Multi-agent Supply Chain System Architecture of

ClusterYuangao Chen

Information School, Zhejiang University of Finance&Economics,Hangzhou, 310012, P.R.China

Abstract-In the face of highly competitive markets and continuing pressure to reduce lead time and achieve quick customer response,

more enterprises today consider supply chain management to be the key area where improvements can significantly impact the bottomline, but as the R&D, manufacturing, marketing and sales become entire global affairs, the basis of competition will no longer bebetween individual companies and their independent supply chains but between regional industrial clusters. In this paper, the supplychain system of cluster is discussed. So an agent-based system of cluster supply chain is designed to enhance the cluster supply chainmanagement process. Moreover, multi-agent supply chain system architecture of cluster is provided.

Keywords: supply chain, cluster, cluster supply chain system, multi-agent

I . INTRODUCTIONFollowing the global economy wave and information

technology development, business is undergoing a majorparadigm shift. The traditional management methods focusedon single organization has to be changed. The world ofcollaboration has come into being, form internal cooperationto extended enterprises and supply chain. The partners utilizethe great advantages of collaboration, respond to the demandsof market, and share the risk of uncertainty. Advancedtechnology and new management methods are constantlybeing adopted to improve the strength and competitive abilityof enterprise in order to achieve predominance among hotglobal competition. The core competence beyond theorganizational boundary involves the collaboration of moreexternal resources and business activities. With "economy ofscope", a single organization may not have sufficient internalcapacities to respond effectively to dynamic market demandand meet required delivery deadlines. Now, companiesbecome extended enterprises and supply chain members fromintegrated enterprise [1]. Moreover, following the industrybecoming truly global, there is a new form of competitionbetween the regional clusters. The competitiveness of industryin any region of the world will depend on the regional totalbusiness infrastructure which will attract companies to theregion and retain them. For a certain industrial cluster, thefocus is the internal business relationship and resource andbehavior collaboration of cluster members. The objective ofthis paper is to identify and explain the characteristics ofenterprise cluster supply chain, and also discuss theapplication multi-agent technology in enterprise cluster supplychain management and give a multi-agent supply chainarchitecture of enterprise cluster.

II. SUPPLY CHAIN OF CLUSTERToday's competition environment presents the new

challenge to many companies. More enterprises now considerthe entire supply chain structure while taking businessdecisions. They try to identify and manage all criticalrelationships both upstream and downstream in their supply

chains. In addition, enterprise clusters have been the mostdistinct characteristic of several regional economies. Theenterprise clusters are characteristics of technological diffusion,clusters learning and cooperative competition [2]. So supplychain and enterprise cluster have been the focus of researchers,entrepreneurs and regional government. The enterprise clustersprovide excellent ecosystem for the development of supply chain.In another word, the supply chain management becomes theimportant method of enterprise cluster strategy. They areindependent in operation and form the homobium in the strategy[3].

A. Background ofsupply chainA Supply chain is a worldwide network of suppliers,

manufactures, warehouses, distribution centers and retailersthrough which raw materials are acquired, transformed anddelivered to customers [4]. There are four stages in the supplychain management process, including supply, integrated scheduleplan, logistics and demand. The current supply chain depends oncollaboration technology and Internet/Intranet to achieve quickrespondency and low cost.

In recent years, a new system approach for managing thesupply chain at the tactical and operational level has emerged.Supply chain system, like most systems, are composed ofinteracting components, exhibiting a wide range of dynamicbehavior that can interfere with scheduling and control in anenterprise. Thus, the human resources, funds, technology andfacilities of the supply chain members should be integrated,collaborated and managed as a whole. However, the optimizingthe utilization of supply chain resources and taking fulladvantages of manufacturing technology, information technology,network technology and computer become the important contentof current supply chain management.

B. Cluster and its supply chain systemAlthough the term "clusters" has only recently become

commonplace, we are all familiar with several clusters, such astextile industry in Shaoxing, or clothing and fashion trade inNingbo. The theoretical basis of the cluster concept, as a factor

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in competitive advantage, was put forward by Porter [5]. Heargued that the strength of a cluster depends on severalinteracting factors including firm strategy, structure andrivalry, demand conditions, related and supporting industriesand factor conditions. These factors build up the clustersfactors diamond model. Carrie indicated that cluster was anetwork of companies, their customers and suppliers of all therelevant factors, including materials and components,equipment, training, finance, and so on. It extended toeducational establishments and research institutes that providea large part of their human and technological capital [1].

So, cluster is a geographically proximate group ofinterconnected companies and associated institutions inparticular fields, linked by commonalities andcomplementarities.

Depending on regional concentration and industrialcentralization, the members of clusters achieve greatadvantage in industrial economy. These member companiesbuild up the interaction relationship through industrial valuechain, or cooperative competition, and other collaborativemodes. All the members and the relationship constitute thecluster industrial ecosystem. The enterprises of the clusterexchange the value by the market trade; the connection ofcluster is loose and value-oriented; without formal and fixedorganizational structure, but the cluster reveals its hearty lifeand strong advantage. Such as the regional clusters inZhejiang Province, a large amount of local enterprisesaggregate tightly to constitute different scale and extremespecialization clusters. These clusters are the most importantroles in the Zhejiang economy. The clusters of Zhejiangcomposed of great deal of middle and small firms arecharacterized by several facts including the economies ofscale, the flexibility, industrial specialization, resource sharing,collaborative and learning culture and regional brand etc.

In particular, the success of cluster can be traced back tothree major aspects: a) the flexible specialization model; b)the industrial atmosphere provided by the system of social andeconomic relationships of informal nature based on trust; c)the learning processes producing the widespread innovativecapacity [6].

Based on the external pressure of competition and marketdemand, every members of cluster focus on certain position ofthe industrial value chain and constitute the cluster supplychain system [7]. In this cluster supply chain system, everymember of the cluster, such as supplier, manufacturer, retailer,training, finance, and so on, has its related independent supplychain; moreover, all these enterprises have certain position intheir individual supply value chain, especially the coremembers play the distinct dominant role in the cluster. Hence,the intense collaboration in the cluster supply chain systemconsist of several parts, one is cooperation between theupstream and downstream members of the individual chain,furthermore the coordination among various organization ofdifferent individual chains, even large amount of the small andmedium sized specialized complementary firms surround thecore enterprise. All the members form the organic cluster

supply chain system and the competition advantage of the clusterrelies on the core member's competence.

So the cluster supply chain has four fundamentalcharacteristics, including:

1) Integration. The cluster supply chain should concentrate thecluster resources and coordinate the whole chain processes. Fromthe supply chain perspective, geographically centralizedinter-connected companies and associated institutions aremodeled as open and reconfigurable network of cooperativemembers with the aid of networks and computers [6].

2) Inter-networking structure. Each specialized unit of thecluster constructs the horizontal and vertical competition andcooperation relationship. The structure of cluster supply chain isdistinctive from the traditional linear supply chain. Thecoordination behavior and cooperation process lead to theexternal synergy and business collaboration for material flow,fund flow, information flow, and even the knowledge flowamong the R&D organizations and education agencies.

3) Core domination. The geographically embedding corecompanies become the critical factor of the cluster for its uniquecore competition competence [8]. The core firms have dominanteffect on the constitution and revolution of the cluster. At thesame time, the core firms involve three pattern with clustersupply chain structure including need pattern, seed pattern andfeed pattern. [9]

4) Agility. The ability to quickly respond to market's changesand customers' demands called agility has been recognized as akey element in the success and survival of enterprises in today'scompetition. The supply chain agility has basically two meanings:flexibility and reconfigurability. Especially, the cluster supplychain depend on the networking linked commonalities andcomplementarities (they compete but also cooperate). Therefore,in certain area, the cluster supply chain become agile and breakthrough the traditional linear supply chain structure according todynamic alliance compositing and reconfiguration.Of course, the cluster supply chain has its weaknesses. The

local nature of cluster and the small size of firms can lead to theclosure of cluster towards the external environment and reducethe external market opportunities, because it is less cost for thecluster to keep supply relationship inside the local area withsame well-known suppliers than overcoming the geographicalboundary. Furthermore, the informal and unstructured nature ofinter-firm relationships and fragmented process of traditionalcluster limit its dense collaboration. So the opportunitiesprovided by the adoption and implementation of information andcommunication technologies in cluster are practical. Under thecurrent information technology environment, it is evident thatcluster supply chain becomes a distributed system and it issuitable for an open, cooperative and dynamic environment.

III. AGENT BASED CLUSTER SUPPLY CHAIN SYSTEMClusters work as enlarged companies, being the locus of a

dense network of relationships, trades, material and immaterialflows. In order to enhance the collaboration within clustermembers, the effectiveness and efficiency of the informationexchange and cooperation have to be raised. Therefore, it is mostimportant to increase the amount and richness of exchanged

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information and improve the automation of clustercollaboration. These put forward new demand for theinformation technology: the infrastructure of IT for clustersupply chain should be suitable to the inter-networked firmsand the implementation of IT should be aimed at reinforcingintra-cluster collaboration relationships without losing itsinherent advantage such as loyalty and trust. Agentcollaboration technology provides a promising way forcommunicating and resolving any conflicting issues within acluster supply chain.

A. Agent technologyNwana views agents as "software components and/or

hardware that are capable of acting exactingly to accomplishtasks on behalf of its user and learn as they react and/orinteract with their external environment" [10]. There are threemain components of an agent typology including cooperation,autonomy and learning. It is important to note that the agentparadigm fits better the real structure of a supply chain, wheredifferent entities are in charge of their own responsibilities. Asmembers of a loosely coupled network, these entities worktogether to solve a problem (optimizing supply chainoperation) that is beyond the individual capabilities orknowledge of each components. Of course, tackling thisspecific problem in this way does not conflict with otheraspects of supply chain management.

Peng et al. studied the use of agents for designing supplychain management systems and concluded that there are threerequirements that are essential [11]:

1) Contents level. The contents of Agents communicationsneed a common format. So STEP (the standard exchange ofproduct model data) and XML (extensible mark language)become the content application languages.

2) Protocol level. A common agent communicationlanguage (ACL) and protocol is applied by the agents toexchange messages such as the knowledge query andmanipulation language (KQML). KQML is both a messageformat and a message-handling protocol to support run-timeknowledge sharing among agents. KQML can be used as alanguage for an application program to interact with anintelligent system or for two or more intelligent systems toshare knowledge in support of cooperative problem solving.

3) Agent implementation level. A shared ontology is thesignificant factor of the supply chain agents. Ontology is themodel aggregations which descript the supply chain entitiesand their properties, relationships, constraints and behavior.Agents of the supply chain must share the same conceptualmodel in order to understand the concepts and get effectivecommunications.

B. ICA cluster supply chain systemAn agent-based system called an intelligent collaborative

agent (ICA) system is designed to enhance the supply chainmanagement process. The ICA researches both the technologyand the methods that are needed to improve the wayinformation is gathered, managed, distributed and utilized bydecision-makers in key supply chain functions and operations.

The ICA supply chain system characteristics are as following[12]-[14]:

Intelligence: The agent automatically customizes itself to thepreferences of its clients, based on previous experience andimprecise information from interaction with client andautomatically adapts to the changes in its environment.

Autonomous: An agent is able to take the initiative andexercise a non-trivial degree of control over its own actionsthrough service agreements.

Cooperation: An agent makes suggestions to modify requestsor ask questions for clarification. It also cooperates with otheragents to query the modules needed.

With the autonomous, intelligent and cooperative entities thatwork across the separate systems. The activities of the ICAsupply chain agents involve selecting modules to satisfy therequirements of clients, combination the modules into anintegrated service, and coordinating and scheduling the processesintelligently. Buzzell and Gale argue that the cost of R&D andmarketing result in economy of scope in the enterprise valuechain, but the cost of purchase and manufacture takes mostproportion of the whole cost [15]. So the ICA cluster systemtakes advantage of the collaboration behavior to decrease thefunction cost. Moreover, the certain resource including tangibleresource (for example, cluster architecture, transportation,services foundation) and intangible resource (e.g. technology,knowledge, management, and cluster brand), all these resourcecan be shared and developed with the ICA cluster supply chainsystem.The application of agent technology within clusters supply

chain can allow the following positive effects:1) Reinforcing the existing relationships among cluster firms,

complementary organization and external firms, helping theintegration of the units operating along the global supply chainbeyond the traditional cluster boundary;

2) Providing the cluster firms with virtual supply chainnetworks and more opportunities to access to global purchaseand marketplace;

3) Automating the management of cluster supply chaincollaboration and offering the new ways to create chain valueand exchange material and immaterial flows;

4) Supporting both the joint innovation and knowledgelearning within the cluster companies and outside organizations.

So in the agent based cluster supply chain system, it isimportant to improve the way information is gathered, managed,distributed and utilized by cluster core decision maker in keybusiness functions and operations. Each agent is able to performone or more service. A service corresponds to someproblem-solving activities of module combination. Servicerequirements are issued either from internal market throughcluster-intranet or from external customers through Internet.Services are associated with one or more agents that areresponsible for the management and execution of those services.All the activities of the agents such as selecting modules tosatisfy the requirements of cluster customers, combining themodules into an integrated service and coordinating andscheduling the processes intelligently.

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. ARCHITECTURE OF MULTI-AGENT CLUSTERSUPPLY CHAIN SYSTEM

Being able to collaboration various partners in a supplychain effectively is the key to successful cluster enterprisesand other agencies integration. Multi-agent technologyprovides a promising way for communication and resolvingconflicting issues within the cluster supply chain system.

The agents of cluster supply chain are grouped by thefunctions and roles. Cluster supply chain entity such as firmsand institutes are modeled as agents, and materials andinformation are modeled as objects. But from the value chainperspective, the cluster supply chain is composed of four rolesof agents, such as manufacturing, trading, logistics,knowledge diffusing and other support service agency such asgovernment, financing, human resource agency, marketinformation agency etc. These agents have effect on theinformation flow, knowledge flow, money flow and materialflow. At the same time, the dynamics of cluster supply chainmakes collaboration a key success factor in its integration.The decisions of single agent also have effect on other agents.It should collaborate with related agents to choose analternative that is optimal over the entire cluster supply chain[16], [17]. So the collaboration behavior among variousfunction agents is accomplished through the collaborationagents including schedule and coordination agent, optimizingagent, managing agent.

Manufacturing agent. This agent handles the function ofcluster manufacturing. So it is responsible for the productionresources assignment to satisfy requests for production. It isthe engineering side of the cluster supply chain and playsmore dominant role than other collaboration chaincomponents. The manufacturing agent should be schedulingand control the production for more flexible and agile to beable to respond to the dynamic factor in cluster supply chain.It monitors production operation and facilities. If theproduction operation is abnormal or a manufacturing unitbreaks down, this agent re-arranges the task or re-scheduleswith other scheduling agent.

Logistics agent. This agent is responsible for the materialflow among the cluster supply chain members. The importantfunctions include stock and transportation. The stock agenthandles the cluster unit inventory management and stockreplenishment, including the warehousing and distributionfunctions. Furthermore, the stocking policy of geographicallyintegrated cluster has to strike an optimal balance amonginventory criteria of lower storage and capacity related cost,on-time delivery and minimum losses in the event ofstock-outs. The transportation agent is responsible for theassignment and plan of transportation resources to satisfyrequests of material and goods movement [18]. Especially, thelogistics agent is responsible for coordinating multi-plans,multiple-supplier, and the multiple-distribution centre domainof the enterprise to achieve the best possible results in termsof cluster supply chain goals, which include on-time delivery,cost minimization, etc. Furthermore, the third party logisticsagencies play important role in the cluster material flow

accomplishment and are included in planning of the logisticsagent.

Trading agent. This agent is responsible for fulfilling thedemands of cluster members and external customers, includingacquiring orders (negotiating prices, due dates, and the like),procuring, marketing, sales and customer servicing. It estimatesthe resource demand and determines purchasing quantities andtiming, and responsible for selecting supplies that can minimizecosts and maximize prompt material availability Traders use a"customer" function that sets boundary marks in demand bydefining a monthly rate of demand that the traders know up tothe present moment and whose value they have to forecast forthe next period.Knowledge and learning agent. The innovation of cluster are

developed by knowledge diffusing and learning of cluster firms,colleges and institutions, R&D agencies, training and consultingorganization, information agencies and by other kinds ofadoption of exogenous innovations. The knowledge and learningagent is responsible for analyzing the demand of clusteroperation and innovation, integrating the cluster knowledge datawarehouse and support the communication and e-learning.

Support service agent. The support service agencies includegovernment, financing, human resource agency, industrialassociation and infrastructure service providing. The supportservice agent interchanges with cluster enterprises and supportservice provider based on service demands and providingpolicies.

Moreover, collaboration agents of cluster supply chain play asystem coordinator role by promoting collaboration amongagents and providing integrated service. They dispatch the tasksto the functional agents or other collaboration agents, coordinateand modulate the functional agent activities, and optimize thecollaboration process of cluster members.

Schedule and coordination agent. This agent schedules andcoordinates the collaboration operation and is responsible forassessing and monitoring agent ability. This involves two mainroles: scheduling and exception handling. The collaborationscheduling involves maintaining a record of the availability ofthe resource of cluster supply chain, which can then be used todetermine whether agreement can be met or new agreement canbe accepted. Furthermore, the exception handler receivesexception reports from the optimizing agent and decides uponthe appropriate response. This agent is also responsible for thecoordination activities of the cluster.

Optimizing agent. This agent is responsible for cluster supplychain module and collaboration optimization based upon therequirements from cluster firms and customers, the changes frommarket, the engineering constraints, and the limitations of supplychain capacities. The functions of optimizing agent involve threeaspects, the first is optimizing executed services as specified bythe chain agent's agreement and certain optimation moduleslocated in distributed databases, the second is routing solutionpresentation between cluster chain members, and the last is theexception handling with the meaning of monitoring the chainexecution of jobs and services for unexpected events and thenreacting appropriately.

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Managing agent. This agent is the manager of thecollaboration agents. Firstly, it maintains the supply chainpartner and agent relationships and coordinates the agentactivities. Secondly, it communicates active servicesinformation relating to collaboration activities among thecollaboration agents and functional agents, e.g., instruction tostart certain collaboration service, service completion andservice results.

In additional, the collaboration action of cluster supplychain agents need supports of agents' databases including:cluster members database describes firm agent relationshipswith others in the cluster community; resource databasereserves a list of resources that are owned by and available tothe agents; module database stores the modules informationfor agents and allows these agents to search and perform thecertain module information; task database is responsible forproviding logical descriptions of collaboration tasks known tothe agent.

| Logistics Agent Trading Agent Support Service Agent

Schedule and coordinationAgent

I~~~Managing Optimizing

l Agent Agentl

I. _____ ___.____

Manufacturing Agent Knowledge and learningAgent

r- --- --- ---- -- - --- --- --- --- --- ---------------___ _Cluster member Resource Module Task

Database Database Database Database

Figure 1: Architecture of multi-agent cluster supply chain systemFigure 1 shows a common architecture of agent-based

cluster supply chain system. Moreover, in the system,information must be organized and presented in a standardformat to allow easier understanding and effective use byrelevant members. A communication network is needed tofacilitate data access, format and transfer among variousagents and partners is needed. So KQML is adopted in theproposed architecture as a medium of communications.

V. CONCLUSIONSWhen the applications of IT and network communication

in cluster become more prevalent, competition will beincreasingly between regions of the world. The multi-agentsupply chain system architecture can improve interactions andinformation exchanges among cluster firms and optimize thecluster collaboration processes performance. The agent-basedcluster promote co-opetition, including co-informing,

co-learning, co-marketing, co-purchasing, and co-production.On the contrary, the slow disappearance of traditional advantagein the information global environment such as regionalconcentration and industrial centralization presents a newchallenge to our cluster. The geographical cluster structure willface the consequent affirmation of virtual clusters based onnetwork and information technologies.

ACKNOWLEDGMENTThis research was supported by the Humanities and Social

Science Foundation of Ministry of Education of China underGrant 05JD790137.

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