, Berry, L. L. (1984). Services Marketing. Boston,
37, 1221–1241. doi:10.1108/03090560310486960 MA: Kent Publishing.
Al-Kaabi, H., Potter, A., & Naim, M. (2007). An Berry, L. L., Hensel, J. S., & Burke, M. C. (1976).
Outsourcing Decision Model for Airlines’ MRO Ac- Improving retailer capability for effective consumer-
tivities. Journal of Quality in Maintenance Engineer- ism response. Journal of Retailing, 52, 3–14.
ing, 13, 217–227. doi:10.1108/13552510710780258 Berry, L. L., & Parasuraman, A. (1991). Marketing
Azzolini, M., & Shillaber, J. (1993). Internal ser- Services: Competing through Quality. New York,
vice quality: winning from the inside out. Quality NY: Free Press.
Progress, 75-78. Berry, L. L., Parasuraman, A., & Zeithaml, V. A.
Babba, S., & Koufteros, X. (2008). The human ele- (1994). Improving service quality in America: les-
ment in airline service quality: contact personnel sons learned. The Academy of Management Execu-
and the customer. International Journal of Opera- tive, 8, 32–52.
tions & Production Management, 28(9), 804–830. Bharadwaj, N., & Matsuno, K. (2006). Investigat-
doi:10.1108/01443570810895267 ing the antecedents and outcomes of customer firm
Baglieri, E., Secchi, R., & Croom, S. (2007). transaction cost savings in a supply chain relation-
Exploring the impact of a supplier portal on the ship. Journal of Business Research, 59, 62–72.
buyer–supplier relationship. The case of Ferrari Auto. doi:10.1016/j.jbusres.2005.03.007
Industrial Marketing Management, 36, 1010–1017. Bhote, K. R. (1991). Next operation as a customer.
doi:10.1016/j.indmarman.2007.06.005 Executive Excellence, 11-12.
Bak, C. A., Vogt, L. H., George, W. R., & Greentree, Boeing. (2010). Long-Term Market. Retrieved from
I. R. (1994). Management by team: an innovative tool http://www.boeing.com/commercial/cmo/
for running a service organisation through internal
marketing. Journal of Services Marketing, 8, 37–47. Bonner, J. M., & Calantone, R. J. (2005). Buyer atten-
doi:10.1108/08876049410053285 tiveness in buyer–supplier relationships. Industrial
Marketing Management, 34, 53–61. doi:10.1016/j.
Baltacioglu, T., Ada, E., Kaplan, M. D., Yurt, O., & indmarman.2004.07.003
Kaplan, Y. C. (2007). A new framework for service
supply chains. The Service Industries Journal, 27, Boyle, B., Dwyer, F., Robicheaux, R., & Simpson, J.
105–124. doi:10.1080/02642060601122629 (1992). Influence strategies in marketing channels –
measures and use in different relationship structures.
Bansal, H. S., Mendelson, M. B., & Sharma, B. JMR, Journal of Marketing Research, 29, 462–473.
(2001). The impact of internal marketing activities doi:10.2307/3172712
on external marketing outcomes. Journal of Qual-
ity Management, 6, 61–76. doi:10.1016/S1084- Briones, C., & Nguyen, A. (2007). Under the Radar,
8568(01)00029-3 How Airline Outsourcing of Passenger Services
Compromises Security and Service Quality at LAX.
Barnes, B. R., Naudé, P., & Michell, P. (2007). Per- Retrieved from http://www.laane.org/docs/research/
ceptual gaps and similarities in buyer–seller dyadic Under_the_Radar.pdf
relationships. Industrial Marketing Management,
36, 662–675. doi:10.1016/j.indmarman.2006.04.004 Burt, D. N., Dobler, D. W., & Starling, S. L. (2004).
World Class Supply Management, the Key to Supply
Barnes, J. G. (1989). The role of internal marketing: Chain Management. New York, NY: McGraw Hill.
if the staff won’t buy it why should the customer?
Irish Marketing Review, 4, 11–21.
is prohibited.
Caniëls, M. C. J., & Gelderman, C. J. (2007). Power Ewing, M., & Caruana, A. (1999). An internal mar-
and interdependence in buyer supplier relationships: keting approach to public sector management. The
A purchasing portfolio approach. Industrial Mar- marketing and human resources interface. Interna-
keting Management, 36, 219–229. doi:10.1016/j. tional Journal of Public Sector Management, 12(1),
indmarman.2005.08.012 17–26. doi:10.1108/09513559910262652
Carlzon, J. (1987). Moments of Truth. Cambridge, Field, J. M., & Meile, L. C. (2008). Supplier rela-
MA: Ballinger. tions and supply chain performance in financial
services processes. International Journal of Op-
Carr, A. S., Kaynak, H., Hartley, J. L., & Ross, A. erations & Production Management, 28, 185–206.
(2008). Supplier dependence: impact on supplier’s doi:10.1108/01443570810846892
participation and performance. International Jour-
nal of Operations & Production Management, 28, Fisk, G. (1986). Marketing Management Technology
899–916. doi:10.1108/01443570810895302 as a Social Process. New York, NY: Praeger.
Chan, D. (2000). The development of the airline Foreman, S. K., & Money, A. H. (1995). Internal
industry from 1978 to 1998; A strategic global marketing-concepts measurements and applications.
overview. Journal of Management Development, In Proceedings of the Marketing Education Group,
19(6), 489–514. doi:10.1108/02621710010372891 Lexington, MA.
Choy, K. L., Chow, H. K. H., Lee, W. B., & Chan, Forker, L. B. (1997). Factors affecting supplier quality
F. T. S. (2007). Development of performance mea- performance. Journal of Operations Management,
surement system in managing supplier relationship 15, 243–269. doi:10.1016/S0272-6963(97)00001-6
for maintenance logistics providers. Benchmark-
ing: An International Journal, 14, 352–368. Frost, F. A., & Kumar, M. (2000). INTSERVQUAL?
doi:10.1108/14635770710753149 An internal adaptation of the GAP model in a large
service organization. Journal of Services Marketing,
Christopher, M. (1992). Logistic and Supply Chain 14, 358–377. doi:10.1108/08876040010340991
Management. London, UK: Pitman.
Gao, T., Sirgy, M. J., & Bird, M. M. (2005). Reducing
Collier, D. A. (1991). A service quality process map buyer decision-making uncertainty in organizational
for credit card processing. Decision Sciences, 22(2), purchasing: can supplier trust, commitment, and
406–420. doi:10.1111/j.1540-5915.1991.tb00355.x dependence help? Journal of Business Research,
58, 397–405. doi:10.1016/S0148-2963(03)00137-1
Cooper, M. C., Ellram, L. M., Gardner, J. T., & Hank,
A. M. (1997). Meshing Multiple Alliances. Journal George, W. R. (1977). The retailing of services – a
of Business Logistics, 18, 67–89. challenging future. Journal of Retailing, 85–98.
Cunningham, L. F., Gerlach, J. H., & Harper, M. George, W. R. (1990). Internal Marketing and
D. (2005). Perceived risk and the consumer buying Organizational Behavior; A partnership in Devel-
process: internet airline reservations. International oping Customer Conscious Employees at Every
Journal of Service Industry Management, 16, 357– Level. Journal of Business Research, 20, 63–70.
372. doi:10.1108/09564230510614004 doi:10.1016/0148-2963(90)90043-D
Davis, T. R. V. (1992). Internal Service Operations; Grönroos, C. (1981). Internal marketing – an integral
Strategies for Increasing their Effectiveness and part of marketing theory. Marketing of Services,
Controling their Cost. Organizational Dynamics, 20, 326-38.
5–22. doi:10.1016/0090-2616(91)90068-K
Grönroos, C. (1985). Internal marketing – theory and
Doran, D., Thomas, T., & Caldwell, N. (2005). practice . In Bloch, T. M., Upah, G. D., & Zeithaml,
Examining buyer-supplier relationships within V. (Eds.), Services Marketing in a Changing Environ-
a service sector context. Supply Chain Manage- ment (pp. 41–47). Chicago, IL: American Marketing
ment: An International Journal, 10, 272–277. Association.
doi:10.1108/13598540510612749
Grönroos, C. (1990). Service Management and
Emberson, C., & Storey, J. (2006). Buyer–sup- Marketing-Managing the Moments of Truth in Service
plier collaborative relationships: Beyond the Competition. Boston, MA: Maxwell MacMillan.
normative accounts. Journal of Purchasing and
Supply Management, 12, 236–245. doi:10.1016/j.
pursup.2006.10.008
is prohibited.
Gummesson, E. (1987). The new marketing-de- Hutt, M., & Speh, T. (1992). Business Marketing
veloping long term interactive relationships. Long Management: A Strategic view of Industrial and
Range Planning, 20, 10–20. doi:10.1016/0024- Organizational Markets. Orlando, FL: Dryden Press.
6301(87)90151-8
International Air Transport Association. (2000).
Gummesson, E. (1993). Quality Management in Airline Economic Results and Prospects, Part
Service Organizations. New York, NY: International 1-Summary Report. Montreal, QC, Canada: Author.
Service Quality Association.
Kamp, B. (2005). Formation and evolution of buyer–
Handfield, R. B., & Nichols, E. L. J. (1996). Intro- supplier relationships: Conceiving dynamism in
duction to Supply Chain Management. Upper Saddle actor composition of business networks. Industrial
River, NJ: Prentice-Hall. Marketing Management, 34, 658–668. doi:10.1016/j.
indmarman.2005.04.006
Harari, O. (1991). Should internal customers exist?
Management Review, 41–43. Kannan, V. R., & Tan, K. C. (2006). Buyer-supplier
relationships; The impact of supplier selection and
Harari, O. (1993). Internal customer RIP. Manage- buyer-supplier engagement on relationship and firm
ment Review, 30–32. performance. International Journal of Physical
Harrell, G. D., & Fors, M. F. (1992). Internal market- Distribution & Logistics Management, 36, 755–775.
ing of a service. Industrial Marketing Management, doi:10.1108/09600030610714580
21, 299–306. doi:10.1016/0019-8501(92)90038-U Keller, S. B. (2002). Internal Relationship Market-
Hart, C. W. L., Heskett, J. L., & Sasser, W. E. Jr. ing: A Key to Enhanced Supply Chain Relation-
(1990). The profitable art of service recovery. Har- ships. International Journal of Physical Distribu-
vard Business Review, 68(4), 148–156. tion and Logistics Management, 32, 649–668.
doi:10.1108/09600030210444908
Hawkins, T. G., Wittmann, C. M., & Beyerlein,
M. M. (2007). Antecedents and consequences of Kim, J. B., & Michell, P. (1999). Relationship
opportunism in buyer–supplier relations: Research marketing in Japan: the buyer-supplier rela-
synthesis and new frontiers. Industrial Marketing tionships of four automakers. Journal of Busi-
Management, 1–15. ness and Industrial Marketing, 14, 118–129.
doi:10.1108/08858629910258991
Heikkila, J., & Cordon, C. (2002). Outsourcing: a
core or non-core strategic management decision? Knotts, R. M. H. (1999). Civil aircraft maintenance
Strategic Change, 11, 183–193. doi:10.1002/jsc.589 and support fault diagnosis from a business perspec-
tive. Journal of Quality in Maintenance Engineering,
Helman, D., & Payne, A. (1992). Internal market- 5, 335–347. doi:10.1108/13552519910298091
ing: myth versus reality. Cranfield, UK: Cranfield
School of Management. Large, R. O. (2005). External communication
behaviour of purchasers—effects on supplier
Heskett, J. (1987). Lessons in the service sector. management performance. Journal of Purchasing
Harvard Business Review, 65, 118–126. and Supply Management, 11, 28–41. doi:10.1016/j.
pursup.2005.06.001
Heskett, J. L., Jones, T. O., Loveman, G. W., Sasser,
W. E. J., & Schlesinger, L. A. (1994). Putting the ser- Leek, S., Turnbull, P. W., & Naudé, P. (2004). A
vice profit chain to work. Harvard Business Review. comparison of manufacturers and financial services
suppliers’ and buyers’ use of relationship manage-
Hult, G. T. M., Ketchen, D. J. Jr, & Chabowski, B. R. ment methods. Industrial Marketing Management,
(2007). Leadership, the Buying Center, and Supply 33, 241–249. doi:10.1016/j.indmarman.2003.10.013
Chain Performance: A Study of Linked Users, Buyers,
and Suppliers. Industrial Marketing Management, Lings, I. N. (2000). Internal marketing and supply
36, 393–403. doi:10.1016/j.indmarman.2005.12.002 chain management. Journal of Services Marketing,
14, 27–43. doi:10.1108/08876040010309194
Humphreys, P. K., Li, W. L., & Chan, L. Y. (2004). The
impact of supplier development on buyer–supplier Little, E., Tait, C., & Marandi, E. (2005). Achieving
performance. Omega, 32, 131–143. doi:10.1016/j. a services marketing orientation. Business Review
omega.2003.09.016 (Federal Reserve Bank of Philadelphia), 4, 256–262.
is prohibited.
Mahnert, K. F., & Torres, A. M. (2007). The Brand Piercy, N., & Morgan, N. (1991). Internal market-
Inside: The Factors of Failure and Success in Internal ing: the missing half of the marketing programme.
Branding. Irish Marketing Review, 19(1-2), 54–63. Long Range Planning, 24, 82–93. doi:10.1016/0024-
6301(91)90083-Z
Malhotra, N., & Mukherjee, A. (2003). Analysing
the Commitment – Service Quality Relationship: A Prahinski, C., & Benton, W. C. (2004). Supplier
Comparative Study of Retail Banking Call Centres evaluations: communication strategies to improve
and Branches. Journal of Marketing Management, supplier performance. Journal of Operations Man-
19, 941–971. doi:10.1362/026725703770558277 agement, 22, 39–62. doi:10.1016/j.jom.2003.12.005
Maloni, M. J., & Benton, W. C. (2000). Power Prasad, A., & Steffes, E. (2002). Internal Marketing
influences in the supply chain. Journal of Business at Continental Airlines: Convincing Employees that
Logistics, 21, 42–73. Management Knows Best. Marketing Letters, 13(2),
75–89. doi:10.1023/A:1016009201552
Mcdowell, R. (2007). String of crashes in Asia raises
concerns about airline safety. Retrieved from http:// Provan, K., & Gassenheimer, J. (1994). Supplier
www.usatoday.com/travel/flights/2007-09-17-asian- commitment in relational contract exchanges with
crashes_N.htm buyers: a study of interorganizational dependence and
exercised power. Journal of Management Studies,
Mclean, D. (2006). The operational efficiency of pas- 31, 55–68. doi:10.1111/j.1467-6486.1994.tb00332.x
senger aircraft. Aircraft Engineering and Aerospace
Technology: An International Journal, 78, 32–38. Rafiq, M., & Ahmed, P. K. (2000). Advances in the
doi:10.1108/17488840610639663 internal marketing concept: definition, synthesis
and extension. Journal of Services Marketing, 14,
Min, S., & Mentzer, J. T. (2000). The role of marketing 449–462. doi:10.1108/08876040010347589
in supply chain management. International Journal
of Physical Distribution and Logistic Management, Reynoso, J. F., & Moores, B. (1995). Towards the
30, 765–787. doi:10.1108/09600030010351462 measurement of internal service quality. International
Journal of Service Industry Management, 6, 64–83.
Mukherji, A., & Francis, J. D. (2007). Mutual ad- doi:10.1108/09564239510091349
aptation in buyer–supplier relationships. Journal of
Business Research, 1–8. Reynoso, J. F., & Moores, B. (1996). Internal relation-
ships . In Buttle, F. (Ed.), Relationship Marketing:
Normann, R. (1984). Service Management: Strategy Theory and Practice. London, UK: Paul Chapman
and Leadership in Service Businesses. Chichester, Publishing.
UK: John Wiley & Sons.
Rhoades, D. L. (2006). Growth, customer service and
Oppenheimer, S. (2007). An Integrated And Profes- profitability Southwest style. Managing Service Qual-
sional Approach To Fuel Management, Optimizing ity, 16, 538–547. doi:10.1108/09604520610686160
Transactional Decisions. Retrieved from http://www.
Tradecapture.Com/Articles/Transportation_Sector. Rhoades, D. L., & Waguespack, B. (2008). Twenty
Pdf years of service quality performance in the US airline
industry. Managing Service Quality, 18(1), 20–33.
Ostrowski, P. L., O’brien, T. V., & Gordon, G. L. doi:10.1108/09604520810842821
(1993). Service Quality and Customer Loyalty in the
Commercial Airline Industry. Journal of Travel Re- Rowley, J., & Slack, F. (2004). Conducting a Lit-
search, 32, 16–24. doi:10.1177/004728759303200203 erature Review. Management Research News, 27(4),
31–39. doi:10.1108/01409170410784185
Piercy, N. (1995). Customer satisfaction and the
internal market: marketing our customers to our Saccani, N., & Perona, M. (2007). Shaping buyer–
employees. Journal of Marketing Practice and supplier relationships in manufacturing contexts:
Applied Marketing Science, 1, 22–44. doi:10.1108/ Design and test of a contingency model. Journal
EUM0000000003878 of Purchasing and Supply Management, 13, 26–41.
doi:10.1016/j.pursup.2007.03.003
Piercy, N., & Morgan, N. (1990). Internal marketing:
making marketing happen. Marketing Intelligence & Sargeant, A., & Asif, S. (1998). The strategic applica-
Planning, 8, 4–6. doi:10.1108/EUM0000000001069 tion of internal marketing; an investigation of UK
banking. International Journal of Bank Marketing,
16, 66–79. doi:10.1108/02652329810206716
is prohibited.
Sasser, W. E., & Arbeit, S. P. (1976). Selling jobs Varey, R. J. (1995). Internal marketing: a review
in the service sector. Business Horizons, 61–65. and some interdisciplinary research challenge.
doi:10.1016/0007-6813(76)90053-7 Journal of Service Industry Management, 6, 40–63.
doi:10.1108/09564239510078849
Schneider, B., & Bowen, D. E. (1985). Employee and
Customer Perceptions of Service in Banks: Replica- Voss, M. D., Calantone, R. J., & Keller, S. B. (2005).
tion and Extension. The Journal of Applied Psychol- Internal Service Quality, Determinants of Distribu-
ogy, 70, 423–433. doi:10.1037/0021-9010.70.3.423 tion Center Performance. International Journal of
Physical Distribution & Logistic management, 35,
Shostack, G. (1987). Service Position through 161-176.
Structural Change. Journal of Marketing, 51, 34–43.
doi:10.2307/1251142 Wasti, S. N., Kozan, M. K., & Kuman, A.
(2006).. . International Journal of Opera-
Sweeney, D. J. (1972). Marketing: management tions & Production Management, 26, 947–970.
technology or social process? Journal of Marketing, doi:10.1108/01443570610682580
36, 3–10. doi:10.2307/1250419
Wilson, A. (1991). The internal marketing of services
Theodorakioglou, Y., Gotzamani, K., & Tsiolvas, – the new surge. Management Decision, 29, 4–7.
T. (2006). Supplier management and its relation- doi:10.1108/00251749110002558
ship to buyers’ quality management. Supply Chain
Management: An International Journal, 11, 148–159. Worthington, S., & Harbisher, A. (1997). Retail-
doi:10.1108/13598540610652546 ers and their relationships with their financial
services suppliers: the case of debit card charges
Thompson, T. W., Berry, L. L., & Davidson, P. H. in the United Kingdom. Journal of Retailing and
(1978). Banking Tomorrow: Managing Markets Consumer Services, 4(4), 269–274. doi:10.1016/
through Planning. New York, NY: Van Nostrand S0969-6989(96)00055-0
Reinhold Company.
Zampetakis, L. A., & Moustakis, V. (2007). Fostering
Tibben-Lembke, R. S., & Rogers, D. S. (1998). The corporate entrepreneurship through internal market-
impact of reverse logistics on total cost of ownership. ing. European Journal of Innovation Management,
Journal of Marketing Theory and Practice, 6, 51–60. 10(4), 413–433. doi:10.1108/14601060710828754
Van-Haastrecht, R., & Bekkers, M. (1995). Market- Zeithaml, V. A., Berry, L. L., & Parasuraman, A.
ing of change: the added value of internal marketing (1996). The behavioral consequences of service qual-
to change management. In Proceedings of the 24th ity. Journal of Marketing Management, 60, 31–46.
EMAC Conference.
Varey, R., & Lewis, B. (1999).Abroadened conception
of internal marketing. European Journal of Market-
ing, 33, 926–944. doi:10.1108/03090569910285869
Yudi Fernando is a PhD candidate from the School of Management, Universiti Sains Malaysia.
He is an MBA graduate from the School of Management, Universiti Sains Malaysia, Penang,
Malaysia. He earned his first degree in management from Universitas Andalas, Indonesia. His
current research interests are internal marketing, internal service quality, supplier relations
and logistics. Thus far, he has published in several journals such as International Journal of
Information Management, Journal of Accounting, Management and Economics Research, In-
ternational Journal of Productivity and Quality Management, International Journal of Value
Chain Management, Journal of Technology Management and Innovation, International Journal
Logistics Systems and Management, International Journal Logistics Systems and so on. He is
corresponding author.
is prohibited.
Norizan Mat Saad is currently a lecturer in marketing at Universiti Sains Malaysia, Penang,
Malaysia. He earned his Ph.D., from the Management Centre, University of Bradford, UK, his
MBA from the University of Hull, UK and his BBA (Hons) in marketing from Coventry University,
UK. He has published scholarly papers in internationally refereed journals and proceedings. In
summation, his works have been published in five journals including two published under widely
cited Emerald journals. It should be noted, that one article has been published in the European
Journal of Marketing. As an acknowledgement, EJM is one of the most referred international
journals in marketing area and is included in ISI Social Sciences Citation Index recently. Dr
Norizan has also published about twenty articles in international conferences.
Mahmod Sabri Haron is a marketing lecturer at the School of Management Universtiti Sains
Malaysia. His received a PhD from the Management Centre University of Bradford, UK, and
his MBA and B.Sc in International Business from Bridgeport, CT. He also has a Diploma in
Business Studies from Institute technology Mara, Malaysia and Pg. Diploma in research method
from Bradford, UK.
Suhaiza Hanim Mohamad Zailani is an Associate Professor of Operations Management at the

Graduate School of Business, Universiti Sains Malaysia. She received a PhD and MSc from
Lancester university, United Kingdom and B.S. degree from Universiti Putra Malaysia. She has
been teaching for the past 10 years as well as being involved in a few management consultancies
focusing on the areas of operations management. She has more than 150 Research Publications
in International/ National Seminars and Journals. She is quite comfortable in operations related
projects. Her areas of interest are supply chain, logistics, and transportations by involving in
few important projects, which are suited to her capability.
is prohibited.
Building an Expert-System
for Maritime Container
Security Risk Management
Jaouad Boukachour, University of Le Havre, France
Charles-Henri Fredouet, University of Le Havre, France
Mame Bigue Gningue, University of Le Havre, France
Abstract
Until lately, transportation risk management has mostly dealt with natural or man-made accidental disasters.
The September 11th tragedy has made transportation operators, as well as shippers and public authorities,
aware of a new type of risk, man-made and intentional. Securing global transportation networks has become
an important concern for governments, practitioners and academics. In the current time-based competi-
tion context, securing transportation operations should not be sought at the expense of time effectiveness
in physical and informational flow processing. In this paper, the authors describe a project for the design
of an expert-system dedicated to maritime container security risk management, present a literature review
on decision-support systems dedicated to transportation risk management, and discuss the various steps of
expertise modeling in a transportation risk management context.
Keywords: Expert-Systems, Maritime Transportation, Port Security, Risk Management, Supply Chain
Security, Trade Facilitation
Introduction aware of a new type of risk, still man-made but

this time intentional (Abkowitz, 2003).
Until lately, transportation risk management has Securing the global transportation net-
mostly dealt with either natural or accidental works has thus become an important concern
man-made disasters (Merrick, Dorp, Mazzuchi, for governments, practitioners and academics,
Harrald, Spahn, & Grabowski, 2002) focusing and all the more so as:
therefore predominantly on incident prevention
and consequence mitigation. 1) beyond terrorism-related risks, lie numer-
9/11 tragedy has made transportation opera- ous other intentional man-made transporta-
tors, as well as shippers and public authorities, tion risks such as drug smuggling or tax
avoidance: e.g., “South African ports face
a relatively low risk of international ter-
rorist attack, but high incidences of illegal
DOI: 10.4018/jal.2011010103
is prohibited.
human movements through stowaways • Adopted in 2003, the SAFE Framework of

and trafficking as well as smuggling of Standards to Secure and Facilitate Global
illegal substances” (Maspero, Van Dyk, Trade is World Customs Organization’s
& Ittmann, 2008). initiative to promote security and facilita-
2) in a widely spread time-based competition tion standards for international trade, se-
context, securing transportation operations curity-centric networking between national
should not be sought for at the expense customs administrations, and, through the
of delay effectiveness in physical and Authorized Economic Operator (AEO)
informational flow processing: e.g., “the concept, a cooperation between customs
WCO passed a unanimous resolution in and business operators likable to the US C-
December 2007, expressing concern that TPAT (Customs-Trade Partnership Against
implementation of 100 percent scanning Terrorism) program.
would be detrimental to world trade and
could result in unreasonable delays, port Academics and practitioners have also
congestion, and international trading dif- begun addressing this topic:
ficulties” (Caldwell, 2008). Following an informal and rather natural
thread,
In the past 5-6 years, various initiatives
have been launched reflecting this concern • Some authors have contributed to the defi-
(Bichou, Bell, & Evans, 2007) for a detailed nition of the concept of supply chain risk
presentation of these initiatives), as “Govern- management (Juttner, Peck, & Christopher,
ments and industry have all responded with 2003) and have defined this concept as “the
proposals to create more confidence in supply identification and management of risks for
chain security, while maintaining smooth flows the supply chain, through a coordinated
of goods and services in a global supply chain” approach amongst supply chain members,
(Lee & Whang, 2005): to reduce supply chain vulnerability as a
whole”;
• As from 07/01/2004, the International Ship • Other academic writers have looked into
and Port facility Security (ISPS) Code the sources of risk for the supply chain:
launched by the International Maritime e.g. based on the robust classification
Organization (IMO), aims at detecting of risks into three types (environmental,
security threats, assessing security and organizational and network-relates), Das
ensuring that adequate measures are in and Teng (1998) have identified the first
place, based on collection and exchange two uncertainties as sources of risk to the
of security information and the establish- members of the supply chain, whereas
ment of roles and responsibilities in the network-related uncertainties would be
risk management process. sources of risk arising from these members.
• The Container Security Initiative (CSI) has • An important body of literature is dealing
been designed in 2002 by the US Customs with the risk assessment dimension of
and Border Protection (CBP) Adminis- supply chain risk management: Gilbert
tration to identify potentially high-risk and Gips (2000) have mentioned that
containers and evaluate the risk actually implementing supply chain-wide risk as-
brought by these containers before they sessment may get more and more difficult
are shipped to the US, using such screening as the number of links involved in the as-
devices as X-ray scanners. sessment gets higher.
is prohibited.
• Regarding risk mitigation, which stands ment context (Part 3), this paper describes the
as the final step of a risk management different components of the expert-system’s
process, it has been addressed mainly as prototype (Part4).
a trade-off issue, risk mitigating strategies
being designed to strike the best possible
balance between safety / security and such Security: A New
other supply chain performance criteria Performance Criterion
as costs and lead-times: Sheffi (2002) has for the Global
suggested to mitigate product disruption Supply Chain
risk by building a number of safety stocks
Since the 1990s, the international economic
and / or keeping a set of local suppliers,
context has favored the reduction of trade
dedicated to the handling of specifically
barriers (Nonneman, 1996), the decrease of
high disruption emergencies.
custom duties (Minyard, 1997), and the surge
of international sourcing (Swenson, 2005).
Beyond these various instances of research As time passes by, the transportation
activities led in this field, a wider review of sup- industry brings up new development oppor-
ply chain risk management literature shows that tunities for this globalization of economic
security risk is dealt with mostly as a supply- activities (Douglass, 2001); the expansion of
chain disruption issue (Mentzer & Manuj, dedicated, network-structured, transportation
2008), and using the traditional three-step infrastructures ensure that shipments are opti-
risk management process: risk identification, mally delivered. Maritime ports get larger and
risk assessment and risk avoidance/mitigation larger, adjusting to the continuous growth of
(Bichou, 2008). containerization (Amerini, 2008).
Among all possible contributions to this To profit by the obvious economic ad-
trend, involving multiple stakeholders at the vantages of international sourcing (Ferdows,
crossroads between local border protection 1997), companies are looking world-wide for
and global supply-chain performance, stands commercial partners, suppliers and customers.
the design and implementation of relevant Besides, wherever they stand along the
decision support systems. Consequently, a global supply chain, they tend to externalize a
project of this type has been set up, to help growing number of logistics related activities.
secure international transportation networks’ Finally, as sea-borne trade is increasing
seaport nodes. In its first phase, it has followed strongly and rapidly, global supply chains are
a case-based methodology for field data col- becoming more and more difficult to design and
lection, calling on specific process and risk control, compared to local ones (MacCarthy
analysis resources. The project has now reached & Atthirawong, 2003), with an ever tighter
the stage of prototyping a decision-support dependency from international transportation
system dedicated to container transportation, networks.
security-wise, decision making; it features an Before the 9/11 tragedy, global supply
expert-system architecture, well-suited for the chain’s performance relating to maritime trans-
modeling of the ill-structured patterns shown portation was measured in terms of cost, delay,
by risk management decision processes. and a quality of service particularly focused on
Reset in the triple frame of global sup- container’s integrity, cargo theft being a critical
ply chain’s continuous drive for performance risk for many companies.
improvement (Part 1), a literature review on Since 9/11, a new era has begun, character-
decision-support systems dedicated to trans- ized by a high probability of terrorist acts. The
portation risk management (Part 2), and the attention of international trade stakeholders has
presentation of the various steps of expertise turned to the possibilities of using containers
modeling in a transportation risk manage-
is prohibited.
to hide and ship weapons of mass destruction Containers have for long been used for
and/or terrorist agents. All around the world, clandestine immigration, illegal weapon and
security managers have started to fear that the drug smuggling, but associated risks are in no
maritime transportation system might be used as way comparable to those created by weapons
a target and/or vector for further terrorist attacks. of mass destruction. One of the major possible
As to global supply chain managers, they consequences of the explosion of such devices
have always been faced, in a changing environ- in a major maritime port would be the complete
ment and a strongly competitive market, with shutdown of all of this port’s facilities, with its
conventional disruptions due to ill-operated related impacts on national economies through
procurement processes, capacity constraints, multiple disruptions of the international trade
and/or quality issues in factories. Today, they activities.
also have to deal with a high uncertainty, Besides, all the more so as container carri-
arising from war against terror, and the prob- ers’ capacities are getting larger and larger (over
ability of further attacks, notwithstanding the 10 000 TEU), ships themselves can be used as
consequences of port congestion in the wake a support for, or viewed as a target of, terrorist
of a possible incident. attacks, and may also indirectly help collect
Therefore, global supply chain vulner- funds for terrorist organizations. Consequently,
ability has become a capital issue for all of and whatever the associated costs, governments,
the logistics networks’ partners, and security, port authorities and all international trade opera-
together with effectiveness, is now an unavoid- tors need, as they have already started to do since
able high performance factor for the maritime 9/11, to collaboratively design and implement
(including container) transportation system. world-wide a hopefully sufficiently efficient
array of technical, regulatory and organizational
Maritime Transportation measures, for enhanced safety and security of
System’s Securisation freight and people.
In seaports, a large variety of products is in Technology-Based

transit, in great quantity, from diverse origins, Security Measures
to several destinations. These products are
more and more often shipped in containers: Security risk management in the maritime
maritime container transportation becomes the transportation network being a concern for each
first transportation mode for the manufacturing partner in the global supply chain, responsibili-
industry. In 2002, the International Container ties for this management are shared between
Bureau (BIC) had estimated the containers to a federal agencies, state agencies, local agencies,
world-wide number of 15 000 000 (Organisation border protection administration, logistics
for Economic Co-operation and Development and transportation operators, freight shippers,
[OECD], 2005). Every day, those millions of notwithstanding each individual’s potential
containers, carrying each more than 20 tons of contribution (Abkowitz, 2003).
products, are conveyed to and from seaports on More specifically, Port Authorities focus
trucks, carriages, barges and ships. on two levels of security:
However efficient and reliable such flows
may now be, this huge volume of container • The assets level, where security issues
movements, besides significantly increasing regarding port facilities and access to port
the complexity of the global maritime trans- premises are handled, and
portation system (Robinson, 1998), appears as • The in-transit level, at which physical and
a formidable challenge to freight and people informational flows security problems are
security, more specifically during the seaport dealt with.
transit operations.
is prohibited.
In this context, a growing number of rel- qualification procedure of supply chain mem-
evant inspection-like control processes are being bers as Authorized Economic Operators.
implemented in seaports, a priori leading to extra International Maritime Organization
delays and additional costs in the handling of (IMO) has designed regulation rules stemming
the containers. However, all along the global out of SOLAS (Safety of Life at Sea) Conven-
supply chain and including within the seaport tion modifications and ISPS Code extension.
link, new information and communication Finally, World Customs Organization
technologies help companies combine efficient (WCO), which has shown continuous interest
security management and time-effective opera- since the years 2001-2002 in the enhancement
tions management through various improve- of global supply chain security, has adopted
ments in such fields as facility access, container the SAFE Framework of Standards to secure
handling and transport document processing. and facilitate global trade during its June 2005
Among the security-wise equipment supporting annual Council Sessions.
these improvements stand out container sealing The implementation of all those regulatory
systems, risk-centric container targeting sys- actions has brought mixed feelings among sup-
tems, RFID-based container stuffing, moving ply chain operators:
and loading, supervision systems (Juels, 2005; Advanced notice of information on inbound
Kearney 2004; Weis 2003), and smart boxes containers may speed up the average transit-time
and x-rays or y-rays scanners (Massey, 2005). at the port of entry, and the security-centric
handling of C-TPAT or AEO labeled freight
Regulatory-Based may prove less time-consuming.
Security Measures More generally speaking, improved ac-
curacy, reliability and availability of ship- and
Regulatory actions have also been taken, some freight-related information, as a result of
at a national level, others at international and security measures implementation, is a well-
even world-wide levels, as a result of collab- reckoned contribution to a more efficient and
orative projects which have been launched to more effective operation of the global supply
define common strategies dedicated to reducing chain (Kearney 2004; Bhatnagar & Viswanathan
the risk of terrorist attacks within the maritime 2001; Sheffi, 2001; Sheffi & Rice, 2005).
transportation system. These strategies focused Conversely, a number of non-US inter-
on container tracking, ships and port facilities national logistics networks’ stakeholders,
security, seamen identification and freight including Port Authorities, fear that world-
integrity (JBW Group International, 2009). wide extension of CSI-inspired, but unwisely-
The United States has adopted institu- implemented, physical inspections of containers
tional measures such as the Act of Maritime may increase port congestion and globally
Transportation Security in 2002, the Arrival slow down freight flows along and out of the
Notification Rule (96 hours advanced notice), supply chain. This feeling has actually been
compulsory visas for crew members, and the reinforced recently by the legislation passed
Advanced Manifest Rule (24 hours before in 2007 by the US Congress to have 100% of
ship loading). Moreover, they have promoted the US-bound containers be scanned before
voluntary programs such as CSI, intended to leaving their port of exit.
increase container security, and C-TPAT, to Besides, because of its requirements for
enhance shippers’ motivation in fighting terror- large numbers of highly-qualified personnel and
ism through cooperation with the US Customs high-technology equipment, the full implemen-
and Border Protection agency. tation of the above-mentioned security measures
In the European Union, comparable ini- within each link of a given global supply chain
tiatives have been taken, such as the Custom may be excessively costly.
Security Program, and the optional audit-based
is prohibited.
Associated Costs ply chain performance as important as cost or

delay can be, any company (including seaport
One of the key decision factors for security communities) knows that, in the years to come,
measures implementation is the comparative it will be renewed as a member of a logistics
analysis of associated action vs inaction costs. network, or will be offered the opportunity of
Obviously, the global cost of securing, entering a new one, only if it has adjusted to a
the cost of a security-dedicated such complex sufficiently high level of operational security
organizations as are transportation networks, (Fredouet, 2007).
may be huge. In such a context where they are led to
For instance supply chain redesign could assess and possibly redesign their risk manage-
amount to more than USD 65 billion (Russel & ment strategy and processes, actors of global
Saldanha, 2003), not only because the relevant transportation systems may feel the need for
equipment is presently very expensive (e.g., dedicated risk identification, evaluation and
RFID-based data acquisition system), but also mitigation decision-support systems.
because the comprehensive cost of the whole
project should include installation costs, main-
tenance costs, operation costs, and so forth. Decision-Support Systems
Also, the total costs induced by the applica- for Transportation
tion of the advanced manifest rule for example Risk Management
are estimated between 5 and 10 milliards dollars
Depending upon the nature of the processed
per year (Organisation de Cooperation et de
data, one of two types of risk analysis (Gleyze,
Developpement Economique [OCDE], 2003).
2000), quantitative and qualitative, and a num-
As to container scanning systems, they
ber of tools and methods are usually applied
can cost up to 5 USD million dollars (OCDE,
in risk management, among which stand the
2003), while handling from 4 to 20 containers
Monte-Carlo method, decision trees, heuristics,
per hour, depending upon the technology used.
and fuzzy sets. Risk management covers sev-
Potential costs associated with reaching
eral areas (Camara, Kermad, & El Mhamedi,
C-TPAT or AEO status are quite high too:
2005): risk management project, financial
companies must invest heavily to protect
risk management, software risk management,
their own assets and to meet the status-related
product/service risk management and process
requirements.
risk management.
Notwithstanding other, possibly equally
The risk analysis can be deterministic or
high, and most likely organizational, cost
probabilistic by quantifying uncertainties. The
items, financial cost of implementing security
interpretation of this quantification can follow
measures is therefore a formidable burden for
a diagram of deductive logic (tree of failures or
all global supply chain stakeholders, would
defects) or an inductive diagram (tree of events).
they be public institutions or private companies.
The quantitative risk analysis, in the case of
Yet, the maritime transportation system
complex systems, is done by stochastic methods
is so vulnerable that a large scale multi-point
applying to a large number of events, the oc-
terrorist attack would cause losses amounting
currence of which is hard to quantify (natural
to tens of billions of US dollars (~USD 58 bil-
risks, risks generated or not by human activity).
lion only for the US system). There is then no
Generally, an inductive step is activated in such
sensible way for any public authority, a priori
methods (Leroy & Signoret, 1992).
involved in securing freight and people trans-
The events can be individualized, in which
portation, to avoid addressing this issue in the
case one speaks about microscopic data. The
most possible efficient manner.
macroscopic data are associated with events
Besides, as it is now well-agreed upon
which cannot be quantified individually.
that security has become a component of sup-
is prohibited.
Among the inductive methods, there are warehousing and transportation activities within
preliminary risk analysis (PHA), hazard and the densely-populated area of Ravenna (Italy).
operability study (HAZOP), and failure mode Bubbico, Maschiob, Mazzarottaa, Milazzob,
and effects analysis (FMEA/FMECA). Fault and Parisi (2006) studied the same problem.
Tree Analysis (FTA) is one of the most important They used a transportation risk analysis to as-
deductive methods. sess the risks associated with different modes
(road and rail) hazardous goods transportation.
Maritime Transportation Risk mitigation is sought by changing route
and/or transportation mode using a combination
Since seaports are open gateways to world of road, rail and inter-modal solutions. After
markets and significant contributors to the de- mitigation, an F-N societal risk curve for land
velopment of world economy, many research transportation is calculated. Frequency-Number
works have focused on maritime transporta- (F-N) curves can show the societal risk in a
tion. The logistics tracking system designed by situation where there is a potential for accidents
Tsai (2006) addresses the issue of risk-related impacting more than one person. These are
information integrity. This system, initiated by obtained by plotting the cumulative frequency
a Taiwanese seaport, is dedicated to smuggling (F) of accidents scenarios that cause N or more
risk avoidance/mitigation during container tran- fatalities per year as a function of N (usually
siting operations. The analysis of information on a log-log scale) (Casal, 2008).
integrity is done using the FMEA methodology. The societal risk is also calculated in
Each risk, quantified by priority number, is as- (Gheorghe, Birchmeier, Vamanu, Papazoglou,
sessed as intolerable, negligible or in-between. & Kröger, 2005) in the usual format of a
The tracking system deals with information CCDF (Complementary Cumulative Distribu-
unreliability stemming out of human and/or tion Function) for any railway traffic segment
organizational errors, as well as with informa- based on location-specific infrastructural and
tion inconsistency coming from technical error. environmental data. Different calculations have
Degre (2003) uses the SAMSON methodol- been conducted, including LOC (Loss Of Con-
ogy (Safety Assessment Models for Shipping tainment) frequency and accident consequence
and Offshore in the North Sea) to estimate the estimation. However, event- and fault- trees
number of maritime accidents. A quantitative have been developed for investigating sig-
risk assessment using FSA (Formal Safety As- nificant events following the identification of
sessment) aims at improving safety in seaports. the immediate cause of a derailment and/or a
FSA methodology identifies risks, quantifies collision. A detailed Master Logical Diagram
their level and specifies risk reducing measures. including fault/event tree analysis determines
This paper deals more precisely with risks of LOC frequency.
such possible accidents as collisions, stranding, Still in the field of hazardous goods trans-
contacts (collisions with man-made structures), portation risk management, more specifically in
damages, fires, and explosions. These accidents a case of NP hard-classified risk transportation
depend upon many factors including the ship’s programming, Mavrommatis and Panayioto-
type, size, age, and registration flag. More poulos (2004) have designed a mathematical
recently, Yip (2008) studied accidents in the model of the situation, and built a dedicated
Port of Hong Kong using regression analysis. problem-solving heuristics. External factors
such as weather, war, strikes, and accidents,
Hazardous Goods Transportation
may alter transportation schedules, and therefore
In the case of hazardous goods transportation, modify costs within a given planning horizon.
Egidi, Foraboschi, Spadoni, and Amendola In order to spread risks, the final purpose is to
(1995) analyzed the major risks of accident (fire, find a set of dissimilar paths in route planning
explosion, toxic emanations) as connected with for the transportation of hazardous materials.
is prohibited.
Unlike these studies that focus on predic- transportation management. Additionally, for
tion and probability of occurrence of a risk or a wide range of transportation problems, the
optimization, we are particularly concerned with document helps decide what tools to implement,
in detection of risks due to the occurrence of under what conditions, and for what specific
some known events. Our risk management is applications. For each paradigm or method, a
based on monitoring and tracking the physical brief description is given as well as its strengths
flow of goods (Bechini, Cimino, Marcelloni, and weaknesses, and the types of problems it
& Tomas, 2008; Planas, Pastor, Presutto, & is best suited for solving.
Tixier, 2008). Developed around the need of In addition, the circular points out at three
our partners, our research focuses on using a reasons to use AI:
tracking system as a tool for risk management.
• Transportation problems deal with qualita-
AI Applications tive data, which makes it most appropriate
to use KBS- and FS- based decision-support
There are also a number of artificial intelligence
systems,
(AI) applications to the solving transportation
• Transportation systems’ behavior is so hard
management problems. AI is actually quite
to model that the best solution is to build
suitable to address those problems which so
empirical models of these systems based
far have been difficult or impossible to solve
on observed data, and for which NNs are
using classical mathematics.
perfectly relevant, and
The 2007 Transportation Research Cir-
• For optimization problems which abound in
cular E-C113 of the Transportation Research
transportation management, there is a need
Board (Transportation Research Board, 2007)
for alternative meta-heuristic approaches,
describes the state of the art of AI tools and
such as GA’s, to help deal with over-sized
methods (see Table 1), namely knowledge-
and non linear decisional situations.
based systems (KBS), neural networks (NN),
fuzzy sets (FS), genetic algorithms (GA) and
agent-based models (ABM), usually applied in Combining AI with data analysis, Bayesian
Network (BN) stands out as a tool frequently
Table 1. AI methods
Method Category Description

KBS Symbolic AI Include expert-systems and case-based reasoning, together with FS, are
described as quite appropriate for the support of uncertainty-loaded decision
processes, and the solving of problems requiring human expertise.
NN computational Made of sets of neurons connected together in such a way that they are able to
learn nonlinear behaviors from a limited set of measurement data, and adaptive-
ly respond to inputs in accordance with a relevant learning rule. These networks
are useful for function approximation or for input-output mapping. They are also
excellent pattern classifiers (pattern recognition and classification problems).
FS computational Based on probability / possibility distribution functions, are widely used in the
modeling of ill-defined input data, problem-solving knowledge and/or awaited
solutions.
GA computational Specifically stochastic optimization algorithms.
ABM Symbolic AI Models an organizational system from down to top, starting with its individual
actors (agents) and defining their potential interactions. The simulation of these
interactions generates the system-level (top) behavior. ABM seems therefore
appropriate for the in-depth exploration of complex systems’ behavior.
is prohibited.
used in (transportation) risk management. In the KBS as Applied to

case of a transportation-related risky context, Transportation
Bouchiba and Cherkaoui (2007) have followed Risk Management
a BN approach when building a graph of all
events likely to generate accidents within the Rather than on data analysis, transportation
Moroccan railroad network. BN is a power- security-dedicated decision support systems
ful decision-support tool, although it cannot may rely on the modeling of human expertise
take into account multiple-attribute and fuzzy in relevant risk identification, assessment and
expressions. The nodes of the graph represent hedging. In that case, the whole decision-support
hazard variables (uncertain events) and the process consists in the best possible duplication
edges represent the probabilistic causal depen- of the problem-solving protocols followed by
dence among the variables. A network allows various experts in transportation security risk
a qualitative description of the relationships management.
between different variables (causal graph) and The design of such a knowledge-based
a quantitative description of the relationships system goes follows a two-stage path: one is
between events. BN makes it possible to analyze the knowledge acquisition stage; the other is
a large quantity of data, in order to enrich the the knowledge representation stage.
knowledge base from which the decision will be
made, to control the behavior of the monitored Knowledge Acquisition
system, and/or to identify the likely cause(s) of
a given phenomenon. Collecting human expertise faces a variety of
In Trucco, Cagno, Ruggerri and Grande difficulties, which are accounted for through a
(2008), the Maritime Transport System (MTS) range of dedicated techniques.
is described through the modeling of its differ-
The Difficulties Encountered
ent actors and their mutual influences. Within
the model, the risk analysis process is based Knowledge acquisition potential problems re-
partly on FTA and partly on a Bayesian Belief late respectively to the content of the knowledge
Network (BBN) to account for the risk Human to be acquired and to the personal behavior of
and Organizational Factors (HOF). its holder.
Yang, Bonsall, and Wong (2009) have Most of the time, the human expert-led
integrated BN in MAUT (Multiple Attribute risk management process is both complex and
Utility Technique) to make for uncertain at- pervaded with uncertainty (Vale, Ramos, Faria,
tributes. Additionally, the BN incorporates a Santos, Fernandes, Rosado, & Marques, 1997):
notation of preference. They studied the case
of a container transportation lead-time, and
• Risk identification is based on a large
designed a decision-making scenario dedicated
number and wide variety of qualitative as
to the choice of the appropriate transportation
well as quantitative criteria (Yang, Shyu,
mode of transportation for lead-time reduction.
Lin, & Hsu, 2005). Each of these criteria
Fuzzy logic was used to take into account crisp
characterizes a specific standpoint, from
values (which represent uncertain data), fuzzy
which a potentially risky situation should
numbers and linguistic variables.
be looked at to build for it a measurable
Among all those possible approaches
and reliable description. Furthermore,
to decision support in transportation risk
risk identification data often are not as
management, this paper focuses on expertise
complete, as precise and/or as reliable as
modeling, leading to the design of an expert-
they should be, to ensure that the decisions
system, therefore within the field of knowledge-
which they support reach an acceptable
based systems.
level of certainty.
is prohibited.
• Risk assessment and hedging may follow from the expert is likely to be rather poor.
various paths, mostly heuristic in nature, Incidentally, the experts involved in the
as they result from the experts’ years design of the KBS described later in this
of practice (Zsidisin & Ritchie, 2009). paper, who work for most of them for the
These assessment and hedging scenarios Customs administration, have spontane-
are structured in some kind of individual ously adopted a definitely cooperative
meta-knowledge, which each specialist attitude; the assumption regarding this
uses to dynamically adjust his/her analysis matter is that, as they are civil servants
of a given risky situation to the context en- and the expert-system project is at this
countered. While such heuristics obviously stage only a research project, they felt no
speed up the assessment/hedging process, threat for their job.
they at the same time greatly contribute
to the complexity of the problem-solving The Techniques Available
knowledge base.
Apart from the rather theoretical option of
The knowledge is sought from experts letting experts conduct a self-interview, self-
whose individual cognitive behaviors, as well transcription informal process, knowledge
as personal attitudes towards the acquisition acquisition is usually dealt with by knowledge
process itself, are likely to be different: engineers through the implementation of dedi-
cated techniques (Reitman & Rueter, 1987).
• Whereas some people have a rather syn- Traditionally, retrieving its knowledge
thetic cognitive style, which means they from an expert is done via a series of more or
can make their decisions using relatively less structured interviews. However, using this
simple decision-trees, each based on a technique is rather time-consuming and costly,
limited number of data, some other people and the knowledge retrieved may not be as
have a more analytical cognitive style; they complete and unbiased as it should: e.g. will-
require a larger amount of data for context ingly or not, the risk management expert may
and problem description, which leads to speak out only part of his/her assessment and
the densification and complexification of hedging processes, or the knowledge engineer
their decision networks (El-Najdawi & may have a wrong understanding of the expert’s
Stylianou, 1993). discourse (Cullen & Bryman, 1988).
• Moreover, different people feature different Therefore, based on a heuristic, rather
cognitive capacities, partly in the way that than algorithmic, concept of experts’ thought
some are able to simultaneously handle a processes, it may be worth turning to other
larger number of data than others at a given techniques, more specifically coming from the
step of a given decision process, therefore field of cognitive psychology (Cooke, 1992).
shortening and narrowing this process Among these knowledge elicitation techniques,
(O’Leary, 1996). protocol analysis stands out as one of the most
• Besides, when being asked whether they widely-used.
would agree to participate in the building of In the present risk management context,
a KBS based (partly) on their knowledge, a protocol is the expression by the expert of
experts take stands which go from sincere his/her assessment/hedging process in a given
willingness to frantic opposition (McGraw risk-loaded situation. Once it has been collected,
& Seale, 1988). When knowledge acqui- the protocol is analyzed in order to identify the
sition is constrained into situations close pieces of expertise actually implemented for ad
to this latter case, the quality (including hoc problem evaluation and solving (Ericsson
reliability) of the knowledge retrieved & Simon, 1993):
is prohibited.
• Three main options have to be taken dur- First step in preparing the protocol for
ing protocol collection: One is between analysis consists in identifying the structure
written or verbal protocols; admittedly, a of the recorded material, by isolating hopefully
written protocol would eliminate the risks meaningful words or sets of words. Through
of information alteration or even loss in the more complex segmentation of this material into
course of a verbal protocol transcription; sentences, the next step is to look for instances
however, the more complex, the lesser of specific mental processes likely to have been
structured, thought processes are, the bet- activated by the expert. From these processes
ter verbal protocols seem to be suited for may then be inferred the general structure of
their identification, in terms of knowledge the mental activities.
completeness and reliability. Beyond this first level of analysis, a num-
ber of qualitative as well as quantitative, non
The second option is in vitro collection vs. exclusive, techniques have to be implemented,
in vivo collection; although in vitro collection to extract from the protocols retrieved their full
is less time-consuming and probably allows significance regarding the research issue to be
for a better control of the on-going acquisition addressed. Among these techniques, two are
process, in vivo collection is likely to bring out widely practiced: content analysis (Ford, Stetz,
a richer knowledge, would it only be because Bott, & O’Leary, 2000), which typically relies
most of the time the expert feels more moti- on counting the frequency of occurrence of
vated when handling ‘real-life’ than ‘lab-like’ words or sets of words or sentences; sequential
on-the-job situations. analysis (Fisher & Sanderson, 1993) rather
The third option is the choice of col- searches for (repetitive) sequences of sentences
lecting protocols when expertise is actually or group of sentences in the expert’s flow of
implemented or later; a posteriori collection is thinking.
worth practicing in the way that it gives time Once the knowledge acquisition step is
to the expert to re-think his/her past evaluation/ over, expertise modeling enters the knowledge
decision process, and in the end build a more representation stage.
thorough description of this process than he/she
would have during a ‘live’ collection. However, Knowledge Representation
having protocol collection coincide with exper-
Knowledge acquired from experts using such a
tise implementation preserves the spontaneity
collection process as protocol analysis, is formu-
of the expert’s behavior, and therefore avoids
lated for the most part in these experts’respective
the self-censuring and/or post-rationalization
personal natural languages. Therefore, so as to
attitudes which experts rather frequently adopt
be effectively stored and efficiently retrieved
during a posteriori collection.
and implemented, expert knowledge needs to
be represented through some kind of common
• Protocol analysis consists in two main standardized structure (Huang, & Tseng, 2009).
activities, described in some detail by This structure may frame in different ways the
Bainbridge and Sanderson (1995): “once information needed for evaluation and decision
[they] have been collected, the first activ- making, and the processing of this information:
ity [in protocol analysis] is the prepara-
tion and description of the protocols […]. Information Modeling
The second activity is the analysis of the
explicit and implicit content and structure Following standard IS design principles, the
of the protocols”. information may be structured into a data-base
combining object-oriented technology and
is prohibited.
relational architecture, thus maximizing the transportation risk management expertise

diversity of information that could be stored modeling are the production rules, which
in the data-base. require that the knowledge be formulated
Regarding risk management decisional ac- as sequences of IF (hypotheses) THEN
tivities, database management systems (DBMS) (conclusions) (Hou, Li, & Wang, 2009).
are helpful in the way that they provide both a • In the database, most likely using a DBMS-
dedicated frame to host the information feeding structure, is stored the information relating
the risk identification / assessment / hedging to the specific problem to be solved. More
processes, and a query language to retrieve specifically, in a transportation risk man-
the information relevant to a given step of a agement context, at least part of the data
given decisional activity (LaFue, 1983; Jarke used in the risk identification phase needs
& Vassiliou, 1983). to be collected and transmitted in real time,
But, even if part of the information process- so that risk assessment and possible hedg-
ing knowledge may also be re-formulated using ing actions may be led as soon as possible
a DBMS structure (knowledge components are after the risk has been identified. Global
framed into a set of objects and object classes, positioning systems, various kinds of sen-
characterized by a number of attributes and sors as well as EDI networks are therefore
relationships) (see the Ksys architecture in among the technological resources sup-
Wiederhold, 1995), this structure is generally porting data base feeding within the risk
not fit for the representation of the experts’ management expert-system (Skorna, Bode
most of the time inferential thought processes. & Wagner, 2009).
• Standing as the model of the expert’s
Process Modeling thought process, the inference engine uses
the knowledge available in a given field of
Experts’ information processing may be for- expertise to help solve a problem within
malized using expert-systems shells, which this field (Southwick, 1991). It follows
supply the risk management DSS designer / a three-phase operating cycle, from the
builder with a set of tools for the transcription of detection phase to the deduction phase,
human problem-solving processes into a three- through the choice phase:
component standard model: an expert-system ◦◦ The detection phase is dedicated to the
made of a database, a knowledge base and an identification, within the knowledge
inference engine. Each of these components base, of all the elements of knowledge
represents one of the three dimensions of a likely to contribute to the solving of
decisional activity: have knowledge of the the problem.
types of problems needing to be solved, have ◦◦ The selection phase retains, from all
information on the specific situation calling the elements of knowledge identi-
for the decision, apply the former (available fied during the detection phase, only
knowledge) to the latter (problem to be solved): those which will actually be used for
improved problem-solving.
• In the knowledge base is stored most of the ◦◦ The deduction phase applies the ele-
acquired expertise, made of both a basic ments of knowledge retained to the
domain-specific knowledge, and a meta- present step of the evaluation/deci-
knowledge which helps prevent the com- sion process, thus leading to a better
binatory explosion that would result from understanding of the situation and
the systematic exploration of the whole preceding a step forward in the solving
knowledge base. The knowledge repre- of the problem.
sentation mode most commonly used in
is prohibited.
Built from the expertise collected during stage is case-based, within a set of typical Sup-
the knowledge acquisition phase, based on a ply Chains involving internal (e.g., Port of Le
variety of knowledge representation modes, Havre) and also external logistics actors. The
the expert-system is ready for use as a support processes taken into account go from the origi-
for transportation risk management decision- nation port to point of destination (for imports)
making. and from point of origin to the destination port
To illustrate part of this rather long DSS (for exports).
design and building process, the following Risk assessment is addressed with refer-
section describes the implementation of the ence to security-dedicated standards as food
different components of an expert-system industry Hazard Analysis and Critical Control
prototype, designed for transportation security Points (HACCP). HACCP is a method of risks
risk management. identification, evaluation and control (Rivituso
& Snyder, 1981; (Walker & Jones, 2002) that
helps to lead a risk analysis to identify potential
Prototyping a risks, to decide which potential risks to manage,
Transportation Security to specify the critical points to control and to
Risk Management define the risk indicators that must be evalu-
Expert-System ated. Table 2 shows an overview of the HACCP
method with some critical control points.
Our methodology encompasses the three core
Risk management is taken care of through
elements of (1) risk modeling, (2) risk assess-
the implementation of an expert-system cou-
ment and (3) risk management.
pling a database to a knowledge base. The
Risk modeling is process-based. It is
database should be fed with real-time and au-
an “activity-resource” model well suited for
tomatically collected information from the
logistics systems analysis and the associated
monitored logistics operations. The knowledge
security-centric performance monitoring. The
base is fed with the expertise of, among others,
data-collection methodology followed at this
Table 2. HACCP application
Risk Point Scenario Risk Indicator Preventive actions

empty container depot The owner is Not- Modification of Shape of the Check the shape of the
AEO and no ac- the empty con- empty container empty container before
cess control to the tainer shape packing and point out
empty container that the container is
depot reserved
The owner is Fraudulent con- Empty container Check and forward
Not- AEO and the tainer number the number of the
number of empty empty container before
containers is packing
unknown
Empty container pick The owner is Modification of Shape of the Check the shape of the
up from container Not- AEO and the the empty con- empty container empty container before
depot to a customer’s driver is a risky tainer shape packing and point out
warehouse person that the container is
reserved
Customer Customer is Not- Intrusion Container contents Check the container
AEO and employ- before terminal arrival
ees background is and scan the container
unknown on arrival at the port
is prohibited.
customs / police / immigration agents, lawyers, or more premises and a conclusion (decision).
and port authorities. To optimize container A premise being composed of a name attribute
transit security and facilities, the expert-system linked by a relational operator, such as is equal
inference engine first interprets information on to or is less than, with an attribute value to
the incoming (from sea or from land) con- form logical expressions that can be evaluated
tainer and then presents a solution for dealing as true or false.
with each cargo, on the basis of available expert We identified different risk scenarios
knowledge. Our prototype was developed thanks to our partners French Customs and Soget
within a Research Institute for Securing and firm. We have thus collected many security risk
Facilitating International Logistic Chains, situations according to the view point of French
which includes University of Le Havre, French customs. Table 3 presents two situations and
customs, SOGET (world leader in E-Maritime illustrates the way in which CLIPS expresses
applications) and Port Authority of Le Havre. them the defrule definition. Defrule allows the
In this specific instance of transportation statement of the rules by giving each of them a
risk management, the risks dealt with by the name and a salience (priority).
expert-system may occur at different stages of Several conditions are mentioned in the
a given container seaport-bound transportation left side and should be checked with the facts
process. reflected in the facts base.
The implementation of the knowledge- One example is the fifth position, which
based system was carried out using CLIPS includes two rules with the names “state-site-
(C Language Integrated Production System). secure-conclusions” and “state-site-unsecure-
CLIPS is a forward-reasoning and pattern- conclusions”.
matching KBS shell. It provides support for The conditions set out in the left side of
rule-based, object-oriented and procedural the first rule such as:
programming. CLIPS is extremely popular
because of its high portability, low cost, and “state-site notisolated”, “guarding_time se-
easiness of integration with external programs cure”, “badge_control perfect”, and
(Girratano & Riley, 1989). Knowledge in CLIPS “enclosure_high secure” must be verified
is represented through a modular environment, with the facts existing in the facts base.
a module being a set of constructs (deftemplate,
defrule, deffacts). The “site is secure” is presented as the con-
CLIPS supplies mechanisms to store the clusion of this rule. The decision displayed by
rules, and an inference engine for rule selec- the function “repair” is “the site is sufficiently
tion and rule activation. Rules within CLIPS secure”. The second rule of the present situa-
are expressed by the construct defrule, which tion where the site was not secured by the fact
contains a left-hand side (LHS) and right-hand that one of the conditions of the left side is not
side (RHS). The LHS is a series of conditional satisfied. The decision to be taken is “the site
elements which consist of patterns to be matched is insufficiently secure, the container must be
against. The RHS contains a list of actions to scanned.”
be performed when the corresponding LHS All these situations involve different
conditions are met. classes: Container, Actor, Hazardous goods,
Shipping, Country, Transport mode, Site,
Implementation of
Transport Company and Driver. The Container
Knowledge Within CLIPS
class models the basic characteristics of a con-
To help validate the expert-system, a test-bed tainer (see Figure 1). This class is associated
has been built out of a set of 50 potentially risky with Goods entity to track the contents of the
situations. Each situation is composed of one container, especially dangerous goods. There
is an association between Container and Actor
is prohibited.
Table 3. Examples of risky situations
Situation CLIPS implementation

The container is in transshipment. It was (defrule state-container-secure-conclusions
first controlled at the export port. It has (declare (salience 10))
already been transshipped once. The three (type-armement-first oea)
operators that have interfered since the (type-armement-second oea)
departure checking are all AEOs so the (type-shipper-first oea)
container may pass without inspection. =>
(assert (state-container secure))
(assert (container Crossdocking))
(assert (histo-cross 1))
(assert (repair ” the container pass without inspection “)))
The container is a LCL/LCL(Less than (defrule normal-container-conclusions
container load) container. Shippers are all (declare (salience 10))
AEOs, but not the provider that has done the (state_container normal)
stuffing. In addition, some of the containers =>
on board are travelling to destinations at (assert (repair ” the container pass without inspection “))
risk. In such a case, the container must pass (assert (type-container LCL))
the scans. (assert (type-shipper oea))
(assert (type-handling oea))
(assert (destination notrisk)))
(defrule scanner-conteainer_conclusion
(declare (salience 10))
(state-container suspect)
=>
(assert (state-container LCL))
(assert (type-shipper oea))
(assert (repair ” The container must pass the scans.”)))
classes to enforce a container to be always Then, within the context of the situation
associated with a responsible actor. Two asso- retained, the user is guided through a series of
ciations exist between container and Site and questions depending upon the values he as-
between Container and transport mode. Thus, signs to associated variables and the accuracy
at each stage of the supply chain, we are able of these values. These values are included in
to retrieve the information about the site where the data-base.
the container has been processed or stored and Finally, after the inference engine has
about the various modes used for a movement. performed its three-stage (detection – selection –
Finally, intermodal transport includes shipping deduction) problem-solving cycle, conclusions
through rail, sea, river and ground mode from/ reached are displayed to the end-user.
to many countries, some of them may be risky. The following screenshot (see Figure
2) shows the case when a container must be
USER Interface inspected after the user has responded that the
container is in transshipment. It was first con-
The man-machine interface presents the user trolled at the export port. It has already been
with questions and information, and stores the transshipped once. One of the three operators
answers in the system’s data-base, where they that have interfered since the departure checking
can be accessed by the inference engine. First, is not an AEO so the container must be inspected.
the system provides the user with a choice of The expert system allows to target risky
one among the five different situations described containers according to multiple indicators.
here above. New scenario (see Figure 3) can be easily in-
is prohibited.
Figure 1. UML class diagram
tegrated in order to make the suitable decisions tracking and localization, container-integrated
considering future risky situations. sensor technologies and data available on the
First results from the development have container. This work is part of a wider research
been successfully validated by custom advisor project in partnership with some supply chain
at Soget. We expect approval of the French operators, whose main goal is to provide a Web
Customs for assessment of applicability for real Services platform coupled with technological
world problems. solutions to track and secure container ship-
ping. To this end, key fields of technology in
Further Research which research work should be conducted are
those of risk analysis and security require-
Our research is currently focused on a system for ments engineering, risk and security modeling,
monitoring and tracking containerized goods, model-driven development, general compli-
especially hazardous goods, through le port of ance in service-oriented architectures (SOA)
Le Havre and through the global supply chain and supply chains, and security in embedded
for security purposes (Boukachour, Fredouet, & systems. Regarding this last field of research,
Chaieb, 2009). The aim is to provide a system ca- focus may be brought on how to ensure that
pable of identifying security threats. The system real-world information, collected for instance
combines different technologies, like container
is prohibited.
Figure 2. Response to a risky situation
Figure 3. Add a situation
through radio frequency identifiers (RFIDs) and diversity of potential risks, which they try to
wireless sensor networks (WSN) can actually avoid and/or mitigate by setting up dedicated
enhance the security of the supply chain. risk management strategies and programs.
Among all organizational risks, those relating
to global transportation networks feature an
Conclusion increasingly important security component.
This kind of risk is partly but tightly linked
Socio-economic organizations, whatever their
to the actual widely-spread threat of interna-
level of complexity, are threatened by a great
is prohibited.
tional terrorism. Obviously, as gates through Amerini, G. (2008). Maritime transport of goods
national borders and transportation load break- and passengers 1997-2006. Statistics in focus. Re-
trieved from http://www.accessessays.com/samples/
points, seaports are therefore highly security
Inter_Trade_laws_WTO_and_Developing_Coun-
risk-intensive transportation networks’ nodes, tries_MLA_.pdf
and dealing efficiently with security risks is for
them a definite source of competitive advantage Bainbridge, L., & Sanderson, P. (1995). Verbal proto-
col analysis . In Wilson, J. R., & Corlett, E. N. (Eds.),
in the battle for keeping present, and gaining Evaluation of human work: a practical ergonomics
new, spots in world-wide supply chains. methodology. London, UK: Taylor & Francis.
Actually, properly managing transportation
security risks has become a necessity for all Bechini, A., Cimino, M., Marcelloni, F., & Tomas, A.
(2008). Patterns and technologies for enabling supply
supply-chain operators involved, all the more so chain traceability through collaborative e-business.
as 1) security has joined cost, quality and delay in Information and Software Technology, 50, 342–359.
the list of logistics performance criteria favored doi:10.1016/j.infsof.2007.02.017
by growingly disruption-averse customers and Bhatnagar, R., & Viswanathan, S. (2001). Re-engi-
2) securing transportation operations may at the neering global supply chains. International Journal
same time facilitate these operations especially of Physical Distribution and Logistics, 30, 13–34.
through enhanced process anticipation. doi:10.1108/09600030010307966
In a move towards improved seaport and Bichou, K., Bell, M. G. H., & Evans, A. (Eds.). (2007).
supply-chain performance, while hopefully Risk management in Port Operations, Logistics and
positively contributing to the academic risk Supply Chain Security. London, UK: Informa.
management field, this paper has described
Bouchiba, A., & Cherkaoui, A. (2007). Contribution
a knowledge-based decision support system de la modélisation dans la recherche des indicateurs
project showing two potentially interesting de performance des processus métiers: cas de la sûreté
characteristics: one comes from the opportu- ferroviaire au niveau de l’ONCF. In Proceedings
nity given to seaport / transportation networks’ of the 5th International Conference on Integrated
Design and Conception, Rabat, Morocco.
operators and academic researchers to closely
collaborate on a mutual advantage basis; the Boukachour, J., Fredouet, C.-H., Chaieb, H., &
other lies in the opening of further research White, C. (2009). Tracking Shipping Containers. In
perspectives, especially in the fields of supply- Proceedings of the 4th International Conference on
E-Commerce with focus on Developing Countries,
chain management (performance measurement, Kuala Lumpur, Malaysia.
physical flow optimization, and so forth) and
information management (systems’ interoper- Bubbico, R., Maschiob, G., Mazzarottaa, B., Milaz-
ability, pattern recognition, and so forth). zob, M. F., & Parisi, E. (2006). Risk management of
road and rail transport of hazardous materials in Sicily.
Journal of Loss Prevention in the Process Industries,
19(1), 32–28. doi:10.1016/j.jlp.2005.05.011
Acknowledgment
Caldwell, S. L. (2008). Supply chain security:
This research project is supported by a grant Challenges to Scanning 100 Percent of U.S.-Bound
from the Regional Council of Upper Nor- Cargo Containers. Retrieved from http://www.gao.
gov/new.items/d08533t.pdf
mandy and the French Minister of Research
and Education. Camara, M. S., Kermad, L., & El Mhamedi, A. (2005).
Contribution à la formalisation de la gestion des
risques dans les projets ERP. In Proceedings of the
4th International Conference on Integrated Design
References and Conception, Rabat, Morocco.
Abkowitz, M. D. (2003). Transportation risk man- Casal, J. (2008). Evaluation of the effect and con-
agement: a new paradigm. In Proceedings of the sequence of major accidents in industrial plants.
Transportation Research Board 82nd Annual Meet- Amsterdam, The Netherlands: Elsevier.
ing, Washington, DC.
is prohibited.
Cooke, N. J. (1992). Modeling Human Expertise Fredouet, C. H. (2007). Global supply-chain securiza-
in Expert Systems . In Hoffman, R. R. (Ed.), The tion as applied to sea port operations: a knowledge-
Psychology of Expertise: Cognitive Research and based approach. Journal of International Logistics
Empirical AI. Mahwah, NJ: Lawrence Erlbaum and Trade, 5(1), 57–73.
Associates.
Gheorghe, A. V., Birchmeier, J., Vamanu, D., Pa-
Cullen, J., & Bryman, A. (1988). The Knowledge pazoglou, I., & Kröger, W. (2005). Comprehensive
Acquisition Bottleneck: Time for Reassessment? risk assessment for rail transportation of dangerous
Expert Systems: International Journal of Knowledge goods: a valid platform for decision support. Reli-
Engineering and Neural Networks, 5(3), 216–225. ability Engineering & System Safety, 88(3), 247–272.
doi:10.1111/j.1468-0394.1988.tb00065.x doi:10.1016/j.ress.2004.07.017
Das, T. K., & Teng, B. (1998). Resource and risk Gilbert, G., & Gips, M. (2000). Supply-side contin-
management in the strategic alliancemaking process. gency planning. Security Management, 44(3), 70–74.
Journal of Management, 24(1), 21–42. doi:10.1016/
S0149-2063(99)80052-X Girratano, J., & Riley, G. (1989). Expert-systems:
principles and programming. Boston, MA: PWS-
Degre, T. (2003). L’importance d’une approche de la KENT Publishing.
sécurité maritime fondée sur les modèles d’évaluation
des risques. Recherche Transports Sécurité, 78, Gleyze, J.F. (2000). Introduction au risque (rapport
21–32. doi:10.1016/S0761-8980(03)00004-9 interne).
Douglass, M. (2001). Intercity competition and the Hou, J., Li, F., & Wang, H. (2009). An Ordered Binary
question of economic resilience: globalization and Decision Diagram Model for Production Knowledge
crisis in Asia . In Scott, A. J. (Ed.), Global city- Representation and its Reasoning. Paper presented
regions: trends, theory, policy. Oxford, UK: Oxford at the Third International Conference on Genetic and
University Press. Evolutionary Computing, Guilin, China.
Egidi, D., Foraboschi, F. P., Spadoni, G., & Amen- Huang, C. C., & Tseng, T.-L. (2009). Supply Chain
dola, A. (1995). The ARIPAR project: analysis of the Risk Management: Annotation of Knowledge Using
major accidents risks connected with industrial and a Semi-Structured Knowledge Model . In Wu, T., &
transportation activities in the Ravenna area. Reli- Blackhurst, J. (Eds.), Managing Supply Chain Risk
ability Engineering & System Safety, 49(1), 75–89. and Vulnerability Tools and Methods for Supply
doi:10.1016/0951-8320(95)00026-X Chain Decision Makers. London, UK: Springer.
doi:10.1007/978-1-84882-634-2_11
El-Najdawi, M. K., & Stylianou, A. C. (1993).
Expert support systems: integrating AI technolo- Jarke, M., & Vassiliou, Y. (1983). Coupling Expert
gies. Communications of the ACM, 36(12), 55–65. Systems with Database Management Systems. Paper
doi:10.1145/163298.163306 presented at the Symposium on Artificial Intelligence
Applications for Business, New York, NY.
Ericsson, K. A., & Simon, H. A. (1993). Protocol
analysis; Verbal reports as data. Cambridge, MA: JBW Group International. (2009). Supply Chain
Bradford Books/MIT Press. Security and ISO 28000. Retrieved from http://
www.jbwgroup.com/documents/JBWGroup-IB-
Ferdows, K. (1997). Making the most of foreign SupplyChainandISO28000V1-N1.0.pdf
factories. Harvard Business Review, 75, 73–88.
Juels, A. (2005). Attack on a cryptographic RFID
Fisher, C., & Sanderson, P. M. (1993). Exploratory device. RFID Journal.
sequential analysis: traditions, techniques and tools,
report of the CHI’92 workshop. SIGCHI Bulletin, Juttner, U., Peck, H., & Christopher, M. (2003). Sup-
25, 31-40. ply chain risk management: outlining an agenda for
future research. International Journal of Logistics:
Ford, J. M., Stetz, T. A., Bott, M. M., & O’Leary, B. Research & Applications, 6(4), 197–210. doi:10.10
S. (2000). Automated Content Analysis of Multiple- 80/13675560310001627016
Choice Test Item Banks. Social Science Computer
Review, 18(3). doi:10.1177/089443930001800303 Kearney, A. T. (2004). Smart boxes. Chicago, IL:
A.T. Kearney.
is prohibited.
LaFue, G. M. E. (1983). Basic Decisions about Link- O’Leary, D. E. (1996). The relationship between
ing an Expert System with a DBMS: A Case Study. errors and size in knowledge-based systems. Inter-
IEEE Database Engineering Bulletin, 6(4), 56–64. national Journal of Human-Computer Studies, 44,
171–185. doi:10.1006/ijhc.1996.0009
Lee, H., & Whang, S. (2005). Higher supply chain
security with lower cost: Lessons from total qual- Organisation de Cooperation et de Developpement
ity management. International Journal of Pro- Economiques (OCDE). (2003). La surete dans les
duction Economics, 96, 289–300. doi:10.1016/j. transports maritimes: facteurs de risque et repercus-
ijpe.2003.06.003 sions economiques, Rapport du Comite des Trans-
ports Maritimes. Paris, France: Author.
Lee, S. J., & Hung, C. (1995). CLXPERT: A Rule-
Based Scheduling System. Expert Systems with Organisation for Economic for Co-operation and
Applications, 9(2), 153–164. doi:10.1016/0957- Development (OECD). (2005). Container trans-
4174(94)00058-4 port security across modes. Paris, France: Author.
Retrieved from http://www.internationaltransport-
Leroy, A., & Signoret, J. P. (1992). Le risque tech- forum.org/europe/ecmt/pubpdf/05ContainerSec.pdf
nologique. Paris, France: PUF.
Planas, E., Pastor, E., Presutto, F., & Tixier, J. (2008).
MacCarthy, B. L., & Atthirawong, W. (2003). Fac- Results of the MITRA project: Monitoring and inter-
tors affecting location decisions in international vention for the transportation of dangerous goods.
operations – a Delphi study. International Journal of Journal of Hazardous Materials, 152, 516–526.
Operations & Production Management, 23, 794–818. doi:10.1016/j.jhazmat.2007.07.032
doi:10.1108/01443570310481568
Reitman, O. J., & Rueter, H. H. (1987). Extracting
Maspero, E. L., Van Dyk, F. E., & Ittmann, H. W. expertise from experts: Methods for knowledge ac-
(2008). Maritime supply chain security: navigating quisition. Expert Systems: International Journal of
through a sea of compliance requirements. Journal Knowledge Engineering and Neural Networks, 4(3),
of Transport and Supply Chain Management, 2(1). 152–168. doi:10.1111/j.1468-0394.1987.tb00139.x
Massey, C. (2005). Penny wise but dollar foolish – Rivituso, C. P., & Snyder, O. P. (1981). Bacteria
the fact behind sensors-in-the-box. Paper presented growth at foodser-vice operating temperature. Jour-
at the Maritime Port and Cargo Security Summit, nal of Food Protection, 44, 770–775.
San Diego, CA.
Robinson, R. (1998).Asian hub/feeder nets: the dynam-
Mavrommatis, G., & Panayiotopoulos, J. C. (2004). ics of restructuring. Maritime Policy & Management,
Risk transportation via a clique number problem 25(1), 21–40. doi:10.1080/03088839800000043
formulation. European Journal of Operational
Research, 152(2), 500–506. doi:10.1016/S0377- Russel, D. M., & Saldanha, J. P. (2003). Five tenets of
2217(03)00040-7 security-aware logistics and supply chain operations.
Transportation Journal, 42(4), 44–54.
McGraw, K. L., & Seale, M. R. (1998). Knowledge
elicitation with multiple experts: considerations and Sheffi, Y. (2001). Supply chain under the
techniques . Artificial Intelligence Review, 2(1), threat of international terrorism. International
31–44. doi:10.1007/BF00139624 Journal of Logistics Management, 12, 1–11.
doi:10.1108/09574090110806262
Merrick, J. R. W., Dorp, J. R., Mazzuchi, T., Harrald,
J. R., Spahn, J. E., & Grabowski, M. (2002). The Sheffi, Y. (2002). Supply chain management under
Prince William Sound risk assessment. Interfaces, the threat of international terrorism. International
32(6), 25–40. doi:10.1287/inte.32.6.25.6474 Journal of Logistics Management, 12(2), 1–12.
doi:10.1108/09574090110806262
Minyard, A. (1997). The WTO: History, Structure,
and Analysis. Retrieved from http://www.accesses- Sheffi, Y., & Rice, J. B. (2005). A supply chain
says.com/samples/Inter_Trade_laws_WTO_and_ view of the resilient enterprise. Sloan Management
Developing_Countries_MLA_.pdf Review, 47(1), 41–48.
Nonneman, G. (1996). Political and economic lib- Skorna, A. C. H., Bode, C., & Wagner, S. M. (2009).
eralization: Dynamics and linkages in comparative Technology-enabled risk management along the
perspective. Boulder, CO: Lynne Rienner Publishers. transport logistics chain . In Bode, C., & Wagner, S.
M. (Eds.), Managing risk and security: the safeguard
of long-term success for logistics service providers.
Bern, Switzerland: Haupt.
is prohibited.
Southwick, R. W. (1991). Explaining reasoning: Walker, E., & Jones, N. (2002). An assessment of
an overview of explanation in knowledge-based the value of documenting food safety in small and
systems. The Knowledge Engineering Review, 6(1), less developed catering businesses. Food Control,
1–19. doi:10.1017/S0269888900005555 13, 307–314. doi:10.1016/S0956-7135(02)00036-1
Swenson, D. L. (2005). Overseas assembly and Weis, S. A. (2003). Security and privacy in radio-
country sourcing choices. Journal of International frequency identification devices. Unpublished
Economics, 66(1), 107–130. doi:10.1016/j.jin- master’s thesis, MIT.
teco.2004.07.005
Wiederhold, G. (1995). A Precis of Research on
Transportation Research Board. (2007). Transporta- Knowledge-Based Management Systems. Retrieved
tion Research Circular E-C113: Artificial Intelligence from http://infolab.stanford.edu/pub/gio/1988/
in Transportation, Information for Application. kbms.html
Washington, DC: Author.
Yang, Y. L., Shyu, W. H., Lin, C. H., & Hsu, S. F.
Trucco, P., Cagno, E., Ruggerri, F., & Grande, O. (2005). Risk Management of international transpor-
(2008). A Bayesian belief network modeling of tation of integrated circuit products. Journal of the
organizational factors in risk analysis: a case study Eastern Asia Society for Transportation Studies, 6,
in maritime transportation. Reliability Engineering 3386–3400.
& System Safety, 93(6), 845–856. doi:10.1016/j.
ress.2007.03.035 Yang, Z. L., Bonsall, S., & Wong, J. (2009). Use of
hybrid multiple uncertain attribute decision making
Tsai, M. C. (2006). Constructing a logistics track- techniques in safety management. Expert Systems
ing system for preventing smuggling risk of a with Applications, 36(2), 1569–1586. doi:10.1016/j.
transit containers. Transportation Research Part A, eswa.2007.11.054
Policy and Practice, 40(6), 526–536. doi:10.1016/j.
tra.2005.11.001 Yip, T. L. (2008). Port traffic risks-a study of acci-
dents in Hong Kong waters. Transportation Research
Vale, Z. A., Ramos, C., Faria, J., Santos, L., Fer- Part E, Logistics and Transportation Review, 44(5),
nandes, M. F., Rosado, C., & Marques, A. (1997). 921–931. doi:10.1016/j.tre.2006.09.002
Knowledge-based systems for power system control
centers: is knowledge the problem? Paper presented Zsidisin, G. A., & Ritchie, B. (2009). Supply Chain
at the International Conference on Intelligent Systems Risk Management – Developments, Issues and Chal-
Applications to Power Systems, Seoul, Korea. lenges . In Zsidisin, G. A., & Ritchie, B. (Eds.), Supply
Chain Risk: A Handbook of Assessment, Manage-
ment, and Performance. New York, NY: Springer.
Jaouad Boukachour is an Associate Professor at the Department of Computer Sciences, Univer-

sity Institute of Technology, University of Le Havre, France. He received his PhD in computer
science from the University of Rouen, France and Accreditation to Supervise Research from the
University of Le Havre, France. His primary research interests are in Scheduling problems, Hard
optimisation, Supply chain and Logistics Information System. Jaouad Boukachour has more than
30 referred research papers. He has supervised a number of PhD researchers in areas such as
logistics and scheduling aircraft landings. Currently, he is supervising six PhD students working
on traceability, modeling road traffic and vehicle routing and presently acts as scientific director
of various research projects.
is prohibited.
Charles H. Fredouet, MBA, Ph.D, is a professor of supply-chain management at Le Havre Uni-

versity (LHU)’s School of Logistics. After 20 years of research in the field of information and
decision-support systems, Prof. Fredouet turned to global logistics management (transportation
network and logistics process modelling and simulation, local and global performance modeling
and measurement); he has more than 50 publications in business administration and manage-
ment reviews and conferences. A former vice-president of Le Havre University, Prof. Fredouet
heads LHU’s School of Logistics research center; he is a member of the Supply Chain Council
and reviewing for TRB’s International Trade and Transportation Committee. He presently acts
as scientific director of various research projects accounting for more than USD 650,000 of
public / private grants.
Gningue Mame Bigué is a PhD student at CERENE (Centre d’Etude et de Recherche en Economie
et gestioN logistiquE) located in Le Havre University, France. Her research interests include
Supply Chain Management and Risk Management. Her PhD thesis is entitled “Security risk
management in global supply chain”.
is prohibited.
The 2008 Survey of Indian

Third-Party Logistics (3PL)
Service Providers:
Comparisons with the 2004 Survey
of Indian 3PLs and 2006 Survey
of North American 3PLs
Subrata Mitra, Indian Institute of Management Calcutta, India
Abstract
This paper presents a survey of Indian third-party logistics (3PL) providers and compares the state of the
industry with that in 2004 based on an earlier survey. The 3PL industries of India and North America are also
compared. The survey finds that the Indian 3PL industry lags behind North America in terms of global reach
and breadth of service. Indian 3PL providers also underperform in key variables that determine performance
levels. Other problems identified by the survey are the lack of awareness among Indian shippers, shortage of
management talent, inadequate infrastructure, complex documentations, and multiple tax systems. Despite
these limitations, the Indian 3PL industry is growing. Many global players are entering the Indian market
through direct investments, acquisitions, and alliances. The Indian government is also improving the infra-
structure, reducing paperwork, simplifying taxation systems, and implementing economic policies conducive
to growth. This paper provides significant insights for logistics managers, government, and other stakeholders.
Keywords: India, Logistics Outsourcing, North America, Supply Chain Logistics, Third-party Logistics
(3PL)
Introduction and chain complexities, curtail costs and overheads,

Research Background and expand their global reach. By outsourcing
logistics, companies are able not only to focus on
There is growing interest in third-party logistics their core competencies, but also to realize better
(3PL) or logistics outsourcing among practicing delivery performance and therefore customer
managers and academicians alike as shippers satisfaction. According to the research done by
worldwide are increasingly outsourcing their Armstrong & Associates, Inc., global gross 3PL
logistical activities in order to reduce supply revenues in 2007 were USD 487 billion, out of
which the U.S. accounted for USD 122 billion or
DOI: 10.4018/jal.2011010104 about 25% of the global market (Quinn, 2008).
is prohibited.
Although due to the global recession and hike green supply chain initiatives, shippers would
in fuel prices, the 3PL sector, like any other be willing to share the additional costs, if any,
sector, has been affected, there are opportunities equitably with service providers. However, in
as well for 3PL companies since shippers are practice, it is observed that in many cases ship-
outsourcing transportation, warehousing and pers pass on the entire cost burden to service
other logistical activities like never before in providers (Blanchard, 2008). Service provid-
order to reduce costs and remain competitive ers are also not able to meet the expectations
(Thoppil, 2008). So far, there was lack of clar- of shippers in terms of deployment of IT and
ity on 3PL and their roles and responsibilities. security measures after security requirements
However, very recently the role of a 3PL has have been made more stringent for international
been recognized by the U.S. federal law. The shipments.
law accords the status of an intermediary such Surveys from the perspectives of 3PL users
as a carrier or forwarder to a 3PL provider and are available in abundance in literature. How-
specifically stipulates that a 3PL provider is not ever, 3PL provider surveys are comparatively
to be considered a manufacturer, distributor or less in number. Lieb and Butner (2007) and
retailer, exempting 3PL companies to a great Lieb (2008a) conduct longitudinal surveys of
extent from stringent legislations and regula- large North American 3PL providers that cap-
tions applicable to manufacturers, distributors ture the dynamics of the North American 3PL
and retailers towards rising concerns over cargo industry as pricing pressure and low margins,
security and consumer safety (O’Connor & globalization of operations, expectation of
Anderson, 2008). increased breadth of service offerings, large-
Due to the growing interest in 3PL, there scale consolidations, recruitment and reten-
have been many academic and trade publication of employees, and branding of services.
tions. While academic publications address The industry is very much competitive and
theoretical issues and their practical implica- the margin is low since, as mentioned before,
tions, trade publications are mainly concerned shippers prefer to outsource relatively com-
with practical issues. Academic publications moditized services and keep customer-centric,
take various forms such as (i) theoretical and more value-added services in-house. In order
conceptual model development, (ii) empirical to overcome this problem, service providers
surveys, (iii) studies on 3PL relationships and need to differentiate and customize service
partnerships, (iv) supplier evaluation and selec- offerings (Anonymous, 2008; Hannon, 2008),
tion, (v) role and use of information systems and provide one-stop solutions to shippers by
and technologies, and (vi) case studies of 3PL offering a wide array of value-added services
companies. Most of the academic research and global reach. This necessitates large-scale
is based on empirical surveys. Langley et al. acquisitions and alliances such as the takeover
(2007, 2008) conduct longitudinal surveys of of TNT Logistics and Eagle Global Logistics
3PL users wherein they observe persisting gaps by Apollo Management and rechristening the
between expectations of users and achievements merged entity CEVA logistics, one of the top
of service providers in terms of value-added 5 global logistics providers by gross revenue
service offerings, green supply chain initia- (Quinn, 2008). However, each and every 3PL
tives, deployment of IT and security concerns. provider may not be up for mergers and acqui-
While shippers mostly outsource relatively sitions. For them, partnering with other 3PL
commoditized services such as transportation providers and acting as a fourth-party logistics
and warehousing, they still maintain skepti- (4PL) provider or Lead Logistics Provider (LLP)
cism in outsourcing customer-focused and make more sense in terms of providing a single
more strategically-oriented services that may point of contact to shippers and offering one-
directly affect revenue streams, and hence prefer stop solutions to all their logistical requirements
to keep these services in-house. With regard to (Trunick, 2008). Recruiting and retaining skilled
is prohibited.
logistics professionals remain a contentious is- transportation infrastructure, long turnaround

sue. For example, C.H. Robinson hires people times, high transportation costs, congestion, toll
who are customer-focused and proactive. The and other local taxes. The only survey (Mitra,
Senior Management spends a lot of time with 2006) of Indian 3PL providers concurs with the
the new recruits and existing employees as findings of Lieb (2008b). It also identifies the
well. The employees go through continuous fragmented nature of the market and the lack
training and are empowered to take decisions of awareness among Indian shippers as some
on behalf of the Management (Anonymous, of the major roadblocks. However, the survey
2008). 3PL companies need to put in a lot of also projects a growth rate of over 20% of the
efforts in branding exercises, and differentiate in Indian 3PL industry, which was estimated to be
terms of their products/services and projecting USD 1 billion in 2004, as the Indian GDP is
themselves environment-friendly. The impor- growing at a steady rate and the market is going
tant differentiators identified by Lieb and Lieb to mature through consolidations once foreign
(2008) are company’s IT capability, geographic 3PL players set up shops in India by acquiring
coverage, breadth of services and non-asset or partnering with existing 3PL providers.
approach. Many top global 3PL companies For detailed surveys of the 3PL literature,
such as Exel Logistics (taken over by DHL in readers may refer to Maloni and Carter (2006),
2005), Keystone Dedicated Logistics, Logistics Selviaridis and Spring (2007), and Marasco
Management Solutions and Transplace are (2008).
asset-free (Anonymous, 2008; Penton Media, The current paper is the second survey of
2008). A study of Hong Kong 3PL providers Indian 3PL providers. It puts the Indian 3PL
also found that a combined strategy of cost and industry in the perspectives of the 2004 survey
differentiation performed best with respect to (Mitra, 2006). It also brings out similarities
financial performance, followed by a pure dif- and dissimilarities between the Indian 3PL
ferentiation strategy, which in turn outperformed market and the mature and largest 3PL market,
a pure cost-based strategy (Yeung et al., 2006). i.e., North America based on an earlier survey
Recently a lot of attention has been attracted (Mitra & Bagchi, 2008). In many conceptual
by 3PL activities in the Asia-Pacific region, so and survey papers (Ashenbaum et al., 2005;
much so that Langley et al. (2008) and Lieb Maloni & Carter, 2006; Mentzer & Kahn,
(2008b) have been including this region in their 1995), rigour of research on 3PL has been
longitudinal surveys since the last few years. emphasized. It is highlighted that more efforts
While both acknowledge entry of foreign play- should be put in to build theory, constructs
ers and high growth potential of 3PL markets and conceptual frameworks, which may be the
in this region, inadequate infrastructure and foundation for subsequent empirical studies
inconducive regulatory structures are identified (Marasco, 2008). In an effort to this effect, a
as major impediments. In addition, Lieb (2008b) survey of North American 3PL providers (Mitra
finds similarities in industry dynamics with & Bagchi, 2008) was done in 2006 to explore
global 3PL markets such as pricing pressure, underlying relationships among several impor-
demanding customers, pressure to internation- tant variables such as key success factors and
alize operations and shortage of management performance metrics through interdependence
talent. Within the Asia-Pacific region, India techniques and dependency relationships. Part
seems to have the highest growth rate as 10 of the questionnaire for the 2006 survey was
major global players operating in this region utilized in the current survey of Indian 3PL
have projected the maximum growth of their providers to compare between the Indian and
revenues from India while revenues from other North American 3PL industries, and generate
countries in this region have been projected to learnings for Indian 3PL companies, shippers
grow marginally or even decline. The problems and the government. Literature shows that
identified in Indian 3PL are the lack of modern there have been comparisons among countries
is prohibited.
in terms of 3PL usage. However, as far as 3PL In order to achieve the above-mentioned
providers are concerned, there has been only one objectives, a survey of Indian 3PL providers
paper (Wang et al., 2008) so far that compares was conducted to capture the following:
3PL providers of Hong Kong with those of
Mainland China. The study mentions the com- a. Demographic information about the
parison between the 3PL industries of Mainland respondents
China and the U.S., a mature 3PL market, as b. Respondents’ perceptions of importance
a possible direction for future research. In this of various key success factors and their
perspective, the current survey of Indian 3PL companies’ achievements with respect to
has two major contributions: (a) comparing these factors to identify gaps, if any
between the states of the Indian 3PL industry c. Respondents’ perceptions of their compa-
in 2004 and 2008, and (b) comparing between nies’ achievements with respect to various
the 3PL industries of India and North America performance metrics and dependency
with respect to some key industry variables. The relationships with the key success factors
research methodology has been drawn from an d. Respondents’ perceptions of the industry
earlier survey of North American 3PL providers size, growth rates, problems and prospects
(Mitra & Bagchi, 2008). It is expected that the e. Respondents’ growth strategies
results of the survey would provide valuable
managerial insights to Indian 3PL firms, foreign In particular, the following research ques-
3PL firms contemplating entry into the Indian tions were addressed.
market and the government.
The rest of the paper is organized as fol-
a. Do 3PL firms of various types have differ-
lows. Research objectives and methodology
ent perceptions of importance of the key
are presented in the next section, followed by
success factors? If so, how are the rankings
the analysis of survey results and discussion on
of the key success factors different across
survey results. Then managerial implications
various types of 3PL firms and what are
are presented, and the paper is concluded with
the implications for logistics managers?
directions for future research.
b. Are there significant gaps in perceptions
between the expectations and achievements
Research Objectives with respect to the key success factors for
and Methodology various types of 3PL firms? If so, what are
the learnings for logistics managers?
The primary objectives of this research were, c. What are the significant relationships
as mentioned before, to between the performance metrics and the
key success factors? In other words, which
a. Assess the changes in the Indian 3PL key success factors are determinants of
industry since the earlier survey in 2004 which performance metrics and what are
(Mitra, 2006), henceforth referred to as the the implications for practicing managers?
2004 survey, and
b. Compare between the 3PL industries in To address the first research question, it
India and North America, based on Mitra was required to carry out a cluster analysis
and Bagchi (2008), henceforth referred of the responses of 3PL firms based on their
to as the 2006 survey, to generate valu- perceptions of importance of the key success
able insights for industry personnel and factors. Different clusters would then give
the government. different rankings of the key success factors
is prohibited.
based on their perceived importance. The sec- received registering about 20% response rate. A
ond research question would be addressed by check for nonresponse bias in survey data was
performing z-tests (or t-tests, depending on the made by the method suggested by Armstrong
sample size of the cluster) on the differences and Overton (1977) and no nonresponse bias
of perceptions of 3PL firms of the actual firm was found. The survey data were collated in
performance and the desired firm performance Microsoft Excel, and analyzed using the sta-
for each key success factor. Finally, to address tistical package “Stata”. Details of the analysis
the third research question, an ordered logit are presented in the next section. Finally, about
model would be run and a canonical correla- 15 respondents were contacted over phone and
tion analysis would be carried out to identify e-mail to validate some of the survey results.
significant relationships among the performance
metrics (criterion variables) and the key success
factors (predictor variables). Analysis of Survey
Data for the survey and subsequent analysis Results
were collected from two sources: primary and
The survey data are presented in the following
secondary. Primary sources were the respon-
sequence: profile of the respondents, respon-
dents and data collection was through a mail sur-
dents’ perceptions of problems, prospects,
vey. Secondary sources were articles published
industry size and growth rates, respondents’
in academic and trade journals. Variables for
growth strategies, and respondents’ perceptions
the questionnaire were obtained from second-
of the key success factors and performance
ary sources such as the extant 3PL literature.
metrics.
The questionnaire was limited to two pages in
order to ensure a reasonable response rate, a Location and Coverage
copy of which is reproduced in the Appendix
for reference. For perception-related questions, 71.43% responses were received from Mumbai,
a 5-point Likert scale was used where “1” rep- National Capital Region1 (NCR) and Chennai
resented “very low” and “5” represented “very with Mumbai topping the list with 33.33%
high”. The questionnaire was administered to responses. 50% of the respondents have geo-
some selected 3PL providers in a pilot study graphic coverage limited to India only while
to assess its practicality and relevance. A few 50% cover India and abroad. Within India,
modifications were made before the final ver- South, West and North are covered by 78.57%,
sion of the questionnaire was accepted. 78.57% and 76.19% respondents, respectively,
The Indian 3PL industry is in its early while East, Central India and North-East are
stage of development and there is little official covered by only 52.38%, 45.24% and 23.81%
information available in the public domain. respondents, respectively. Among the respon-
The author had to contact industry sources, dents having geographic coverage abroad,
and refer to business dailies and the Internet to 80% cover the Asia-Pacific region, 70% cover
identify potential 3PL respondents. About 200 Europe, 65% cover North America and Middle
3PL providers were identified in the process East, 50% cover Latin America and 45% cover
each of whom was sent a questionnaire along Africa.
with a covering letter, addressed to the CEO,
and a self-addressed envelope. Every two- Age and Employee Base
three weeks thereafter, e-mail reminders were
sent and prospective respondents were also More than half the respondents started their
contacted over phone. The survey was done in 3PL operations in 2000 or later, which shows
the first half of 2008 and after all the efforts, the young age of the Indian 3PL industry.
42 filled-in, and usable, questionnaires were While 66.67% respondents have 300 or fewer
is prohibited.
employees, 25.64% respondents have 1000 Services Offered and

or more employees, showing the fragmented Industries Served
nature of the industry.
Among the services offered, warehousing tops
Financials the list with 83.33% respondents offering this
service, closely followed by transportation
As far as financials are concerned, 33 firms dis- (80.95%), freight forwarding (78.57%) and
closed revenue figures. The gross 3PL revenues customs clearance (73.81%). These 4 services
of these 33 firms in 2006-07 were Rs. 4836 also happen to be the top revenue earners for
crore2 (~ USD 1 billion). Out of these, 8 firms the respondent firms. Table A1 in the Ap-
(24.24%) grossed Rs. 4438.23 crore, i.e. 91.78% pendix indicates the major services and the
of the total turnover of these 33 firms in 2006- % of respondents offering them. Considering
07, which again indicates the fragmented nature services, except transportation and warehous-
of the Indian 3PL industry. As far as growth ing, as value-added services, it was observed
figures are concerned, the combined revenue of that respondents offered, on an average, 7.71
respondent firms grew 27.38% in 2006-07 over value-added services No significant correlations
last year and is projected to grow by 24.59% were found between the number of value-added
in 2007-08 over 2006-07. The Compounded services and firms’revenues in 2006-07, and also
Annual Growth Rates (CAGR) of individual between the number of value-added services
firms had a wide range with small and medium and firms’ globalization.
firms growing at faster rates than large firms. Among the top three industries/sectors
Between the 2004 and 2008 surveys, there were served by the respondent firms, Engineering/
18 common respondents, out of whom CAGRs Industrial is at the top with 47.62% respondents
(1999-2000 through 2003-04 from the 2004 mentioning it as one of the major revenue earn-
survey and 2004-05 through 2006-07 from ers, followed by Automotive (35.71%), Com-
the 2008 survey) for 12 respondents could be puter/Electronics (23.81%), Textile/Apparel
computed, which showed no significant differ- (21.43%) and Chemical/Fertilizer (21.43%).
ence in growth rates by a paired-sample t-test Table A2 in the Appendix lists the industries/
at 5% level of significance. sectors and the % of respondents mentioning
No significant correlation was found them as top revenue earners. It may be observed
between firms’ revenues in 2006-07 and glo- from the table that the contribution of Retail
balization. is insignificant since currently only 5% of the
Retail sector is organized. Globally, 70% of the
Ownership of Assets logistics cost is accounted for by Retailing. As
Among the respondents, 17.07% own assets the organized Retail sector in India grows and the
(vehicles, warehouses, material handling equip- government allows Foreign Direct Investment
ment etc.), 31.71% outsource to third parties (FDI) in Retail, it is expected that the contribu-
and the rest 51.22% both own and outsource tion of Retail to 3PL revenues would increase.
assets. As far as managed warehouse space is
Problems and Prospects
concerned, 31 respondents provided data. It
has been observed that 61.29% of them man- Respondents indicated government control,
age warehouse space less than 50,000 sq. ft. bureaucracy and lengthy documentation pro-
and at the same time 25.81% of them have cedures as the major impediment to the growth
warehouse capacities more than 800,000 sq. of 3PL in India with 78.57% of them marking
ft. again indicating the wide division between it as either “important” or “very important”.
small and large firms. Other “important” or “very important” factors
is prohibited.
highlighted by the respondents as threats to the respondents, followed by “Direct Investments”

Indian 3PL industry are poor transportation and (64.29%) and “Acquisitions” (45.24%). Merely
communications infrastructure (76.19%), high 16.67% respondents mentioned “Mergers” as
costs of operations and low margins (73.81%), one of their growth strategies.
lack of skilled manpower (73.81%), and lack
of trust and awareness among Indian shippers Key Success Factors
(61.91%).
Among the factors that are deemed to fuel Respondents were asked to rate 10 key success
the growth of 3PL in India, 92.86% respondents factors based on their perceived importance
marked government investments and public- levels and firms’ achievements. Considering re-
private partnerships (PPP) in development of spondents and factors as independent variables
infrastructure (highways, Special Economic and factor importance ratings as the dependent
Zones, logistics hubs etc.) as either “important” variable, a two-way ANOVA without replica-
or “very important”. Other factors that are per- tion showed significant differences among both
ceived to be “important” or “very important” respondents and factors at 5% level of signifi-
by the respondents are increasing awareness cance, indicating differences in perceptions of
towards 3PL (83.33%), increasing government the importance of key success factors among
support and conducive policies (80.95%), glo- the respondents. Subsequently, the k-means
balization and more Foreign Direct Investment nonhierarchical cluster analysis method was
(FDI) in the Indian 3PL industry (76.19%), applied to the data with many possible numbers
and consistent GDP growth resulting in more of clusters and starting seeds in order to form
demand for 3PL services (73.81%). groups of similar respondents. In each trial for
each cluster, treating respondents and factors as
Estimates of Industry independent variables and factor ratings as the
Size and Growth Rate dependent variable, a two-way ANOVA without
replication was performed to check if there
With regard to the size of the industry, respon- were significant differences among respondents
dents provided varying estimates, like in the and factors at 5% level of significance. After
2004 survey, from tens of crores to several several trials, it was possible to come out with
thousand crores of rupees. However, consider- 4 stable clusters where there were significant
ing the industry size of Rs. 5000 crore (slightly differences between clusters but no significant
more than USD 1 billion) estimated in the 2004 differences among respondents within clusters.
survey and 20% annual growth rate, the current Unfortunately, cluster compositions did not
estimated industry size would be about Rs. throw any light on grouping dimensions. Cluster
10,000 crore (slightly more than USD 2 billion). 1 consisted of 31 respondents whose responses
The average industry growth rate estimated by seemed to be very much “realistic” in the sense
the respondents is 17.52% which is likely to be that these were not biased in either direction
exceeded by 63.63% respondents. The estimated on the rating scale. Cluster 2 had 3 members,
cumulative growth rate (24.59%) of respondent who were “very optimistic” in their responses,
firms in 2007-08 also exceeds the estimated marking almost all factors “very high”. The 7
average industry growth rate. A z-test at 5% respondents of Cluster 3 were “conservative”
level of significance validated the hypothesis in their responses, marking around “average”.
that the Indian 3PL industry would grow by at Finally, Cluster 4 had only 1 member, who was
least 18% per annum in coming years. “extremely pessimistic” in his response and
marked most of the factors “very low” (This
Growth Strategy may be due to confusion at the time of mark-
ing responses, which could not be verified).
Among the growth strategies, “Alliances” However, for the purpose of ascertaining the
was mentioned by majority (73.81%) of the
is prohibited.
importance of key success factors, only Cluster and p-values against each performance metric
1 responses were taken into consideration. It was for the aggregate set and the subset (Cluster 1).
observed that breadth of services and customer It may be observed from Table 1 that there
focus were given the most importance, 96.77% are quite a few differences between the outcomes
respondents having marked them as either of the aggregate set and the subset (Cluster 1).
“high” or “very high”, followed by availability Breadth of services appears as a significant,
of skilled manpower (93.55%), investment in positively related independent variable for
information systems (90.32%) and integration year-on-year growth in revenues, year-on-year
of supply chains (90.32%). Table A3 in the Ap- growth in cargo and on-time delivery perfor-
pendix shows the key success factors and the % mance for the aggregate set while it is con-
of Cluster 1 respondents marking them “high” spicuously absent in any of the performance
or “very high” in terms of importance ratings. metrics for the subset. Internationalization of
Next, for each respondent and each factor, operations bears a significant, positive relation-
the difference between the company rating ship with reducing inventory levels and a sig-
and importance rating is computed to check if nificant, negative relationship with on-time
this difference is significant. Surprisingly, the delivery performance for the aggregate set while
average differences for all factors turned out to it is also absent in any of the relationships for
be negative, and excepting customer focus and the subset. The positive relationship between
3PL experience, the differences for all other internationalization of operations and reducing
factors turned out to be significantly negative inventory levels is the same as was observed
(at 5% level of significance) indicating gaps in the 2006 survey, possibly indicating the
between firms’ achievements and expectations transfer of ownership of inventory and existence
with respect to these factors. of inventory more in the form of sea freight
than in the form of land transportation and
Performance Metrics storage. Another reason may be that as firms
become more and more globalized, there is a
Respondents were asked to rate 10 metrics shift towards providing more value-added
based on their firms’ performance. The objec- services than transportation and warehousing,
tive was to establish dependency relationships though it may not be true for Indian service
among the performance metrics and key suc- providers since no significant correlation was
cess factors as dependent and independent found between the number of value-added
variables, respectively. Since ratings for both services offered and global reach of sample
the performance metrics and key success factors respondents. The negative relationship between
were on an ordinal scale, the ordered logit (or internationalization of operations and on-time
ologit) model was applied for every dependent delivery performance may be attributed to the
variable and the set of 10 independent variables. increased shipping lead time and the lack of
The same exercise was carried out for the entire global reach of Indian service providers. Cus-
set of respondents (41 in number) and Cluster 1 tomer focus has strong positive relationships
respondents (30 in number since one member with on-time delivery performance for the ag-
did not mark his responses for the performance gregate set and customer satisfaction for both
metrics) to check if there were any differences the aggregate set and the subset. This is quite
between the outcomes of the aggregate set and intuitive and needs little explanation.
the subset (Cluster 1) of respondents, who were Focus on industries, on the other hand, bears
“realistic” in their ratings of the key success fac- strong negative relationships with year-on-year
tors. Table 1 shows the statistically significant (at growth in cargo, return on investments (ROI)
5% level of significance) independent variables and geographic reach for the aggregate set while
for an overall model fit, types of relationships it does not appear in any of the relationships
is prohibited.
Table 1. Significant dependency relationships among the performance metrics and the key suc-
cess factors
Perfor- All clusters (41 responses) Cluster 1 (30 responses)

mance Aggregate set Subset
metrics
Independent Type of p- Independent Type of p-
variable relationship value variable relationship value
3PL experi-
Breadth of services + 0.007 - 0.02
Revenue ence
growth Integration of
Investment in asset - 0.015 + 0.002
supply chains
3PL experi-
- 0.019
Profit Integration of supply ence
+ 0.032
growth chains Integration of
+ 0.001
supply chains
Cargo Breadth of services + 0.014 Integration of

+ 0.015
growth Focus on industries - 0.028 supply chains
ROI Focus on industries - 0.029 - NA NA

Integration of
ROA 3PL experience + 0.027 + 0.018
supply chains
Reducing Internationalization + 0.038 Skilled man-

+ 0.005
inventory Skilled manpower + 0.019 power
Breadth of services + 0.034

Internationalization - 0.047
On-time
Focus on customers + 0.007 - NA NA
delivery
Investment in infor-
- 0.018
mation system
Focus on customers + 0.011
Investment in infor-
Customer - 0.024 Focus on
mation system + 0.018
satisfaction customers
Integration of supply
+ 0.011
chains
Investment in
Customer
- NA NA information + 0.013
acquisition
system
Focus on industries - 0.035
Investment in
Geographic Investment in infor-
+ 0.007 information + 0.003
reach mation system
system
Skilled manpower + 0.017
for the subset. The reason may be that unlike various other reasons. Therefore, focusing on
in developed countries in North America and specific industries would not ensure higher
Europe, the industrial output in India is lower, returns, growth and geographic reach in the
and the 3PL market is ill-developed due to the Indian market, at least in the initial period of
lack of awareness among Indian shippers and growth of 3PL. Once the market is adequately
is prohibited.
developed and industries generate substantial systems bears strong positive relationships with
volumes of business, then probably limiting customer acquisition and geographic reach for
one’s offerings to some select industries may the subset. Negative relationships between in-
also lead to growth and expansion of business. vestment in information systems and some of the
Like in the 2006 survey, 3PL relationship performance metrics are counter-intuitive since
does not appear in either the aggregate set or the in today’s world, availability and utilization of
subset. It may be inferred that 3PL relationship information have become absolutely essential
is a necessary but not sufficient criterion for for success in every sphere, more so in the
success of a 3PL firm. 3PL experience, on the context of information-intensive 3PL services.
other hand, has a strong positive relationship However, a glance at the data provided by the
with return on assets (ROA) for the aggregate respondents points to the fact that Indian firms
set, but strong negative relationships with year- are short of investments in information systems,
on-year growth in revenues and year-on-year and this is also validated by the significant
growth in profits for the subset. With experience, negative gap between firms’ achievements and
asset utilization possibly improves and hence expectations of information-readiness.
the first outcome. The second one relates to the Availability of skilled logistics profes-
finding of the 2006 survey and is explained in sionals bears strong positive relationships with
the following way. In the initial years of a firm’s geographic reach for the aggregate set, and re-
existence, the absolute revenues and profits are ducing inventory for both the aggregate set and
low; however, growth rates may be very high if the subset. As already noted, Indian firms have
the firm succeeds in a high-growth market. As under-investment in information systems and
the firm ages, its percentage growth may taper hence the over-reliance on skilled manpower
off, even decline, though the absolute revenues for expansion and inventory management, es-
and profits may be substantial. This is caused pecially because this kind of services becomes
due to the saturation effect, and is not specific exceptionally labour-intensive in the absence
to the 3PL industry. of a proper information system. Integration of
Investment in assets has a strong nega- supply chains has strong positive relationships
tive relationship with year-on-year growth in with many a performance metric for either set,
revenues. In the 2006 survey also, investment year-on-year growth in profits and customer
in assets bore a negative relationship with satisfaction for the aggregate set, and year-on-
geographic reach. This may be due to the fact year growth in revenues/profits/cargo and ROA
that there may be many asset-free firms, which for the subset. As in the 2006 survey, integration
register high growth rates. Alternatively, if a of supply chains proves to be a very important
firm invests heavily into assets, it may have very predictor variable.
little funds available for expansion and growth In the ordered logit model, the relationship
of business. Therefore, as far as possible, a firm is one-to-many, i.e., one dependent variable is
needs to maintain a minimum level of quality taken at a time and its relationship with one or
assets and outsource the rest, especially when more independent variables is established. We
assets are available in abundance at competi- also performed canonical correlation analysis,
tive rates in fragmented markets such as India. which considers all dependent and independent
Investment in information systems, surpris- variables simultaneously and establishes an
ingly, has strong negative relationships with overall dependency relationship. Using vari-
on-time delivery performance and customer ous combinations of pairs of linear composites
satisfaction, and a strong positive relationship from the criterion (dependent) and predictor
with geographic reach for the aggregate set. (independent) variables, a pair was found to be
On the other hand, investment in information maximally correlated at 5% level of significance
is prohibited.
for each of the aggregate set and the subset. Table Comparison with the 2004 Survey
2 shows the canonical correlation coefficient,
F-statistic, p-value and significant dependent As far as the location of headquarters is con-
and independent variables for each set. cerned, NCR, Mumbai and Chennai remain
All canonical loadings and cross-loadings at the top of the list since most of the busi-
were found to be significantly positive, indicat- ness is generated in North, West and South,
ing positive relationships among the dependent with East, Central India and North-East still
and independent variables. It may be observed lagging behind in terms of volumes. Global
from Table 2 that breadth of services, investment reach of Indian service providers has definitely
in information systems, skilled manpower and expanded with increasing coverage in almost
integration of supply chains prove to be the all parts of the world. The Indian 3PL industry
most important key success factors for 3PL still remains very young and fragmented in
firms. However, as already noticed, with respect terms of distributions of both employee base
to each of these factors, there have been sig- and revenues generated. The industry growth
nificant negative gaps between respondent rate also remains in the range of 18-20%. With
firms’ performance and expectations, which respect to ownership of assets, services offered
gives an indication to Indian 3PL firms to take and industries served, there has not been any
appropriate steps and bridge these gaps on an significant change. The only noticeable thing is
urgent basis. that freight forwarding and customs clearance
activities have increased a bit, maybe due to
the expanding global reach of Indian service
Discussion on providers as noted above.
Survey Results With regard to the problems facing the
Indian 3PL industry, the top two concerns re-
This section first presents comparisons between
main as the inadequate transportation/storage/
the current state of the Indian 3PL industry and
communications/bureaucratic infrastructure
its status in 2004. Next, it compares between
and the lack of awareness among Indian ship-
the Indian and North American 3PL industries.
Table 2. Significant dependent and independent variables in canonical correlation analysis
All clusters (41 responses) Cluster 1 (30 responses)

Aggregate set Subset
Canonical correlation coefficient 0.67 0.85
F-statistic* 1.76 2.36
p-value* 0.0349 0.0052
Revenue growth
Revenue growth Profit growth
Profit growth Cargo growth
Dependent (criterion) variables Reducing inventory ROA
Customer satisfaction Reducing inventory
Geographic reach Customer acquisition
Geographic reach
Breadth of services
Investment in information system
Investment in information system
Independent (predictor) variables Skilled manpower
Skilled manpower
Integration of supply chains
Integration of supply chains
* F-statistics and p-values correspond to Wilks’ lambda. Other tests, namely Pillai’s trace, Lawly-Hotelling trace and
Roy’s largest root, were also found significant.
is prohibited.
pers. The encouraging factors for the industry differences in perceptions. However, no such
are development of infrastructure, increasing difference in responses, based on size or any
awareness towards 3PL, globalization and other dimension, was observed in the case of
FDI in 3PL, and consistent growth of GDP and Indian firms. As far as the commonality of
hence more demand for 3PL services, as was responses is concerned, both North American
also observed in the 2004 survey. Regarding and Indian firms accorded high importance
the estimates of industry size, and industry and to customer focus, investment in information
company growth rates, the responses are also systems and availability of skilled manpower,
very similar to those of the 2004 survey. and both assigned medium to low importance
Therefore, based on the outcome of the to internationalization of operations, focus on
survey, it can be concluded that there has not industries, 3PL relationship, 3PL experience
been much change in the profile of respondents, and investment in assets. On the other hand,
except increasing revenues and expanding while North American firms considered breadth
global reach and related activities. of services and integration of supply chains as
having medium and medium to low importance
Comparison with the 2006 Survey levels, respectively, their Indian counterparts
perceived these factors as very highly and
North American 3PL firms are definitely bigger highly important for success, respectively. This
in size and more globalized compared to their may be due to the reason that North American
Indian counterparts. There is a significantly firms have more breadth of services and inte-
high correlation between revenues earned and gration of supply chains than Indian firms, and
the extent of globalization for North American hence perceive customer focus, investment in
firms indicating that as a firm grows in size, it information systems and availability of skilled
becomes more globalized. However, no such manpower as more important than breadth
correlation was found for Indian firms since and integration. For North American firms,
many relatively bigger firms had their opera- there are significant gaps in expectations and
tions limited to India only. The average num- achievements with respect to internationaliza-
ber of value-added services offered by North tion, availability of manpower and integration
American firms is also higher than that offered of supply chains while Indian firms seem to
by Indian firms. There are high correlations underperform with respect to all but customer
between revenues earned and the number of focus and experience.
value-added services offered and also between In the overall dependency relationships
the extent of globalization and the number of among the performance metrics and key suc-
value-added services offered by North American cess factors, breadth of services, investment
firms, indicating that as a firm grows in size and in information systems, availability of skilled
becomes more globalized, the bouquet of value- manpower and integration of supply chains
added services offered by it also expands. Such prove to be very significant predictor variables
correlations are absent in the sample of Indian for both North American and Indian firms. On
firms probably because of the limited number the other hand, internationalization of opera-
of value-added services offered by them. The tions, customer focus and industry focus are
percentage of asset-free Indian firms is more significant for North American firms, but not so
than that of North American firms probably for Indian firms because, as mentioned before,
because of the fragmented Indian transport Indian firms are less globalized, and due to the
market and abundance of assets available at nascent state of the industry and inadequate
competitive rates. volumes, focusing on customers and specific
With respect to the key success factors, industry verticals would not ensure enough
there is a clear difference in responses of dif- revenues, profits and growth at least in the
ferent sizes of North American firms, indicating initial period. 3PL relationship, 3PL experi-
is prohibited.
ence and investment in assets do not appear in Worldwide’s acquisition of Indair Carriers are
the dependency relationships for either North testimonies to this trend. Even Private Equity
American or Indian firms. While 3PL relation- (PE) players are showing a lot of interest in
ship and experience deem to be necessary but not Indian logistics firms (Lieb, 2008b). Indian ship-
sufficient conditions for success, investment in pers are also becoming more and more aware
assets can be minimized subject to availability of the benefits of logistics outsourcing. In the
of the same in the market at competitive rates. 2004 survey, it was observed that shippers put
With respect to growth strategies, responses a lot of emphasis on selection of 3PL providers,
of North American and Indian firms are simi- who were asset-based. However, this trend has
lar. While alliances and direct investments are changed and shippers are accepting 3PL firms
the preferred choices of expansion, other less without asking questions on ownership of as-
traveled routes for growth are acquisitions and sets and subcontracting systems, opined one of
mergers. the respondents. In fact, as mentioned before,
there are many top global 3PL providers, who
are asset-free. From a 3PL point of view, it is
Managerial Implications best to share assets of dedicated asset owners,
who are big and state-of-the-art, on a pay-per-
The survey provides useful insights for logis-
use basis, opined the same respondent. The
tics managers and the government. Although
survey indicates that the global reach of Indian
the Indian 3PL industry is in its early stage
3PL firms has increased with corresponding
of development, it has high growth potential.
increases in related activities. However, ac-
The annual logistics cost in India is estimated
cording to one freight forwarder respondent, it
to be 13% of GDP (Mitra, 2006), and based
is not necessary to go global to provide global
on the World Bank estimate of India’s GDP
services. Any freight forwarder today may join
in 2008, i.e. USD 1232.7 billion (http://www.
a freight forwarding association by which it is
worldbank.org), the annual logistic cost would
connected to the globe. The same has also been
be around USD 160 billion. India’s logistics
echoed by Schoenfeld (2008).
costs are high compared to those of developed
Two of the most important dynamics of the
countries such as the U.S. and Germany where
Indian logistics sector are pricing pressure due to
annual logistics costs are less than 10% of
demanding customers and high costs of opera-
their respective GDPs. Therefore, there are
tions. Due to the global recession, freight rates
opportunities for the Indian logistics sector to
all over the world have dropped significantly.
reduce costs and make the prices of its products
Shippers are demanding the shortest transit
more competitive in domestic and international
times and most competitive air/sea freight
markets. Also, considering the estimated Indian
rates. This, coupled with fluctuations in fuel
3PL industry size to be USD 2 billion, the size
prices and rising costs, is affecting the already
of the industry is about 1.25% of the annual
low margin of 3PL firms. In order to overcome
logistics cost, indicating high potential for the
this problem, thrust should be on cost-efficient
industry that is already growing at a healthy
transportation, value-added service offerings
rate of 18-20% per annum.
and differentiation. Substantial fuel costs can
Many global 3PL providers, who came
be saved through multi-modal transportation
to India primarily to satisfy the needs of their
by railways and waterways, given the large
overseas customers, are now heavily investing
railway network, inland waterways and vast
in physical assets, getting licenses and also
coastal lines. Multi-modal transportations also
extending their network. DHL’s acquisition of
add flexibility in loading/unloading, introduce
Blue Dart, FedEx’s acquisition of Prakash Air-
economies of scale, and result in savings to the
freight Pvt. Ltd., TNT’s acquisition of Speedage
tune of 4-6% (Thuermer, 2008). In addition to
Express and tie-up with Elbee Services, and UTi
redesigning transportation networks, 3PL firms
is prohibited.
should also strive for offering more value-added willing to pay for the value-added services and
services and differentiating vis-à-vis competi- investments of service providers in information
tors. However, the survey finds that firms lag systems and technologies. It is the responsibility
both in terms of breadth of services and key dif- of service providers to make their cost structures
ferentiators identified by Lieb and Lieb (2008). transparent so that shippers get a fair idea of
Apart from breadth of services, investment in their margins.
information systems, availability of manage- As far as the government is concerned,
ment talent and integration of supply chains were there is much to be desired in terms of infra-
identified by the survey as significant predictor structure, procedures, documentations and
variables for performance metrics. However, taxation systems. Road networks are inadequate
the survey also finds that there are significant leading to long turnaround times for vehicles,
gaps between firms’ expectations and achieve- draft availability at some of the major ports is
ments with respect to these variables, which constrained restricting the size of ships coming
should be seriously looked into by logistics into the harbors, there is port congestion due to
managers in order to decide on allocation of the lack of modern warehousing facilities and
scarce resources. One respondent mentions that slow and cumbersome customs procedures, and
Indian logistics companies are going through overall there are bureaucracy, red tapes, lengthy
vertical integration and extending the portfolio documentation requirements, multiple check
of services. As regards information systems, posts, numerous taxes such as toll tax, sales
respondents argue that shippers demand latest tax, octroi3 etc. and interstate issues that cause
technologies, but consider these as part of the substantial delays in shipments. These issues
standard service package and are not willing to have been raised many times and the government
compensate for investments made. Availability is aware of these. Albeit slow, steps are being
of skilled manpower is a global problem; how- taken to mitigate these problems. Constructions
ever, in India this problem is more acute for of the golden quadrilateral project, East-West,
domestic players as they are unable to match North-South corridors and a dedicated rail
the offers made by multinationals. The shortage freight corridor are some of the initiatives that
of manpower is going to be mitigated to some are expected to ease the load on the existing
extent as the supply of workforce would be infrastructure. Allowing private investments in
augmented due to the recession and manpower inland containerized transportation three years
would be available at reasonable costs. Integra- back would increase the percentage of contain-
tion of supply chains, i.e. selling supply chain erized freight from a meager 47% where glob-
solutions to clients’ customers and suppliers, is ally 80% of the freight is moved in containers.
yet to take off in a big way in India because of Also, there are plans to invest in public-private
its early stage and shippers’ unawareness and partnerships (PPP) in airports, seaports, roads,
unwillingness towards logistics outsourcing. refrigerated transportation and warehousing
However, respondents have acknowledged facilities, hubs and Special Economic Zones
high importance levels for integration, which (SEZ). The import policy has become liberal
is going to develop with time. and customs clearance has been made easier.
From the shippers’ point of view, there is Electronic Data Interchange (EDI) is being
already growing awareness towards the ben- implemented in many areas to make paperwork
efits of logistics outsourcing. Shippers have to simpler and faster. Implementation of a uniform
place more trust on and confidence in service Value-Added Tax (VAT) structure is expected
providers, involve 3PLs in the planning process to address the multiple taxation system, check
(Hannon, 2008; Thuermer, 2008) and outsource post delays and interstate issues. However, the
more customer-centric, value-added activities entire process is extremely slow, and the industry
besides the regular activities of transportation is still reeling under cumbersome procedures
and warehousing. Also, shippers should be and complex tax structures. The government
is prohibited.
has to seriously look into this and expedite the present situation as the Indian 3PL industry is
process of modernization. After all, growth in still in its infancy and the market is fragmented
the logistics sector would lead to growth in with a handful of serious players (Only 1% of
GDP and generate employment. the Indian logistics sector is organized). Future
Industry bodies and associations also have studies may look into the issue of response
a significant role to play in this context. They rate. As pointed out by Marasco (2008), future
are the intermediaries between the 3PL industry research should be more devoted to theory
and government. On behalf of the industry, they building, constructs and conceptual frameworks
can lobby with the government for policies con- development. More focus interviews and case
ducive to growth, economic incentives, cheap studies should be conducted to complement the
financing etc. They can increase the awareness body of knowledge on 3PL (Maloni & Carter,
of 3PL by periodically organizing workshops/ 2006; Selviaridis & Spring, 2007). Also, there
seminars/conferences and bringing shippers, should be single, combined studies on 3PL users
service providers, government representatives and providers to get the perspectives from both
and other stakeholders under the same umbrella sides to assess the expectations of 3PL users
for interactions and exchanges of thoughts and and achievements of 3PL providers (Maloni &
experiences. According to one respondent, there Carter, 2006). Finally, more comparative studies
are not many tailor-made courses in India for between Asian countries such as India and China
imparting technical and managerial skills to can be the possible topics for future research.
logistics professionals. The industry bodies and
associations can collaborate with universities
and institutions to offer short-term and long- References
term courses to suit the needs of the industry.
Anonymous, . (2008). 3PLs: Pulling it all together.
Traffic World, 272(39), 22–31.
Directions for Armstrong, J. S., & Overton, T. S. (1977). Esti-
Future Research mating nonresponse bias in mail surveys. JMR,
Journal of Marketing Research, 14, 396–402.
The current survey intended to assess the state doi:10.2307/3150783
of the Indian 3PL industry and compare it with
Ashenbaum, B., Maltz, A., & Ravinovich, E. (2005).
that in 2004 based on a previous survey. A com- Studies of trends in third-party logistics usage:
parison of the Indian and North American 3PL What can we conclude? Transportation Journal,
industries was also made based on an earlier 44(3), 39–50.
survey of North American 3PL providers. The
Blanchard, D. (2008). Manufacturers are passing the
survey provides significant insights to logistics buck on their green supply chains. Industry Week,
managers, and makes recommendations to the 257(90), 60.
government and industry bodies for facilitat-
Hannon, D. (2008). Stiefel labs leverages 3PL to fuel
ing growth of 3PL in India. To the best of the major growth. Purchasing, 137(10), 27–28.
author’s knowledge, there has not been any
study so far comparing the Indian 3PL industry Langley, C. J., Jr., Hoemmken, S., van Dort, E., Mor-
with that of North America, the most developed ton, J., Strata, R., & Riegler, M. (2007). The state of
logistics outsourcing in 2007. Atlanta, GA: Georgia
3PL market, for benchmarking. It is expected Institute of Technology, DHL, Capgemini, SAP.
that the survey would provide valuable inputs
to the Indian 3PL industry to assess where it Langley, C. J., Jr., Morton, J., Wereldsma, D., Swami-
nathan, S., Murphy, J., Deakins, T. A., et al. (2008).
stands and where it has to be.
The state of logistics outsourcing in 2008. Atlanta,
The survey was done based on 42 responses. GA: Georgia Institute of Technology, Capgemini,
Ensuring a better response is difficult in the Oracle, DHL.
is prohibited.
Lieb, R. (2008a). The North American third-party Quinn, J. P. (2008). 3PL market update: The shift is on.
logistics industry in 2007: The provider CEO perspec- Supply Chain Management Review, 12(5), L45–L53.
tive. Transportation Journal, 47(2), 39–53.
Schoenfeld, M. (2008). Global logistics management
Lieb, R. (2008b). The year 2007 survey: provider from a domestic 3PL. Supply & Demand Chain
CEO perspectives on the current status and future Executive, 6(9), 42–43.
prospects of the third party logistics industry in the
Asia-Pacific region. International Journal of Physi- Selviaridis, K., & Spring, M. (2007). Third party
cal Distribution and Logistics Management, 38(6), logistics: A literature review and research agenda.
495–512. doi:10.1108/09600030810893535 The International Journal of Logistics Management,
18(1), 125–150. doi:10.1108/09574090710748207
Lieb, R., & Butner, K. (2007). The North American
third-party logistics industry in 2006: The provider Thoppil, D. A. (2008). Third-party logistics firms
CEO perspective. Transportation Journal, 46(3), escape slowing economy. World Trade, 21(8), 10.
40–52. Thuermer, K. E. (2008). Tweaking the supply chain
Lieb, R., & Lieb, K. (2008). Why 3PLs need to build to optimize value and minimize cost. World Trade,
their brand? Supply Chain Management Review, 21(10), 24–27.
12(8), 46–52. Trunick, P. A. (2008). Asset-based vs. resource rich.
Maloni, M. J., & Carter, C. R. (2006). Opportunities Outsourced Logistics, 1(3), 32–34.
for research in third-party logistics. Transportation Wang, Q., Chu, Z., Zhou, Q., & Lai, F. (2008). A
Journal, 45(2), 23–38. comparative study of third-party logistics in Main-
Marasco, A. (2008). Third-party logistics: A literature land China and Hong Kong. Transportation Journal,
review. International Journal of Production Econom- 47(3), 48–58.
ics, 113, 127–147. doi:10.1016/j.ijpe.2007.05.017 Yeung, J. H. Y., Selen, W., Sum, C. C., & Huo,
Media, P. (2008). 3PLs recognized for excellence. B. (2006). Linking financial performance to
Outsourced Logistics, 1(4), 20–24. strategic orientation and operational priorities.
International Journal of Physical Distribution
Mentzer, J. T., & Kahn, K. B. (1995). A framework and Logistics Management, 36(3), 210–230.
of logistics research. Journal of Business Logistics, doi:10.1108/09600030610661804
16(1), 231–250.
Mitra, S. (2006). A survey of Indian third-party lo-
gistics service providers. IIMB Management Review,
18(2), 159–174. Endnotes
Mitra, S., & Bagchi, P. (2008). Key success factors, 1
National Capital Region refers to the capital
performance metrics, and globalization issues in the of India, New Delhi and its adjoining area
third-party logistics (3PL) industry: A survey of North 2
Rs. 1 crore = Rs. 10 million and USD 1 ~ Rs.
American service providers. Supply Chain Forum: 48-49 (January, 2010)
An International Journal, 9(1), 42–56. 3
a form of tax levied by the local authority
O’Connor, P., & Anderson, J. (2008). Congress
defines role of 3PLs. Outsourced Logistics, 1(4), 11.
Subrata Mitra is a Professor of Operations Management at the Indian Institute of Management

Calcutta (IIMC), Kolkata, India. Prof. Mitra is a Fellow (Ph.D.) of IIMC. He has over thirteen
years of experience in industry and academics. He has research interests in inventory control,
logistics and supply chain management, and has published in international journals such as
European Journal of Operational Research, Omega, Journal of the Operational Research So-
ciety, Asia Pacific Journal of Operational Research and Supply Chain Forum: An International
Journal. Prof. Mitra is a past Fulbright Senior Research Fellow, and he serves on the Editorial
Review Board of the Journal of Supply Chain Management.
is prohibited.
Appendix
Table A1. Major services and % of respondents offering them
Service % of resp. Service % of resp. Service % of resp.

Warehousing 83.33 Break Bulk Ops. 45.24 Import/Export Mgt. 35.71
Transportation 80.95 Cargo Insurance 45.24 NVOCC 33.33
Freight Forwarding 78.57 Packaging/Labeling 42.86 Inventory Mgt. 30.95
Customs Clearance 73.81 Distribution 38.10 Order Processing 28.57
Freight Consolidation 57.14 Reverse Logistics 38.10 Payment Collection 28.57
Freight Brokerage 47.62 Consulting Services 38.10 Vendor Mgt. 21.43
Table A2. Industries/Sectors and % of respondents mentioning them as top revenue earners
Industry % of resp. Industry % of resp. Industry % of resp.

Engineering/Industrial 47.62 Textile/Apparel 21.43 FMCG 14.29
Automotive 35.71 Chemical/Fertilizer 21.43 Food/Beverages 14.29
Computer/Electronics 23.81 Retail 16.67 Pharmaceuticals 11.90
Table A3. Key success factors and % of respondents marking them “high” or “very high”
Key success factor % of resp. Key success factor % of resp.

Breadth of Services 96.77 Internationalization 83.87
Customer Focus 96.77 Investment in Asset 77.42
Skilled Manpower 93.55 3PL Experience 74.19
Investment in Info. Sys. 90.32 3PL Relationships 67.74
Integration of SC 90.32 Industry Focus 58.06
is prohibited.
Table A4. Questionnaire for “A survey of Indian 3PL providers”
1. Name of the company: __________________________________ 2. Location of HQ: ________________

3. Geographic coverage (Please √): □ Only India □ India and abroad
In India: □ North □ South □ East □ West □ NE □ Central India
Abroad: □ North America □ Latin America □ Europe □ Middle East □ Africa □ Asia-Pacific
4. Year of starting 3PL operations: _________ 5. Number of employees in India: __________________
6. Please list below the 3PL revenues and % contributions of the domestic 3PL market for the last 4 years.
Year 3PL revenue (Rs. crore) Contribution of the domestic market (%)
2004-05 _______ _______
2005-06 _______ _______
2006-07 _______ _______
2007-08 (Projected) _______ _______
7. Asset base (Please √): □ Owned □ Outsourced □ Both 8. Managed warehouse space (sq. ft.): ________
9. Please √ one or more of the following services offered by your company. Also, please rank the top 3 services.
□ Transportation □ Warehousing □ Freight forwarding □ Customs clearance
□ Import/export mgt. □ Fleet management □ Freight brokerage □ Freight consolidation
□ Inventory mgt. □ NVOCC □ Port operations □ Break bulk operations
□ Order processing □ Order fulfillment □ Vendor management □ Packaging and labeling
□ Distribution □ After sales support □ Payment collection □ Assembly/Installation
□ Trade finance □ Cargo insurance □ Reverse logistics □ Consulting services
10. How much importance will you give to the following factors for success in the 3PL industry? Also, how will you rate your company with
respect to these factors? (1: Very low, 2: Low, 3: Average, 4: High, 5: Very high)
Factor importance || Company rating
1 2 3 4 5 || 1 2 3 4 5
a) Breadth of service offerings □ □ □ □ □ || □ □ □ □ □
b) Internationalization of operations □ □ □ □ □ || □ □ □ □ □
c) Focus on key customer accounts □ □ □ □ □ || □ □ □ □ □
d) Focus on specific industries □ □ □ □ □ || □ □ □ □ □
e) Length and depth of 3PL relationships □ □ □ □ □ || □ □ □ □ □
f) Experience as a 3PL provider □ □ □ □ □ || □ □ □ □ □
g) Investment in quality assets □ □ □ □ □ || □ □ □ □ □
h) Investment in information systems □ □ □ □ □ || □ □ □ □ □
i) Skilled logistics professionals □ □ □ □ □ || □ □ □ □ □
j) Integration of supply chains □ □ □ □ □ || □ □ □ □ □
11. How will you rate your company with respect to the following performance criteria?
(1: Very low, 2: Low, 3: Average, 4: High, 5: Very high)
12345
a) Year-on-year growth in revenues □ □ □ □ □
b) Year-on-year growth in profits □ □ □ □ □
c) Year-on-year growth in cargo handled □ □ □ □ □
d) Return on investments □ □ □ □ □
e) Return on assets □ □ □ □ □
f) Reducing inventory levels □ □ □ □ □
g) On-time delivery performance □ □ □ □ □
h) Customer satisfaction level □ □ □ □ □
i) Acquiring new customers □ □ □ □ □
j) Expanding geographic reach □ □ □ □ □
12. Please note below the top three industries/sectors served by your company.
1) __________________ 2) ___________________ 3) ____________________
13. How much importance will you give to the following factors for low 3PL growth in India so far?
(1: Not at all important, 2: Less important, 3: Moderately important, 4: Important, 5: Very important)
12345
a) Lack of trust and awareness among Indian firms □ □ □ □ □
b) Poor transportation/communications infrastructure □ □ □ □ □
c) Government control/bureaucracy/long paper work □ □ □ □ □
d) High costs of operations/low margins □ □ □ □ □
e) Lack of skilled manpower □ □ □ □ □
14. How much importance will you give to the following factors for opportunities and growth of 3PL in India?
(1: Not at all important, 2: Less important, 3: Moderately important, 4: Important, 5: Very important)
12345
a) Increasing awareness towards 3PL □ □ □ □ □
b) GDP growing @ over 9%, more demand for 3PL □ □ □ □ □
c) Infrastructure development (Highways/SEZ/hubs) □ □ □ □ □
d) Globalization, FDI in the Indian 3PL industry □ □ □ □ □
e) Increasing government support/conducive policy □ □ □ □ □
15. Please indicate below your estimates for the following:
1) Indian 3PL industry (Rs. crore): ______ 2) Industry growth rate (%): ___ 3) Company growth rate (%): ___
16. Please√ one or more of the following growth strategies appropriate for your company.
□ Direct investments □ Mergers □ Acquisitions □ Alliances
Thank you for taking your precious time off to fill out the questionnaire.
Name of the respondent: _____________________ Designation: _______________ E-mail: _______________
Signature: _________________________________ Date: _____________________
is prohibited.
An Improved Lightweight RFID

Authentication Protocol
Xiaowen Zhang, College of Staten Island - CUNY, USA
Zhanyang Zhang, College of Staten Island - CUNY, USA
Xinzhou Wei, New York City College of Technology – CUNY, USA
Abstract
This study extends the vulnerability analysis of a RFID authentication protocol and offers solutions to security
weaknesses through enhanced measures. Vajda and Buttyan (VB) proposed a lightweight RFID authentication
protocol, called XOR. Defend, Fu, and Juels (DFJ) analyzed it and proposed repeated keys and nibble attacks
to the protocol. In this paper, we identify the source of vulnerability within VB’s original successive session
key permutation algorithm. We propose three improvements, namely removing bad shuffles, hopping the runs,
and authenticating mutually, to prevent DFJ’s attacks, thereby significantly strengthening the security of the
protocol without introducing extra resource cost.
Keywords: Authentication Protocol, Radio Frequency Identification (RFID), Random Permutation, RFID
Authentication, XOR Protocol
1. Introduction frequency antenna. It is capable of emitting

the identification and other information for
As a consequence of the massive deployment of the tagged item. A reader is another electronic
Radio Frequency Identification (RFID) systems device located between tags and backend
in a variety of applications, security and privacy server. A reader receives information from or
issues are still paramount concerns. Some sends information to a tag, which in turn com-
consumer rights protection organizations, like municates with (updates) the backend server.
CASPIAN (Consumers Against Supermarket A backend server runs application software,
Privacy Invasion and Numbering), are against hosts databases, and processes tag information
the use of RFID (CASPIAN, 1999). received from a reader. It communicates with
In general, a RFID system consists of readers through wireless or wired connection
three kinds of components: RFID tags (or on one end and with the enterprise network
transponders), RFID readers (or interrogators), infrastructure on the other end. The wireless
and backend computer servers. An RFID tag communication links between tags and readers
is a tiny microchip embedded with a radio are considered the most vulnerable part in terms
of security and privacy threats. As documented
in the literatures (Avoine, 2005; Juels, Pappu
DOI: 10.4018/jal.2011010105
is prohibited.
& Parno, 2008; Sarma, Weis & Engels, 2002), a synchronized counter i to indicate the current
RFID security experts have devoted much ef- run of authentication, the challenge-response
fort to address these threats. Among them, new process at the ith run can be described as follows:
RFID authentication protocols and analysis
are most active areas of research (Chatmon, Reader –> Tag: a(i) = x(i)⊕ k(i)
Le & Burmester, 2006; Gilbert, Robshaw & // Reader picks a random number x(i), calculates
Sibert, 2005; Juels, 2004; Juels & Weis, 2005; k(i), then sends a challenge a(i) = x(i)⊕ k(i)
Le, Burmester & Medeiros, 2007; Li & Deng, to Tag.
2007; Peris-Lopez et al., 2006). Tag –> Reader: b(i) = x(i)⊕ k(0)
Adding security features to low-cost RFID // Tag calculates k(i), extracts the challenge x(i)
tags is a daunting and challenging task because by k(i)⊕ a(i), then sends a response b(i) =
these tags are extremely resource limited and x(i)⊕ k(0) to Reader. Following that, the
cannot afford strong cryptographic algorithms. Reader verifies the Tag, because only the
Practical RFID authentication protocols should Tag knows k(0).
have the following characteristics: lightweight,
anonymity (un-traceability), and mutual au- Here k(i) = ∏(k(i-1)), and ∏: {0, 1}n → {0, 1}
thentication. n
is a permutation starting from the initial secret
Vajda and Buttyan (Vajda & Buttyan, 2003) key k(0). That is, k(1) = ∏(k(0)), k(2) = ∏(k(1)), …,
proposed a set of five lightweight authentication k(i-1) = ∏(k(i-2)), k(i) = ∏(k(i-1)), …. Because x(i) is
protocols and also gave a brief analysis. Each random, so are a(i) = x(i)⊕ k(i) and b(i) = x(i)⊕ k(0). If
protocol is extremely lightweight in terms of the x(i) is truly random, no information about the
resources required, and is considered suitable secret k(0) is revealed from the communication.
for resource limited devices, like RFID tags. Suppose n = 128 bits as key length, the
Defend, Fu, and Juels (Defend, Fu & algorithm for the permutation ∏ is as follows:
Juels, 2007) performed cryptanalysis on two
of them – XOR and SUBSET. DFJ proposed
• Step-1: At the run (i-1)th iteration, the
repeated keys and nibbles attacks in an attempt
session key k(i-1) is split into 16 bytes, then
to compromise the XOR protocol. In this paper,
we cut each byte into two nibbles of 4-bit
we identify the source of vulnerability that
each. Following that, we concatenate all
existed in VB’s original successive session
key permutation algorithm. We propose three left nibbles k 0(i,L-1) , k1(,iL-1) , …, k15(i -,L1) to form
improvements, i.e. removing bad shuffles, kL(i -1) , concatenate all right nibbles k 0(i,R-1)
hopping the runs, and authenticating mutually,
, k1(,iR-1) , …, k15(i -,R1) to form kR(i -1) .
to prevent DFJ’s attacks, thereby significantly
improve the security strength of the protocol • Step-2: At the run (i)th iteration, the right
without introducing extra resource cost. half key kR(i ) is a permutation of kR(i -1)
controlled by kL(i -1) : i.e., swapping the 0-th
2. Original XOR Protocol and the k 0(i,L-1) -th, the 1-st and the k1(,iL-1) -th,
and Repeated Keys Attack …, the 15-th and the k15(i -,L1) -th nibbles of
The original XOR protocol by VB (Vajda & kR(i -1) .

Buttyan, 2003) is a challenge-response proto- • Step-3: The left half key kL(i ) for run (i) is
col as shown in Figure 1. Under the following a permutation of kL(i -1) controlled by kR(i -1)
assumptions: (1) the readers and tags initially in the similar nibble swaps.
share a piece of secret key k(0), (2) both reader • Step-4: Finally the next run session key
and tag are capable of calculating a permutation
k (i ) is obtained from rearranging (interleav-
∏ (given soon), and (3) reader and tag maintain
ing) the half bytes of kL(i ) and kL(i ) , i.e.,
is prohibited.
Figure 1. A simple example (S: Split, P: Permute, M: Mix). It shows how the session keys k(i-1),
k(i), and k(i+1) are developed. We underline the numbers that are always on the right halves. This
demonstrates that the left half session key always stays on the left, and the right half always
stays on the right.
k (i ) = k 0(i,L) | k 0(i,R) | ... | k15(i ),L | k15(i ),R , here the right halves for all successive session keys kR(i )
symbol “|” represents concatenation. , kR(i +1) , …. We use a simple example, as shown
Observations: The problem in the above in Figure 1, to demonstrate this. It means that
process is the step-4 of the permuta- the symbols on the even positions never travel
tion. This step adds a perfect shuffle to the odd positions, and vice versa. This dra-
to ∏. No matter what we do out- matically decreases the chance for the long
shuffle permutation.
k (i ) = k 0(i,L) | k 0(i,R) | ... | k15(i ),L | k15(i ),R o r These are the reasons why this permutation
in-shuffle suffers from short cycles, as DFJ (Defend, Fu
k (i ) = k 0(i,R) | k 0(i,L) | ... | k15(i ),R | k15(i ),L ,after & Juels, 2007) identified. And this vulnerability
makes the protocol susceptible to their repeated
some number of shuffles the sequence
keys attack.
will return to the original order (Mor-
Based on experiments performed by DFJ
ris, 1998). That is the culprit why this
(Defend, Fu & Juels, 2007), given an initial
permutation suffers from short cycles,
key k(0), the successive session keys k(1), k(2),
as DFJ (Defend, Fu & Juels, 2007)
…, k(i), …, k(10,000), which are generated by the
identified, and it makes the protocol
permutation ∏, cycle after an average of 68
vulnerable to their repeated keys at-
sessions. They also found that about 32% of ses-
tack.
sion keys have cycle 1, and all of tested session
keys eventually repeat themselves and only one
It is noted that at step-4, after an initial key thousandth of keys have the maximum cycle
k (i-1)
is split into two halves kL(i -1) and kR(i -1) , of 36. Let c represent a cycle, then k(i) = k(i+c).
the symbols in kL(i -1) will stay on the left halves Suppose k(i) = k(i-2), under the adversary
model for the repeated keys attack (Defend, Fu
for all successive session keys kL(i ) , kL(i +1) , ….
& Juels, 2007), an eavesdropper, Eve is able to
Likewise the symbols in kR(i -1) will be on the form a valid response without knowing k(0) or
is prohibited.
Figure 2. Repeated keys attack for k(i) = k(i-2). Eve can impersonate a valid tag.
x(i). She calculates e(i-2) = a(i-2)⊕ b(i-2) = k(i-2)⊕ k(0). to create a 128-bit k (0) in hexadecimal as: C3
Since k(i) = k(i-2), she calculates a(i)⊕ e(i-2) = (x(i)⊕ 47 3F BB 8D B4 C1 E0 5F 4C 2D 8B 2B A6
k(i)) ⊕ (k(i-2)⊕ k(0)) = x(i)⊕ k(0) = b(i), therefore she can BD 98, then split it into left and right nibble
impersonate a valid tag, as shown in Figure 2. sets as
3. Improvements to XOR kL(0) : C 4 3 B 8 B C E 5 4 2 8 2 A B 9,

Protocol kR(0) : 3 7 F B D 4 1 0 F C D B B 6 D 8.
In this section we propose three improvements
to the original XOR protocol, namely removing Then under the control of kR(0) / kL(0) , we
bad shuffles, hopping the runs, and authenticat- permute kL(0) / kR(0) to obtain kL(1) / kR(1) as follows:
ing mutually.
3.1 Removing Bad Shuffles kL(1) : 4C 98 BA 2B 52 84 CB E3 and

kR(1) : BD 1B C7 3D 48 60 DB FF.
In step-4 of the original VB’s permutation al- k (1) is the concatenation of kL(1) and kR(1) as:
gorithm, we don’t interleave nibbles of kL(i ) and
k (1) : 4C 98 BA 2B 52 84 CB E3 BD 1B C7 3D
kR(i ) to create k (i ) . Instead, we just simply 48 60 DB FF.
concatenate kL(i ) and kR(i ) to form k (i ) , i.e., k (i )
= kL(i ) | kR(i ) . In this way we remove the out- The second run starts from k (1) : 4C 98 BA
shuffles from the permutation, therefore, the 2B 52 84 CB E3 BD 1B C7 3D 48 60 DB FF.
short cycles disappear, and the DFJ’s repeated Again we split it into left and right nibble sets
key attack is prevented, and the security is as
improved. And we argue that without the out-
shuffle step, the permutation ∏ is a Knuth kL(1) : 4 9 B 2 5 8 C E B 1 C 3 4 6 D F,
shuffle1, i.e., an algorithm for generating a
kR(1) : C 8 A B 2 4 B 3 D B 7 D 8 0 B F.
random permutation of a finite set. In the case
of 128-bit key length, there are two finite sets
with 16 nibbles (0 ~ F in hexadecimal) each. Then controlled by kR(1) / kL(1) , we permute
The operation ∏ to the left and right nibble sets kL(1) / kR(1) to obtain kL(2) / kR(2) as follows:
( kL(i ) and kR(i ) ) will provide 16! permutations
each. Theoretically, there are 16!×16! (> 288) kL(2) : 1B 5E 8C 2B 4C 3D 64 9F and
in total.
kR(2) : 28 BC 7D 0B AB BD 43 8F.
Here is an example to illustrate how the
permutation ∏ without out-shuffles works. We k (1) is the concatenation of kL(1) and kR(1) as:
use a pseudo-random key generation program
is prohibited.
…, k(i-1), k(i), k(i+1), …, k(10,000) and put them into

k (2) : 1B 5E 8C 2B 4C 3D 64 9F 28 BC 7D 0B
a file. We obtained 1000 such files with each
AB BD 43 8F.
containing 10,000 session keys. Our experiment
results show that there is no repeat session key
And so on so forth, we can obtain k (3) , k (4) within these 1000 files. So the repeated keys
, k (5) , … as follows: attack is prevented.
k (3) : 04 A5 6B 88 24 3B 27 19 FD CB 38 4D
3.2 Hopping the Runs
FB BD CE CB, The purpose of making the session keys hop is
k (4) : 23 4F 06 1C 3A BC 82 CF 49 B5 DD 48 so that the next session key does not have to be
BB BD B7 8E, the immediate successor of the current session
k : 18 0B D4 8B 42 BB B3 C4 3C 6F 58 9B
(5)
key. This makes the nibble attack (Defend, Fu
EC D7 2F DA. & Juels, 2007) much harder, if not impossible.
Observations: the permutation ∏ does not Here is how the nibble attack (Defend, Fu
create the new nibbles (hexadecimal & Juels, 2007) works. Starting from run i, the
symbols), instead it just moves all existing attacker Eve builds a table over the following
nibbles around by each run. If an ideal number of runs. Two columns are the challenges
pseudo-random key generator is used and responses between Reader and Tag, i.e., a’s
during the initial key generation, within and b’s. The next column is the xor’ed result of
k(0) nibbles (0 ~ F) should be uniformly the previous two columns, i.e., a(i)⊕ b(i) = k(i)⊕ k(0).
distributed and unbiased. Theoretically, The last column is the xor’ed result of two of
the random permutation ∏ can guaran- consecutive rows from the fourth column, which
tee 16!×16! permutations for a 128-bit will give us the xor’ed result of two consecutive
sequence. However, if the distribution of session keys. As observed, when a nibble of
16 nibbles is not uniform (as the above this last column becomes 0, the corresponding
example shows the frequencies of the nibble of the session key k(i) becomes known.
16 hex symbols are: 0(1), 1(1), 2(2), This is because in the original permutation case,
3(2), 4(3), 5(1), 6(1), 7(1), 8(3), 9(1), the two continuous session keys are
A(1), B(6), C(3), D(3), E(1), F(2)), the
total number of permutations is less than k (i ) = k 0(i,L) | k 0(i,R) | ... | k 8(i,L) | k 8(i,R) | ... | k15(i ),L | k15(i ),R
16!×16!, but still a huge number.
,
k (i +1) = k 0(i,L+1) | k 0(i,R+1) | ... | k 8(i,L+1) | k 8(i,R+1) | ... | k15,
(i +1)
| k15(i +,R1)
In practice, before installation of a k(0)’s to ,L
a tag, this k(0) should be tested to make sure it

can be used to generate enough numbers (5×16!
is already big enough) of session keys without If Eve detects that the second nibble of
repetition. This procedure is used to eliminate (k(i+1)⊕ k(i)) is “0000”, then she has k 0(i,R+1) = k 0(i,R)
weak keys. If the key length is 128-bit, there . Since k 0(i,R+1) is obtained by swapping 0-th and
are in total 2128 key(0)’s. Even there is only one
good strong key among every one hundred k 0,(iL) -th elements of kR(i ) , if k 0(i,R+1) = k 0(i,R) then
keys, the total number of strong keys is about k 0,(iR) swaps with itself. That means k 0(i,L) = 0 .
2121, which is huge. From the fourth column of Table 1, Eve knows
For curiosity, we carried out an experiment
that the first nibble of (k(i)⊕ k(0)) is the k 0(,0L) .
with a 128-bit key length, similarly as in Defend,
Fu and Juels (2007). We generated 1000 dif- Likewise, if the 18-th nibble of (k(i+1)⊕ k(i)) is
ferent k(0)’s, and from each k(0) we permutated “0000”, then she has k 8(i,R+1) = k 8(i,R) . Since k 8(i,R+1)
10,000 times to generate session keys k(1), k(2), is obtained by swapping 8-th and k 8,(iL) -th ele-
is prohibited.
covered by observing “0000” nibbles seen in

ments of kR(i ) , if k 8(i,R+1) = k 8(i,R) , then k 8,(iR) swaps
the last column of the Table 1. In Table 1, in
with itself. That means k 8(i,L) = 8 = (1000)2 . the original XOR protocol, hopping offsets h0,
From the fourth column of Table 1 Eve knows h1, h2, … are all 0’s, and i does not update. With
that xor’ing the 18-th nibble of (k(i)⊕ k(0)) with the hopping the runs, these offsets h0, h1, h2, …
“1000” is the k 8(,0L) . Gradually, all other nibbles are functions of current session keys, e.g.,
of k(0) could be obtained by the attacker in this h0 = h(k (i ) ) .
way. The hopping function is simply defined as
In the permutation without out-shuffles a resulting nibble by performing XOR of the
situation (see section 3.1), two consecutive first eight nibbles of the current session key.
session keys are For instance, the hopping offset
7
h0 = h(k (i ) ) = ⊕ km(i ) , where km(i ) is the m-th
k (i ) = k 0(i,L) | k 0(i,R) | ... | k 8(i,L) | k 8(i,R) | ... | k15(i ),L | k15(i ),R m =0
nibble of the session key k (i ) . It is noted that

this hopping_offset formula could be changed
k (i +1) = k 0(i,L+1) | k1(,iL+1) | ... | k15(i +,L1) | k 0(i,R+1) | k1(,iR+1) | ... | k15(i +,R1)
to a simple hash operation.
With hopping the runs mechanism embed-
ded in the XOR protocol, even when attacker
Now the nibble attack only applies to gain Eve finds “0000” nibble in the last column of
two nibbles of k(0): 17-th and 32-th nibbles. If the Table 1, she has no way of knowing hopping
the first nibble of (k(i+1)⊕ k(i)) is “0000”, then offsets except through the brute force of guess-
she has k 0(i,L+1) = k 0(i,L) . Since k 0(i,L+1) is obtained ing. Therefore the nibble attack is prevented.
by swapping 0-th and k 0,(iR) -th elements of kL(i ) This improvement makes the nibble attack
impossible. Meanwhile it may slow down the
, if k 0(i,L+1) = k 0(i,L) , then k 0,(iL) swaps with itself. calculation speed a little bit, since the next ses-
That means k 0(i,R) = 0 . From the fourth column sion key is not just one iteration of the permuta-
of Table 1, Eve knows that the 17-th nibble of tion, it is (hopping_offset +1) iterations. Note,
(k(i) ⊕ k(0)) is the 17-th nibble of k(0). We have the “+1” is just to prevent repeat session keys
similar argument for gaining 16-th nibble of in case of hopping_offset equal to 0.
k(0). If k15(i +,R1) = k15(i ),R , then k15(i ),L = 15 = (1111)2 3.3 Authenticating Mutually
. So the 16-th nibble of k(0) is the xor’ed result
of 16-th nibble of (k(i+1)⊕ k(i)) and “1111”. All In general, a 3-pass mutual authentication pro-
other nibbles of the k(0) will not be easily re- tocol works as follows. Both parties, Alice and
Table 1. Nibble attack table
run hop a b a⊕b=c c(i+1) ⊕ c(i)

i h0=h(k(i)) x(i) ⊕ k(i) x(i) ⊕ k(0) k(i) ⊕ k(0) undefined
i+h0+1 h1=h(k(i+h0+1)) x(i+h0+1) ⊕ x(i+h0+1) ⊕ k(0) k(i+h0+1) ⊕ k(i+h0+1) ⊕ k(i)
k(i+h0+1) k(0)
i=i+h0+1 h2=h(k(i+h1+1)) x(i+h1+2) ⊕ x(i+h1+2) ⊕ k(0) k(i+h1+2) ⊕ k(i+h1+2) ⊕ k(i+1)
i+h1+1 k(i+h1+2) k(0)
i=i+h1+1 h3=h(k(i+h2+1)) x(i+h2+3) ⊕ x(i+h2+3) ⊕ k(0) k(i+h2+3) ⊕ k(i+h2+3) ⊕ k(i+2)
i+h2+1 k(i+h2+3) k(0)
… … … … …
is prohibited.
Figure 3. Hopped XOR mutual authentication protocol
Bob, have a piece of shared secret key k. Alice In the first pass, a reader sends a challenge
initiates the first pass by sending a challenge a(i) = x(i)⊕ k(i) to a tag. In the second pass, the
Fk(RA), in which Fk is one kind of encryption tag responds the reader by sending b(i) = x(i)⊕
(or cryptographic hash) function controlled by k(0). Only the legitimate tag is able to extract
k, and RA is a random number chosen by Alice. the challenge x(i) and create the response b(i).
Bob responds with Fk(RB)+RA in the second By receiving b(i), the reader authenticates the
pass, where RB is random number chosen by tag. In the third pass, the reader sends
Bob. In this second pass, Bob is authenticated (i + (h +2)/2 )
c (i ) = x (i ) ⊕ k  i 
back to the tag. Be-
by Alice, because only Bob is able to extract cause only the legitimate reader knows x(i) and
the random number RA. In the third pass, Alice (i + (h +2)/2 )
acknowledges Bob by sending Fk(RB+RA) back. is able to generate k  i 
, and send c(i).
In this final pass, Alice is authenticated by Bob, After receiving c , the tag knows it comes from
(i)
since only Alice is able to restore RB with their the right reader. So the tag authenticates the
shared secret k. reader.
In the RFID system, mutual authentication
is very important. Without it, a reader and a 4. Cycle Comparison
tag could be out of synchronization for further Experiment
communication. Due to this reason, challenges
and responses between a reader and a tag have In this section, we provide results that compare
to keep changing in order to avoid traceability. the cycles of session keys from VB’s original
The XOR protocol is a 2-pass protocol. That is, XOR algorithm, and the XOR algorithm without
only the tag is authenticated by the reader and the bad shuffle. For a 128-bit key, there are 16
the reader is not authenticated by the tag. We symbols (0 ~ F). The total number of random
need add a third pass to make it become a mutual permutations is 16!×16!, which is a huge num-
authentication protocol as shown in Figure 3. ber. It is not practical to do an exhaustive test
We use the hopping to run XOR protocol, with our limited computing resources. Instead,
where we change the next session key index as we tested two short cases: 4-symbol (0 ~ 3) and
i+hopping_offset+2 (in stead of “+1” in Im- 8-symbol (0 ~ 7). This experiment provided
provement-II) in order to leave a middle per- us with the opportunity to compare these two
mutation for the acknowledge message c(i) of algorithms under the same conditions for a small
(i + (h +2)/2 )
the third pass. That is, c (i ) = x (i ) ⊕ k  i  permutation data set. It also provided empirical
, where hi is the hopping_offset, and (hi + 2) / 2
 proof that our improvement can significantly
reduce the risk of DFJ’s attack by increasing the
takes the greatest integer less than or equal to
difficulty or cost of carrying out DFJ’s attack.
(hi + 2) / 2 . We measure the difficulty of DFJ’s attack by
is prohibited.
Table 2. Cycle testing results for two XOR algorithms
16-bit key 48-bit key

Number of different initial keys 1,000 100
Number of session keys generated from each initial key 500 10,000
Shortest average cycle of the original XOR algorithm 4 32
Shortest average cycle of the XOR without bad shuffle 22 9,482
the number permutation cycles it takes for a hopping the runs, and authenticating mutually.
successful attack. By these improvements, the XOR protocol is
For the 4-symbol situation, each symbol greatly strengthened to resist the repeated keys
can be represented in two bits. The key consists and nibble attacks proposed by Defend, Fu, and
of two sets of those 4 symbols, and the key Juels. Our improvements to the XOR protocol
(and session key) length is 2×4×2, which is 16 do not introduce extra resource cost. The stor-
bits, or 2 bytes. In an ideal case, the number age resource needed for the XOR protocol is
of random permutations for concatenated two only 128-bit plus some temporary storage for
sets of 4-symbol is 4!×4! (= 576). permutation use. The improved protocol is
For the 8-symbol situation, each symbol can suitable for majority low-cost RFID system
be represented in three bits. The key consists application scenarios.
of two sets of those 8 symbols, and its length
is 3×8×2 bits, i.e., 6 bytes. In an ideal case,
the total number of random permutations for References
concatenated two sets of 8-symbol is 8!×8!,
which is equal to 1,625,702,400. The testing Avoine, G. (2005). Cryptography in Radio Fre-
results are given in Table 2. Shorter cycles quency Identification and Fair Exchange Protocols.
Unpublished PhD thesis, Swiss Federal Institute of
for the XOR without bad shuffle result from Technology.
biased distribution of symbols in the initial
keys (i.e. weak initial keys). For more details CASPIAN. (1999). Consumers Against Supermarket
Privacy Invasion and Numbering. Retrieved from
of the experiment, please see Zhang, Zhang
http://www.nocards.org/
and Wei (2009).
For the 48-bit session key situation, the Chatmon, C., Le, T., & Burmester, M. (2006). Secure
average cycle is 9,482. This is because we Anonymous RFID Authentication Protocols (Tech.
Rep. No. TR-060112). Tallahassee, FL: Florida
limit our runs to 10,000, which is less than State University.
8!×8!. Otherwise, the average should be much
large. Defend, B., Fu, K., & Juels, A. (2007). Cryptanalysis
We performed an experiment to stretch of two lightweight RFID authentication schemes.
In Proceedings of the International Workshop on
test the cycle with the initial key C3473FBB Pervasive Computing and Communication Security
8DB4C1E0 5F4C2D8B 2BA6BD98. It runs up (pp. 211-216).
to 200,000,000 session key without repeating.
Gilbert, H., Robshaw, M., & Sibert, H. (2005).
An active attack against HB+: a provably secure
lightweight authentication protocol. Retrieved from
5. Conclusion http://eprint.iacr.org/2005/237.pdf
In this paper, we identified the weaknesses in Juels, A. (2004). Minimalist cryptography for low-
the XOR authentication protocol proposed by cost RFID tags. In Proceedings of the International
Vajda and Buttyan. We made three improve- Conference on Security in Communication Networks
(pp. 149- 164).
ments to this protocol: removing bad shuffles,
is prohibited.
Juels, A., Pappu, R., & Parno, B. (2008). Unidirec- Sarma, S., Weis, S., & Engels, D. (2002). RFID
tional key distribution across time and space with systems and security and privacy implications. In
applications to RFID security. In Proceedings of the Proceedings of CHES 02 (LNCS 2523, pp. 454-469).
USENIX Security Symposium (pp. 75-90).
Vajda, I., & Buttyan, L. (2003). Lightweight au-
Juels, A., & Weis, S. (2005). Authenticating Pervasive thentication protocols for low-cost RFID tags. In
Devices with Human Protocols. In Proceedings of Proceedings of the 2nd Workshop on Security in
Crypto 2005 (LNCS 3621, pp. 293-308). Ubiquitous Computing (pp. 1-10).
Le, T., Burmester, M., & Medeiros, B. (2007). For- Zhang, X., Zhang, Z., & Wei, X. (2009). Enhance-
ward-secure RFID authentication and key exchange. ments to a lightweight RFID authentication protocol.
Retrieved from http://eprint.iacr.org/2007/051.pdf In Proceedings of the IEEE International Conference
on e-Business Engineering (pp. 454-459).
Li, T., & Deng, R. (2007). Vulnerability analysis
of EMAP: an efficient RFID mutual authentication
protocol. In Proceedings of the 2nd International
Conference on Availability, Reliability and Security
(pp. 238-245). Endnote
Morris, S. (1998). Magic Tricks, Card Shuffling and 1
“Knuth shuffle is to the identity permutation
Dynamic Computer Memories. Washington, DC: or any other any permutation, then go through
Mathematical Association of America. the positions 1 through n−1, and for each posi-
tion i swap the element currently there with
Peris-Lopez, P., Hernandez-Castro, J., Estevez- an arbitrarily chosen element from positions i
Tapiador, J., & Ribagorda, A. (2006). EMAP: An Ef- through n, inclusive. It’s easy to verify that any
ficient Mutual Authentication Protocol for Low-cost permutation of n elements will be produced by
RFID Tags. In Proceedings of the OTM Federated this algorithm with probability exactly 1/n!,
Conferences and Workshop: IS Workshop (LNCS thus yielding a uniform distribution over all
4277, pp. 352-361). such permutations.”
Xiaowen Zhang is an Assistant Professor at Department of Computer Science, College of Staten

Island / The City University of New York (CUNY), U.S.A. He received a PhD in electrical en-
gineering from Northern Jiaotong University, China, and a PhD in computer science from the
City University of New York, U.S.A. His research interests include cryptography, information
security and privacy, RFID, and wireless communication.
Zhanyang Zhang is an Associate Professor at Department of Computer Science, College of Staten

Island / CUNY, U.S.A. He received his PhD in Computer Science from the City University of
New York, U.S.A. His research interests cover wireless ad-hoc and sensor networks, underwater
acoustic networks and RFID. Prior join CUNY, he was a member of technical staff (MTS) at
Bell Labs/Lucent Technologies and worked on 3G wireless networks and data security.
Xinzhou Wei is an Associate Professor at Department of Electrical Engineering and Telecom-

munications Technology, New York City College of Technology / CUNY, U.S.A. He received his
Ph.D. in computer science from the City University of New York, U.S.A. His research interests
include public key cryptography, network security, digital signal processing, and image processing.
is prohibited.
Research of Supply Quality

Control and Optimization Under
Multi-Period Dynamic Game
Jun Hu, Zhejiang Gongshang University, China
Yulian Fei, Zhejiang Gongshang University, China
Ertian Hua, Zhejiang Gongshang University, China
Abstract
To control quality in supply chain, this paper presents multi-period, dynamic game models in principal-agent
theory, which are opposite to static, single period game models. The research comes from industrial practice
and the conclusions are more operational and feasible in theory. Finally, the research is applied into two
famous companies in different industries and shows good effectiveness.
Keywords: Dynamic Game, Game Models, Multi-period, Quality Control, Supply Chain Contract
1. Introduction managed and controlled through quality provi-

sions. Some researchers pay the role of incentive
From “Magdala Red Accident” in 2005 to to quality management and quality contract
“Sanlu Milkpower Accident” in 2008 and becomes one approach to control and manage
“OMP Accident” in 2009, there have being quality in supply chain. As illustrated, there
many food accidents since 2000. Control and are many academic and practical researches
management of quality in food supply chain has to quality management from view of incentive
been paid more and more attention by people. and restraint.
At present, quality management in supply chain Here, we should explain some definitions.
will threaten not only single company but also Firstly, there are two kinds of contracts: supply
industrial development. Pasternack (1995) set chain contract and supply chain quality contract.
forth quality management in supply chain. From So-called supply chain contract is meant tradi-
view of incentive and restraint mechanism, tional contract in supply chain, in which main
supply chain contract is new field in quality variables are price and quantity while quality
control and management, in which quality is is neglected or fixed. And supply chain quality
contract is a kind of supply chain contract, in
which main variables quality, price, quantity and
DOI: 10.4018/jal.2011010106 other related variables while quality interacts
is prohibited.
with other variables. Secondly, there are two contract arrangement in supply chain model
kinds of models: one is structural model and involved quality into the contract. The contract
another is economic and quantificational model model of price rebate and after-sale guarantee
or called game theory. Structural model depicts cost is constructed concerning quality of the
transaction process and information flow be- supplier, sampling policy of production and
tween supplier and buyer, in which information the finished product quality. The strategy and
of variables such as price, volume and quality contract of quality management is studied under
are passed down to next and how these variables cooperation and non-cooperation circumstance.
change. Economic and quantificational model Baiman, Fisher and Rajan (2000) studied that
is called the game theory, which includes many the relation among quality, cost and information,
variables, formula, algorithm, mathematics and and how to coordinate the quality of supplier,
constructed based on principal-agent theory. sampling inspection of purchaser and penalty
There have been many supply chain quality of bad quality between the risk-neutral supplier
contract models. For example, there are some and the risk-neutral purchaser. Starbird (2000)
parameters such as price, quantity, revenue, designs optimal contract arrangement in supply
quality level, sampling level, penalty and chain model involving quality into the contract
incentive in these models. Although there are as to different sampling policy. Reyniers and
some achievements in the contract research, Tapiero (1995) designed the contract model
these models have some disadvantages such of price rebate and after-sale guarantee cost
as static, single period, simple structure and concerning quality of supplier, sampling policy
lack of operation. So, there are many things of production and the finished product quality.
to manage supply chain quality in the future. Agrawal (2002) considered the choice of con-
tract between an entrepreneur and a worker:
in a situation where the worker cannot readily
2. Literature Review observe the outcome (such as profit or output) of
their joint effort, while the entrepreneur cannot
Contracts and quality contracts in supply chain
easily observe the effort supplied by the worker.
have been studied by overseas and domestic
On the basis of analyzing cost in supply chain,
researchers for long time.
Rahim (2000) studied the quality cost of supply
Corbett, Zhou, and Tang (2004) found
chain based on the principal-agent theory under
that more suppliers get information about buy-
asymmetric information. Agrawal (2002) dem-
ers’ cost structure, higher the value between
onstrated that the game model between supplier
supplier and purchaser become. Gurnani and
and manufacturer in two-echelon supply chain
Erkoc (2008) studied the distribution channel
there are suitable incentive and penalty to meet
on the condition that demand is influenced by
first-best. It also analyses the relation among
supplier’s quality and retailer’s promotion.
quality, late delivery and penalty.
When the cost of promotion is private, there
Under asymmetric information assump-
are three types of contract: wholesale price
tion, Huang (2003) studied control of quality
contract, fixed fee contract under marginal cost
and the quality-cost model is built. The model
and franchise contract. Manufacturers have dif-
analyses the principal-agent relation under
ferent choice and costs under three contracts.
asymmetrical information. Zhang (2003) put
Starbird (2001) studied that the relation among
forwards the game model of quality coordina-
quality, quality cost and information and how
tion in two-echelon cooperation supply chain
to coordinate quality of supplier, sampling
consisting of logistics provider and integrator.
inspection of purchaser and penalty of bad
On the ground of two-echelon supply chain,
quality between the risk-neutral supplier and
Li (2005) discussed two types of Stalkelberg
risk-neutral purchaser. Reyniers (1995) studied
game between supplier and retailer, and gave
that as to different sampling policy, the optimal
the Nash-equilibrium.
is prohibited.
In summary, there are more and more Through investigation and analysis, we study
plentiful researches in supply chain quality industrial quality management in supply chain
contract. Based on sampling inspection mecha- from the view of practice. The objects include
nism, quality inspection, penalty and incentive, key environment, technology, influencing fac-
charge to quality lose are, quality management is tors and effects. Especially, we study industrial
coordinated through quality contract. But, those practice under different industries, product
achievements have some disadvantages, such market structure, attitude to risk and electronic
as single structure, ignorance to other factors commerce. Through these works, factors and
of cooperation and standards. characteristics, which influence quality control
in supply chain, are identified.
3. Research Body
(2) Structural model of supply chain quality
3.1 Research Clue contract.
As stated above, the previous researches in According to above analysis, structural

supply chain quality contract have been made model of supply chain quality contract is put
achievements but have some disadvantages forward, which is used to build quantificational
including single tool (mainly sampling), static, model including all hypothesis. It explains regu-
simple model (two period), ignoring electronic lation and essence of quality contract mecha-
commerce and product market structure, partici- nism in supply chain, based on system theory.
pants’ attitude to risk and new means of supply
chain quality management. So, the paper will (3) The game model of quality management
put forward dynamic, multi-period model of in supply chain.
quality control and optimization in supply chain
under different environment after it screens and Followed on the step 1 and 2, we add up to
analyzes all characteristic of factors influenc- two new variables of quality and time (q, t) and
ing quality. new controlling variables such as cooperation in
Its clue is: firstly to find all factors which supply quality contract models. Therefore, any
determine quality in supply chain and induce the dynamic, multi-period models can be designed
characteristics in all factors. Secondly, it builds under different environments.
structural model and quantificational model For example, there are some game models
(adding some variables such as cooperation and with different stages or periods: single period
time) according to process of quality manage- and single stage, single period and multi-stages,
ment in supply chain and influencing factors. multi-periods and multi-stages. There are some
Then, economic and quantificational models game models with different attitudes to risk: risk
of quality control and optimization, which are preference, risk averse and risk neutral. There
based on dynamic and multi-period, are set up are some game models with different means:
under different environments. After building option, revenue sharing, quantity discount and
all models, solutions can be obtained by use buyback contracts. There are some game models
of backward induction method and multi-level with different reputation: reputation signal and
programming. Finally, all conclusions of models trust. There are some game models with different
are accepted by some typical companies and organization structure: traditional environment
the models are modified. (many supplier vs. single manufacturer, single
supplier vs. many manufacturers) and elec-
3.2 Research Content
tronic commerce. There are some game models
(1) Acquisition of factors and characteristics with different market structure: monopolistic
influencing quality control in supply chain. competition, oligopoly, perfect monopoly and
perfect competition.
is prohibited.
This part studies supply quality contract traditional supply contract (such as Newsboys
in theory and is close to industrial practice. model). If adding some variables such as time
The method of research is the combination of and quality, game models of supply chain qual-
theory and practice. ity will respond to above change. What are the
quantificational models under different environ-
(4) Solution and data analysis. ment according to structural models? And what
are these quantificational models hypothesis?
Next to the above step 3, the paper applies
backward induction method and multi-level (3) Building quality game model in supply
programming to obtain solutions. At the same chain
time, it will analyze the effect and feasibility
of solution. After obtaining structural models and
quantificational models in supply chain, what
(5) Application are quality game models under different en-
vironment condition such as product market
The paper takes electronic commerce structure, industrial attitude to risk, competition
Alibaba and traditional company-Shanghai structure and electronic commerce? How are the
VW as example and probes into their quality game models built after considering industrial
management in supply chain. Then, we look quality practice (such as cooperation and time)?
on the effect after they introduce the scheme of
all models. Finally, industrial application will (4) Solution and data analysis
respond to the theory models.
Multi-period models are difficult to get
3.3 Key Issues solution. Then, the next thing is how to select
algorithm suitable to all models and how to
There are many issues in the research, and the value effect and feasibility of solutions.
key issues include:
(5) Example and Model modification
(1) Discovery of factor and characteristic
influencing quality control in supply chain
The research needs to be used in industrial
companies. Then, we will apply the research
In order to set up dynamic, multi-period into industrial companies and the theory models
game structural model of quality control in will be modified according to the companies’
supply chain, we should know that: How and practice.
which factors influence quality control in supply
chain? What characteristic are these factors and
process of quality control? How do industrial 4. Research Scheme and
companies filter these factors and eliminate the Feasibility Analysis
noise from data collected. All of above works
is the basis and hypothesis of structural model. 4.1 Basic Framework
The basic framework of the research is seen

(2) Acquisition of structural model and quanti-
in Figure 1.
ficational model of quality in supply chain
Figure 1 shows the framework of quality
control and optimization research based on
Supply chain quality multi-period, dynamic multi-period, dynamic game. It includes the
game models differ with structural models in body, clue and method of research.
is prohibited.
Figure 1. Framework of quality control and optimization research based on multi-period, dy-
namic game
4.2 Technology Route We will study the stability and the filtration
on basis of analyzing key factors and charac-
teristics. Then, structural models of quality
(1) Step 1: Analysis of influencing factors and control in supply chain are extracted by use of
characteristics of quality control in supply generalization and induction. Structural models
chain. and quantificational models are set up in system
and dynamic theory.
The research method of step 1 is mainly based
on investigation. After gathering all data widely, (3) Step 3: The game models of quality control
we will study quality management practices in supply chain being constructed.
in industrial companies, such as regulation,
process, means and effect. The emphasis is On basis on quantificational models, we
to factors and tools of quality control under construct many game models under different
different environment. Then, key factor and environment based on principal-agent theory,
characteristics is obtained by use of statistics. mathematics and system theory, which add
some variables such as time, quality and tools
(2) Step 2: Acquisition of structural model of (cooperation, C and standards, S) on Newsboy
quality control in supply chain. model.
is prohibited.
(4) Step 4: Model solution and data analysis. such as time, which exist loop system of quality
control in supply chain.
The solution is obtained by use of backward
induction method and multi-period program- (3) Supply contract model under different
ming considering the characteristics of multi- environment being built and optimization.
period. The controlling variables of quality
management in supply chain are extracted .The Quality control practice in supply chain
effect and feasibility of the research achieve- under different environments is studied and
ments are demonstrated (Matlab platform). contract models are constructed accordingly.
Solution of all contract models are obtain by use
(5) Step 5: Example and model modification of backward induction method and multi-level
programming. The effectiveness and feasibility
Through quality practice of supply chain of solution analyzed.
in traditional company, shanghai VW and new
industry, electronic commerce giant, Alibaba, (4) Theory combining with practice
the data of quality management in companies
are studied and analyzed based on our research The research is good at operation because
through Matlab. Finally, models are modi- the models include many practice variables,
fication through demonstration analysis and which exist in quality management of industrial
contract models will be optimized. companies. The research can upgrade quality
management practice in supply chain. Finally,
the models can be modified and rectified while
5. Characteristics and theory and practice both develop deeply.
Innovation of Research
There are some innovations in the research: 6. Example
(1) Influencing factors and characteristics of In a food supply chain, a manufacturer sells food
quality management in supply chain being to a retailer. The manufacturer decides its quality
filtrated. prevention, which can be hidden or observable.
The manufacturer signs the contract with qual-
Through investigation and analysis into ity provisions, in which there are rewards and
supply chain practice, influencing factors and penalties of internal and external loss. After
characteristics are obtained, which shows the that, the retailer decides its quality valuation
rules and essence of quality management in and quantity regarding the need in the market.
supply chain. Through mining from quality data in supply
chain, we find that many variables will change
(2) Structural model and quantificational dynamically in the multi-period. When the
model of quality control in supply chain transaction is one time between the manufac-
being built suitable to industrial practice. turer and the retailer, there is a combination of
quality prevention and valuation between the
manufacturer and the retailer. But when the
The research is based on traditional supply
transaction is many times in multi-period, and
contract model (Newsboy model) and different
we suppose that every good transaction can
static, single period supply quality contract.
bring both parties the reputation revenue, the
The structural model is multi-period and the
quality valuation of the retail will decrease, that
quantificational models add many variables
means its cost will decrease, and its revenue will
is prohibited.
Figure 2. The retailer’s quality prevention level, its revenue and the total revenue in supply chain
Figure 3. The penalties of internal and external loss, the retailer’s revenue, the manufacturer’s
revenue and the total revenue in supply chain
increase under certain other conditions (Figure influencing quality are mined from practice data
2). And the penalties of internal and external loss in supply chain. The structural and game models
can decrease and the revenues of the manufac- under different environments are built based
turer, the retailer and the total supply chain will the principal agent. Solutions are obtained by
increase under certain other conditions when use of backwards induction method and multi-
good transaction increase (Figure 3). level programming. Through the examples,
we can know that good transaction will result
in long-term reputation in both parties. And
7. Conclusion the cost of quality valuation will decrease and
every party’s revenue will increase in supply
The paper studies quality management in supply
chain due to dynamic, multi-period game. So,
chain in dynamic, multi-period. Many factors
we can find that the total supply chain will
is prohibited.
benefit from quality management of dynamic, Gurnani, H., & Erkoc, M. (2008). Supply Con-
multi-period cooperation. tracts in Manufacturer-Retailer Interactions with
Manufacturer Quality and Retailer Effort-Induced
Demand. Naval Research Logistics, 55(3), 200–217.
doi:10.1002/nav.20277
Acknowledgments
Li, L.-J., Huang, X.-Y., & Zhuang, X.-T. (2005).
The paper is sponsored We thanks support of Strategy of quality control in supply chain under
Ministry of Education, Humanities and So- double moral hazard condition. Journal of Manage-
cial Science Foundation Project (09YJC630 ment Sciences in China, 8(1), 42–48.
-200) and 973 Pre-research Project (2009CB Lim, W. S. (2001). Producer-Supplier Contracts
-326204). The author thanks them heartedly for with Incomplete Information. Management Science,
supporting the paper funds. I thanks to people 47(5), 709–715. doi:10.1287/mnsc.47.5.709.10479
who give constructive advice for the paper. Monahan, J. P. (1984). A quantitative discount Pric-
ing model to increase vendor Profits. Management
Science, 30, 720–726. doi:10.1287/mnsc.30.6.720
Reference Pasternack, B. A. (1985). Optimal Pricing and returns
Policies for Perishable commodities. Marketing Sci-
Agrawal, P. (2002). Double moral hazard, monitoring, ence, 4, 166–176. doi:10.1287/mksc.4.2.166
and the nature of contracts. Journal of Economics,
75(1), 33–61. doi:10.1007/s007120200002 Pasternack, B. A. (1999). Using revenue sharing to
achieve channel coordination for a newsboy type
Ahuja, R. K., Huang, W., Romeijn, H. E., & Romero inventory model. Fullerton, CA: California State
Morales, D. (2007). A Heuristic Approach to the University, Fullerton.
Multi-Period Single-Sourcing Problem with Product.
INFORMS Journal on Computing, 19(1), 14–26. Rahim, M. A., Kabadi, S. N., & Barnerjee, P. K.
doi:10.1287/ijoc.1050.0151 (2000). A single-period perishable inventory model
where deterioration begins at a random point in time.
Anupindi, R., & Bassok, Y. (1999). Supply Contracts International Journal of Systems Science, 31(1),
with quantity commitments and stochastic demand . 131–136. doi:10.1080/002077200291532
In Tayur, S., Magazine, M., & Ganeshan, R. (Eds.),
Quantitative Models for Supply Chain Management Reyniers, D., & Tapiero, C. (1995). The delivery
(pp. 197–232). Dordrecht, The Netherlands: Kluwer and control of quality in supplier-producer contracts.
Academic Publishers. Management Science, 41(1), 581–589. doi:10.1287/
mnsc.41.10.1581
Baiman, S., Fischer, P. E., & Rajan, M. V. (2000).
Information, contracting, and quality costs. Man- Starbird, S. (2001). Penalties, rewards, and inspec-
agement Science, 46(6), 776–789. doi:10.1287/ tion: provisions for quality in supply chain contracts.
mnsc.46.6.776.11939 The Journal of the Operational Research Society,
52(1), 109–115. doi:10.1057/palgrave.jors.2601048
Cachon, G. P. (2002). The allocation inventory risk
and advanced purchase discounts in a supply chain. Zhang, C.-H., & Huang, X.-Y. (2003). Supply Chain
Philadelphia, PA: University of Pennsylvania. Quality Prevention Decision under Asymmetric In-
formation. System Engineering Theory and Practice,
Chen, F., & Federgruen, A. (2000). Mean-vanance 12, 95–100.
analysis of basic inventory models. New York, NY:
Columbia University.
Corbett, C. J., Zhou, D., & Tang, C. S. (2004). Design-
ing Supply Contracts: Contract Type and Information
Asymmetry. Management Science, 50(4), 550–560.
doi:10.1287/mnsc.1030.0173
is prohibited.
Jun Hu is a lecturer at the College of Computer Science & Information Engineering, Zhejiang
Gongshang University, China. He received his PhD in industrial engineering from Tongji
University, China. His primary research interests are in strategy management, supply chain &
logistics management and management theory.
Yulian Fei is a associate professor at the College of Computer Science & Information Engineer-
ing, Zhejiang Gongshang University, China. She received his PhD in management science and
engineering from Zhejiang gongshang University, China. Her primary research interests are in
information management and dataming.
Ertian Hua is a professor at the College of Computer Science & Information Engineering,
Zhejiang Gongshang University, China. He received his PhD in mechanical engineering from
Shanghai University, China. His primary research interests are in product innovation manage-
ment and mechanical theory.
is prohibited.
International Journal of Applied Logistics
An offi cial publication of the Information Resources Management Association
Mission
The mission of the International Journal of Applied Logistics (IJAL) is to provide a prestigious forum
of innovative findings for applied research and development in logistics and supply chain management.
Providing researchers, practitioners, and academicians with insight into a wide range of topics, this journal
disseminates the theories and technological progressions in applied research, advances in logistics and
supply chains, and industry experiences in the adoption of developed and emerging theories and technolo-
gies to enhance competitiveness towards enabling efficient and sustainable knowledge-driven economy.
Subscription Information
IJAL is published quarterly: January-March; April-June; July-September; October-December by IGI
Global. Full subscription information may be found at www.igi-global.com/IJAL. The journal is available
in print and electronic formats. Institutions that subscribe to IGI journals get free electronic access to the
journal. Institutions may also choose an electronic-only subscription to IGI journals.
Institutions may also purchase a site license providing access to the full IGI Global journal collection fea-
turing more than 100 topical journals in information/computer science and technology applied to business
& public administration, engineering, education, medical & healthcare, and social science. For informa-
tion visit www.infosci-journals.com or contact IGI at eresources@igi-global.com.
Copies of Articles
Copies of individual articles are available for purchase at InfoSci-On-Demand (www.infosci-on-demand.
com), an aggregated database consisting of more than 31,000 research articles written by prominent ex-
perts and scholars in the field of information/computer science and technology applied to business &
public administration, engineering, education, medical & healthcare, and social science.
Copyright
The International Journal of Applied Logistics (ISSN 1947-9573; eISSN 1947-9581). Copyright © 2011
IGI Global. All rights, including translation into other languages reserved by the publisher. No part of
this journal may be reproduced or used in any form or by any means without written permission from the
publisher, except for noncommercial, educational use including classroom teaching purposes. Product
or company names used in this journal are for identification purposes only. Inclusion of the names of the
products or companies does not indicate a claim of ownership by IGI Global of the trademark or registered
trademark. The views expressed in this journal are those of the authors but not necessarily of IGI Global.
Correspondence and questions:
Editorial: Zongwei Luo Subscriber Info: IGI Global

Editor-in-Chief Customer Service
International Journal of Applied Logistics 701 E Chocolate Avenue
Email: eic.jal@gmail.com Hershey PA 17033-1240, USA
Tel: 717/533-8845 x100
E-mail: cust@igi-global.com
The International Journal of Applied Logistics is currently listed or indexed in: DBLP;
Google Scholar; MediaFinder; The Standard Periodical Directory; Ulrich's Periodicals Directory

Building An Expert System For Maritime Container Security Risk Management PDF

Загружено:

Сведения о документе

Оригинальное название

Авторское право

Доступные форматы

Поделиться этим документом

Поделиться или встроить документ

Параметры публикации

Этот документ был вам полезен?

Это неприемлемый материал?

Авторское право:

Доступные форматы

Building An Expert System For Maritime Container Security Risk Management PDF

Загружено:

Авторское право:

Доступные форматы

IJAL Editorial Board

Editor-in-Chief: Zongwei Luo, U. of Hong Kong, China

Associate Editors: Edgar E. Blanco, Massachusetts Institute of Technology, USA

IGI Editorial: Heather A. Probst, Director of Journal Publications

International Editorial Review Board:

IGIP IGI Publishing

International Journal of Applied Logistics

ToPicS oF iNTEREST (iNclUDE bUT aRE NoT limiTED To):

All submissions should be e-mailed to:

Ideas for Special theme Issues may be submitted to the Editor-in-chief.

Please recommend this publication to your librarian. For a convenient

35 Building an Expert-System for Maritime Container Security Risk Management

57 The 2008 Survey of Indian Third-Party Logistics (3PL) Service Providers:

75 An Improved Lightweight RFID Authentication Protocol

84 Research of Supply Quality Control and Optimization Under Multi-Period

Introducing Quality of Service

Keywords: Customer-Centric Supply Chain, Information and Communication Technology Support,

Introduction and small-sized companies managed to live

Correctness implies faultlessness and precise-

In general, ecology studies the relationships Food Growth

Figure 2. Linear and customer-centric adaptable food-growth supply chains

Figure 3. Linear and customer-centric adaptable production supply chains

Table 1. Increased value categories with the corresponding QoS criteria

Improved customer satisfaction (timeliness, correctness, dependability, liability)

Figure 4. QoS probe placement in the adaptable supply chain model

to constrain deviations from reference values

Introduction models which demand a better service (Rhoades

Literature Review This section explores the literature regard-

Figure 1. The three airline development components

a. For all airlines, after labor, jet fuel is the

Suhaiza Hanim Mohamad Zailani is an Associate Professor of Operations Management at the

Introduction aware of a new type of risk, still man-made but

human movements through stowaways • Adopted in 2003, the SAFE Framework of

In seaports, a large variety of products is in Technology-Based

Associated Costs ply chain performance as important as cost or

Method Category Description

used in (transportation) risk management. In the KBS as Applied to

relational architecture, thus maximizing the transportation risk management expertise

Table 2. HACCP application

Risk Point Scenario Risk Indicator Preventive actions

Table 3. Examples of risky situations

Situation CLIPS implementation

Figure 1. UML class diagram

Figure 2. Response to a risky situation

Figure 3. Add a situation

Jaouad Boukachour is an Associate Professor at the Department of Computer Sciences, Univer-

Charles H. Fredouet, MBA, Ph.D, is a professor of supply-chain management at Le Havre Uni-

The 2008 Survey of Indian

Introduction and chain complexities, curtail costs and overheads,

logistics professionals remain a contentious is- transportation infrastructure, long turnaround

employees, 25.64% respondents have 1000 Services Offered and

highlighted by the respondents as threats to the respondents, followed by “Direct Investments”

Perfor- All clusters (41 responses) Cluster 1 (30 responses)

Cargo Breadth of services + 0.014 Integration of

ROI Focus on industries - 0.029 - NA NA

Reducing Internationalization + 0.038 Skilled man-

Breadth of services + 0.034

Table 2. Significant dependent and independent variables in canonical correlation analysis

All clusters (41 responses) Cluster 1 (30 responses)

Subrata Mitra is a Professor of Operations Management at the Indian Institute of Management

Table A1. Major services and % of respondents offering them

Service % of resp. Service % of resp. Service % of resp.

Industry % of resp. Industry % of resp. Industry % of resp.

1. Name of the company: __________________ 2. Location of HQ: