Expert Systems with Applications 29 (2005) 431–436

www.elsevier.com/locate/eswa

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

Wang Ying*, Sang Dayong
Tsinghua University-Hongta Group Postdoctoral Station, Yunnan, 653100 China

Abstract

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

Keywords: Third party logistics (3PL); E-commerce; Business process reengineering; Multi-agent

1. Introduction chain. To increase the flow rate of goods, enterprise are

looking for more professional logistics service vendors in
The tendency of the global economic development succession. 3PL is selected in place of the private logistics
makes the competition of the supply chains be the main systems of enterprises to take charge of part or whole of the
and essential one between two individual enterprises. Only supply chain logistics for it is informational, professional,
when its whole supply chain keeps high competitive could networked and systemized. Therefore, the efficiency of the
an enterprise survive for a long time. The rapid development supply chain logistics is determined by the efficiency of the
of e-commerce makes it possible to integrate and improve 3PL’s logistics service. On the other hand, the logistic
the competitive advantages of the whole supply chain customer needs to know more, various information of the
because the openness, globalization, low-cost and high- logistics since there exists venture of route as well as the
efficiency of e-commerce extend the internal information ownership of the goods and the goods itself are separated.
network of an enterprise and enable the business to business All of these bring several new requirements both on the 3PL
(B2B) e-business activities among several enterprises. The service and on its logistics business process. How can a 3PL
involved enterprises are connected to be a larger and more provide customized services according to different customer
interactive supply chain network system in which exist four requirements and meanwhile its logistics process could be
flows, i.e. flow of goods, flow of information, flow of stable enough for long period of development is the main
financing and flow of trading. Integration of four flows is researching topic of this paper.
one of the characteristics of e-commerce supply chain even
though they are running in different velocities. For the
velocity of goods flow is far slower than that of other three
ones, the goods flow has been the bottleneck of the supply 2. Characteristics of 3PL in e-commerce environment

* 3PL vendor is defined as a special middleman of

Supported by National Natural Science Foundation of China
(59990470-4). logistics in channel who provides other enterprises with
* Corresponding author. Tel./fax: C86 1082135511. whole or part logistics business service, from generic
E-mail address: yingwangsang@yahoo.com (W. Ying). transportation to design, execute and operation whole
0957-4174/$ - see front matter q 2005 Published by Elsevier Ltd. system of distribution and logistics in certain period by
doi:10.1016/j.eswa.2005.04.039 contract form (Duo Zhang, 2000).
432 W. Ying, S. Dayong / Expert Systems with Applications 29 (2005) 431–436

A 3PL vendor is a professional logistics company getting i.e. shared goals and objectives, trust, mutual dependence,
profit by taking charge of part or whole logistics in the concern for others profitability, open lines of communi-
supply chain of a focal enterprise. Nodes including supply cation, mutual commitment to customer satisfaction (Daniel
chain are joined together by business process (Lambert and H. McQuiston, 2001). As the appurtenant of the supply
Cooper, 2000). As non-supply chain member nodes, 3PL chain, the 3PL must regard the target of the supply chain
connect their conjoint nodes with logistics agent business members, the maximization of the customers’ interest, as
services such as customer relation management (CRM), one of its main goals and takes its tenet as helping the
order fulfillment, structural network design, stock manage- customers realize their values-added. Therefore, whether
ment, transportation management, returns management, etc. the logistics business process or the management of the 3PL
The 3PL appeared in advance of supply chain manage- vender should be adapted to the needs of business process
ment and developed firstly within a very slow speed. In spite and management of the supply chain members. From the
of its history of several decades, up to now 3PL still 3PL vendor’s view, all the business processes of the
occupies a rather low fraction of logistics markets. Even in logistics customers (the focal enterprise) are different and
U.S.A, 3PL only contributes to 6% of related industries it must build a dynamic logistics business process to make it
(Jian-me, 1999). The 3PL is in the initial stage of be able to be integrated with various supply chain business
development in China and according to the interview of processes.
China Storage Association, only 5.9% of commerce
enterprises and 18% of production enterprises outsource 3.1. Reengineering of logistics business process
their logistics to 3PL vendors while the 3PL vendors haven’t
taken part in inner production logistics business of the The most important steps in the inner 3PL logistics
production enterprises (Shao-ji Shen, 2000). business process include management of customer services,
At the same time, the popularization of supply chain product storage and product transportation. Compared with
management provides a good developing environment and a the supply chain business process, 3PL logistics business
huge required market for 3PL industry. In the fierce global process has fewer and more stable customers and no
competition an enterprise is faced with a buyer’s market supplier involved. The core competition ability of a 3PL
which is ever rapid changing and difficult to be forecasted. vendor is its ability of integrated services to help its
The consumers are also becoming more and more dominant customers to optimize their logistics management strategies,
in presenting their personalized and customized build up and operate their logistics systems and even
requirements. manage their whole distribution systems. Only by providing
Internet-based collaboration used in e-commerce enables customized logistics services to various customers as an
the integration of logistics flow, financing flow, information agency, a 3PL vendor could establish a long-term union
flow, workflow and value-added flow. With the utilization relationship with its customers and enhance it continuously.
of e-commerce, the 3PL company could frequently Therefore, logistics agency allowing customization is an
reengineer its logistics business process flow and thus available 3PL mode suitable for being integrated with
improve the customer responding ability and service supply chains.
quality. The focal enterprise outsourcing its logistics to In the running of a supply chain, the 3PL vendor is
3PL will decrease its logistics cost and the whole supply charged with several logistics activities in procurement,
chain product stock and therefore, has more ability to transportation and storage of raw materials and machining,
accommodate the market’s variation. Developing and packaging and delivering of products. 3PL should take the
improving of e-commerce based 3PL will turn the focal advantage of its professional logistics ability and reengineer
enterprises’ logistics into a socialized, professional one. The above logistics activities so that to be able to deliver given
professional logistics management of 3PL realizes the fast products to the receiver in a certain period and minimize the
moving of products among valid supply chains and shortens logistics cost as well. 3PL will connect the suppliers, the
both the distances from the producers to the consumers and manufacturers and the distributors in supply chains and
from the supplying markets to the requiring markets. The provide the substance movement and logistics information
3PL companies and all the supply chain node enterprises flow. The logistics value-added services are realized by the
will win for the improvement of the whole supply chain changes of the products’ time and value states.
efficiency and the decreasing of its cost. Available 3PL logistics business processes suitable for
supply chain management include processes of customer
relation management, customer service management, cus-
3. Integration of 3PL with the supply chain process tomer order fulfillment, structural logistics network design,
stock management, transportation management, returns
Being an associating node in a supply chain, 3PL vendor management, etc.
has a consignment-agency relationship with supply chain
member enterprises. The building and maintenance of this (1) Customer relation management. Its main purpose is to
relationship depends upon the realization of six core values, recognize the core customers and customer groups.
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The level of outstanding achievement provided to the according to the dynamic change of the supply chain and
core customers is demonstrated in detail by products thus the chain’s competition ability is also enhanced.
and services protocols. A customer service team will
work together with the customer to find the source of 3.2. Customized logistics information services
customer requirement variation. The actual level of
customer service will also be evaluated by a service To realize the integration of the whole supply chain
performance analysis system.
business process, the logistics information provided by the
(2) Customer service management. It provides the custo-
3PL vendor should be able to meet the information needs of
mers with real time information from a unique source,
the supply chain management system. The logistics
e.g. information about the consigning date of the
information services are also the preconditions for the
products, the current states of the products including
3PL vendor to achieve its concrete target, i.e. delivering the
their location and completeness, the arriving date of the
right products commonly at a certain quality level at a right
products, etc.
(3) Customer order fulfillment. It tries to increase the time and a right place. An e-commerce based 3PL vendor
fulfillment rate of customer orders to meet the utilizes the Internet as its data interchange path and send the
customer’s needs better. The key problems are how to logistics information concerned by the user. All the
optimize the order fulfilling process, decrease the total interaction between the customer and the 3PL vendor is
logistics cost of the customer and seamlessly integrate conducted in a call center or a customer service center. The
its process with the whole supply chain. logistics information includes that of the states of the
(4) Structural logistics network design. The customer products on the way, e.g. their names, quantity, destination,
allocation strategy and the location of the logistics current location, next location, completeness, etc. Customer
center are determined after several different logistics could inform the receiver on time or even change the
network topologies having been compared and the logistics order at any time if necessary.
influence of the mediating storage and transportation on The barcode techniques, database techniques, electronic
the logistics cost and delivery period is analyzed. ordering system (EOS) and the electronic data interchange
(5) Stock management. The transferred products and the (EDI) techniques are used by the 3PL e-commerce system to
destined ones are distinguished to meet the requirement collect and store the logistics data persistently, process the
of the products and services protocol. Both the expected logistics information automatically, transform the logistics
and unexpected policies are evaluated by a performance information in standardized form and real time and response
system and the relative decision parameters are to the customer’s requirement quickly. The e-commerce
optimized as well. system of the 3PL vendor could provide the information
(6) Transportation management. Its task is to arrange the services to various customers in different areas and under
schedule of transportation, manage the motorcade and different communication conditions for it uses browser/cli-
the vehicles, optimize the frequency of transportation ent (B/S) architecture and distributed data collecting and
and select the transporting route, etc. central data managing strategy. Furthermore, the e-com-
(7) Returns management. The opportunity of productivity merce system or the customer service center (CSC) could
improving and the break points of the focal enterprise exchange logistics information with the supply chain
could be recognized when the returns is effectively management system (SCMS) in real time via an EDI
managed and therefore the focal enterprise’s lasting component and meanwhile keeps the independence of the
competition ability is also available. SCMS, the CSC and the inner logistics management system
(ILMS) of the 3PL vendor. The non-functional requirement
The above logistics processes could be classified into two
of security of the customer or the SCMS is met by this
styles, i.e. customer-faced processes and profit-faced ones.
Customer relation management, customer service manage- independence of several systems. The logistics information
ment and customer order fulfillment are customer-faced services provided by the CSC are listed in Fig. 1 where the
while structural logistics network design, stock manage- relationships between the customers or the SCMSs and that
ment, transportation management and returns management between the CSC and the ILMS of the 3PL vendor are also
are profit-faced. The customer-faced process varies greatly represented.
according to the individual customer’s requirement whereas Supply chain management could transfer the market
the profit-faced one is relatively more stable. A 3PL vendor needs information from the end consumers to the raw
should customize the customer-faced processes and com- material suppliers. 3PL vendor sends the logistics infor-
pose all the customer-faced and the profit-faced processes to mation precisely to the supply chain members in time and
provide individual logistics services to a customer. The enable them to eliminate the unstable factor in the market
profit of the 3PL vendor is maximized when and only when needs so that all the chain members would decrease their
the value-added logistics services are provided to the stock and improve the precision of market forecasting and
customer. Finally, the logistics process is reengineered manufacturing planning.
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Customer Customer Customer correlated aspects, i.e. intelligent agent, multi-agent system
(an SCMS) (an SCMS) (an SCMS) and agent-faced programming (Liu et al., 2000).
According to Wooldridge et al. (Wooldridge and
Internet
Jennings, 1994), an agent has a weak notion and a stronger
notion by different usage. The weak notion of an agent is
EDI / XML
that an agent is thus as a kind of UNIX-like software
CSC process, which exhibits the four fundamental properties
such as autonomy, social ability, reactivity, pro-activeness.
Logistic Information Services The stronger notion of an agent is that an agent is to be a
Informing of consignment (EOS)
States of products on the way computer system that, in addition to having the properties
Destination of products identified in the weak notion, is either conceptualized or
Current transporting station implemented using concepts that are more usually applied
Next transporting station
Logistics order variation to humans. Other attributes of agency include mobility,
Check result of products received veracity, benevolence, rationality, etc.
Delivering information From the systematic view, an agent is an open,
Basic material (introduction of 3PL vendor,
customers / services protocol, etc.) dynamically self-adapted system which, driven by the
system’s object, modifies its structure to accommodate to
the changes of the outer environment and evolves the
Fig. 1. Logistics information services provided by 3PL vendor. system itself. The four fundamental properties of an agent
make it show some intelligence, agility, steadiness and
3.3. Establishment of dynamic union of multiple logistics interoperability. In a multi-agent system, intelligent agents
companies operate each other through conferring and collaborating as
correlative subsystems. Multi-agent systems are especially
On account of the limitation of its resources and location, suitable for dealing with complex, collaborative and hard to
a 3PL vendor often needs to search for other logistics be forecasted problems.
companies as its collaboration partners dynamically when it
operates an actual logistics system. This sort of dynamic 4.2. Intelligent agents in the 3PL system
union could decrease the logistics cost effectively. There
exist several problems in building a dynamic union, e.g. that The 3PL vendor provides logistics services for supply
of interest allocation, responsibilities and constraints, chain members according to their requests and keeps a
collaborating mechanism and credit system between each incompact and independent relationship with the customers.
other. This is a game problem and the solution could be The logistics business process of the 3PL is varying
obtained only after game for many times. A 3PL vendor dynamically due to the movement of logistics and brings
having received a logistics order may look for union about more uncertainty and risks. More reactive and
members in a loaning or deducting a certain percentage of autonomic 3PL logistics services are required to avoid
profit forms. All union members collaborate and share their these uncertainty and risks. On the other hand, as an
resources through the EDI among the several individual e- independent entity, 3PL vendors should obtain the maxi-
commerce systems of themselves. The performance of the mum profit while providing helps and services to supply
union partners is recorded in detail and thus the 3PL vendor chain members. Therefore, the 3PL vendor will utilize all
could evaluate the partners and build up its prepared union the resources available to fulfill the logistics orders and
resource repository consisting of other logistics companies meanwhile according to the feedback of its own system,
once collaborated and qualified. To provide a consistent adjust its own business process to accommodate to the
logistics service to a customer, the 3PL should establish a complex and ever changing environment and keep its core
logistics service teamwork or a virtual private logistics competition ability.
(VPL) subsystem for each customer which might include An agent itself is a commune and its four fundamental
many resources from dynamic union partners. (Fig. 1). properties, i.e. autonomy, social ability, reactivity, pro-
activeness rightly meet the needs of the dynamic logistics
process of a 3PL vendor. A 3PL system could be regarded as
4. A 3PL system with multi-agents a multi-agent system in which each agent takes one or
several responsibilities of the system and collaborates with
4.1. Analysis of the characteristics of intelligent agents other agents as well.

The theory of agents came of the researches on 4.3. Structural analysis of the multi-agent 3PL system
distributed artificial intelligence (DAI) in 1970s and had
been used broadly in many other domains in 1980s. The Three views, i.e. logical view, collaboration view and
studies of agents could be roughly classified into three service view are used to analysis the same multi-agent 3PL
 W. Ying, S. Dayong / Expert Systems with Applications 29 (2005) 431–436 435

system. The logical view of the system focuses on depicting (2) LPRA decomposes the logistics process and recom-
the logical structural relationships among the agents and poses it in order to meet the business sequence required
that between the agents and the collection of logistics by the customer, according to the logistics order and the
teamwork or VPL. The collaboration view of the system reengineering algorithm. The reengineered logistics
reveals the massage transferring among the agents and the business process is sent to RSA.
VPLs in order to maintain the whole life cycle of each VPL (3) Having received the logistics business process, RSA
(from its creation, its running to its destroying) and improve firstly allocates logistics resources within the inner
the ability of building and deleting VPLs. Finally, the resource repository of the 3PL vendor. If the available
service view of the system represents the roles or services inner resource is not enough, RSA will allocate
each agent provides when the system fulfill logistics orders. resources in the prepared union resource repository. If
there are still not enough resources, an application for
4.3.1. Logical view of the multi-agent 3PL system new union resources will be sent to DUA.
Fig. 2 depicts the logical structural view of the multi- (4) DUA seeks new union partners through the e-commerce
agent 3PL system. There are three layers in the multi-agent system and adds their resources into the prepared union
3PL system, i.e. customer layer, logistics teamwork layer logistics resource repository. The result of seeking
(layer of VPLs) and VPL building layer (layer of agents) dynamic union partners will be sent to RSA. If new
among which VPL building layer is consisted of five agents union partners and resources have been found, RSA will
including the order management agent (OMA), the logistics reallocate the resources; otherwise RSA will send a
process reengineering agent (LPRA), the resources schedul- message to OMA and OMA has to return the order back
ing agent (RSA), the dynamic union management agent to the customer. Then the order is refused.
(DUA) and the teamwork evaluation agent (TEA). The (5) RSA creates a VPL according to the logistics process
stereotype Singleton of each agent in Fig. 2 means that each and the allocated resources and informs the CSC. The
agent has only ONE instance at run-time of the system order is actually being executed.
whereas stereotypes Teamwork and Supply Chain Member (6) VPL executes the logistics order and keeps close
indicate the marked entities are instances of logistics communication with OMA.
teamwork (VPL) and supply chain member respectively. (7) When the consigned products are received and checked
by the receiver(s), RSA will free the allocated resources
4.3.2. Collaboration view of the multi-agent 3PL system and destroy the corresponding VPL. The order is
The collaboration of the agents in the multi-agent 3PL fulfilled.
system is mainly aimed to maintain the life cycles of the (8) TEA continuously supervises the running states of the
VPLs. The detail collaborating steps or activities are active VPLs and evaluates them.
described as follows. (9) Each agent improves its structure and algorithms (if it
has any).
(1) OMA receives a logistics order from the CSC and
evaluates the order and the customer candidate. If the
order passes the evaluation and needs to be split (e.g. 4.3.3. Service view of the multi-agent 3PL system
with multiple receivers), OMA will split it into several The services provided by the agents or other units in the
orders. OMA passes the accepted order(s) to BPRA. All multi-agent 3PL system include two aspects, i.e. the
refused orders will be returned to the corresponding logistics services provided to the customers (the external
customers immediately via CSC and the order is services) and the roles they act to maintain the life cycles of
refused. the VPLs (the internal services).

<<Singleton>> <<Singleton>>
Order Management Logistics Process
<<Singleton>> Agent Reengineering Agent
Dynamic Union
Agent
<<Singleton>> <<Singleton>>
Resource Scheduling Teamwork Evaluating
Agent Agent

<<Teamwork>> <<Teamwork>> <<Teamwork>>

Virtual Private Virtual Private Virtual Private
Logistics Logistics Logistics

<<Supply Chain <<Supply Chain <<Supply Chain

Member>> Member>> Member>>
Customer Customer Customer

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

436 W. Ying, S. Dayong / Expert Systems with Applications 29 (2005) 431–436

4.3.3.1. External services. All the following external 5. Conclusion

services are realized by the interaction between the
customers (via the CSC) and OMA. The 3PL vendor provides logistics services to the supply
chain as an associate object of the later. By building up a
(1) Receiving a logistics order. private logistics service unit, virtual private logistics
(2) Splitting the logistics order if necessary. subsystem (VPL) with a multi-agent system, a 3PL vendor
(3) Returning the order unable to be fulfilled. could integrate its logistics business process with the
(4) Collecting the information of the products on the way business process of the supply chain members. Moreover,
and exchanging it with the customer via CSC. the logistics flow and the logistics information flow are
(5) Accepting the changing application of the logistics seamlessly connected with the financing flow and trading
orders from customers and start the execution of the flow of the supply chain. The 3PL vendor would keep the
changes. stability of its own business process while providing
(6) Informing the customer of the fulfillment of order. customized services to the supply chain members.
(7) Making a settlement with the customer.

4.3.3.2. Internal services. References

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