a study on multi-agent supply chain framework based on network economy

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Computers & Industrial Engineering 54 (2008) 288–300

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A study on multi-agent supply chain frameworkbased on network economy

Lan Lu *, Gong Wang

School of Management, Tianjin University, Tianjin 300072, China

Received 10 February 2007; received in revised form 19 July 2007; accepted 20 July 2007Available online 26 July 2007

Abstract

Network economy is a new economy pattern enabled by information technology and the globalization market. Thispaper analyses the characteristic of network economy and builds a topological structure of it. The interactive coefficientmatrix of network economy has also been suggested to depict the effect of network economy. Then, special attentionhas been paid to supply chain operation in network economy. A multi-agent approach has been applied to study the frame-work of supply chain in network economy. The information transfer process and cooperation between agents are two keyissues in this framework. In order to make the image of this network economy based multi-agent supply chain frameworkclearer, a simple case is given to illustrate the supply chain operation and network economy structure.� 2007 Elsevier Ltd. All rights reserved.

Keywords: Network economy; Supply chain; Multi-agent system; Cooperation

1. Introduction

Since the 1990s, the revolution in information and communication technologies, as marked particularly bythe rapid growth of the Internet, has generated extensive and enormous impacts on the global economy. Alongwith the accelerated development and extensive use of the Internet, came the Internet based network economy.The concept of network economy was first mentioned by Flower (1997) as ‘‘Internet Economy’’. The followingworks by Kelly (1998), Shapiro and Varian (1999), and Shy (2001) used network economy as a term describingthe global relationships among today’s economic subjects characterized by massive connectivity, and pre-sented rules for network economy. The general idea of network economy has been widely accepted, but itis still difficult to give an explicit definition because of its broad coverage and impact. Here, we suggest thatnetwork economy is a new economic system which is enhanced by the trend of globalization and informationtechnology. It emphasizes the massive connectivity between business entities, and realizes the flows of infor-mation, capital and materials with the assistance of electronic commerce and intermediary services.

0360-8352/$ - see front matter � 2007 Elsevier Ltd. All rights reserved.doi:10.1016/j.cie.2007.07.010

* Corresponding author. Tel.: +86 13920338185; fax: +86 2287894805.E-mail addresses: [email protected] (L. Lu), [email protected] (G. Wang).

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L. Lu, G. Wang / Computers & Industrial Engineering 54 (2008) 288–300 289

The development of network economy has caused great changes to modern corporations in almost everyaspect. Network economy connects competent business units via Internet technologies to streamline varioustransaction flows, such as goods, information, capital, and administrative control (Lin, Michael, & Michael,2005). Thus, it can change the traditional linear supply chain into a supply chain network in which collabo-ration between manufacturers and their supply chain partners will be improved. In recent years, agent tech-nology has provided a new system approach for managing supply chains at the tactical and operational levels.An agent is an autonomous, goal-oriented software process that operates asynchronously to communicate andcoordinate with other agents as needed. So the application of agent based supply chain management will be aproper method to cope with the coming challenges in network economy.

In this paper, we first give a brief introduction of the related works on network economy and agent basedsupply chain construction in Section 1. In Section 2, we illustrate the topological structure of network econ-omy. Then, we discuss the design of a network economy based supply chain management frame in Section 3.In essence, it is a multi-agent based distributed system which pays special attention to customer-orientationand collaboration. In Section 4, a simple case is given to illustrate our viewpoints. Finally, some concludingremarks are drawn in Section 5, with suggestions for future research.

The basic elements of Internet based network economy include globalization processes, extensive imple-mentation of information technology and the establishment of virtual enterprises. Enterprises that utilizeInternet infrastructure in their activities carry out a specific e-business model. Their key commodity is infor-mation. It is based on changing the traditional SCM (supply chain management) into e-SCM as well as oncreating the so-called ‘‘Internet value network’’. Pastuszak (2004) has described the characteristics of supplychains in network economy, and stressed the significance of information and effective cooperation related tomarket competitiveness of enterprises and supply chains.

To some extent, the expanding development of network economy has generated new challenges of today’ssupply chain. In network economy, information technology provides an infrastructure for integrating theinternal and external activities of a company, so it connects the geographically distant supply chain memberstogether to form a network system, which may also be called ‘‘virtual enterprise’’. Hence, the distributed nat-ure of supply chains becomes more and more obvious. Due to this distributed nature, agent technology hasbeen employed to model supply chains. Agent technology views a supply chain as composed of a set of intel-ligent agents, each being responsible for one or more activities and interacting with other related agents inplanning and executing their responsibilities in complex dynamic environments. It provides methods of inte-grating the entire supply chain as a networked system of independent echelons, each of which utilizes its owndecision-making procedure (Fung & Chen, 2005). A multi-agent system (MAS) is a loosely coupled network ofsoftware agents that interact to solve problems that are beyond the individual capacities or knowledge. Multi-agent systems can enhance overall system performance, such as computational efficiency, reliability, extensi-bility, responsiveness, reuse, maintainability, and flexibility.

Multi-agent application in supply chain management mainly covers building multi-agent architecture ofdemand–supply procedure and modeling a communication or cooperation mechanism between agents.

By defining the function of each agent and analyzing the processes of manufacturing and supply, severalmulti-agent based manufacturing or supply chain framework systems have been built. The multi-agent tech-nology was first used between business units in an enterprise. Lin et al. (2005) developed a multi-agent infor-mation system for enterprise modeling by capturing both the structure and the processes of an enterprise.Concerning the manufacturing system, a NetMan prototype has been implemented in a multi-agent system.Frayret, D’Amours, Montreuil, and Cloutier (2001) illustrated the applications of NetMan strategic frame-work as well as the multi-agent integration platform approach that is implemented in an agent-oriented pro-totype. Application of multi-agent technology in supply chain management, especially supply chaincoordination, has become a strongly emerging research area. Swaminathan, Smith, and Sadeh (1998)described a supply chain modeling framework with software components representing types of supply chainagents, their constituent control elements, and their interaction protocols. Petersen, Divitini, and Matsken(2001) proposed a multi-agent architecture, called AGORA, for modeling and supporting cooperative workamong distributed entities in virtual enterprises.

The cooperation mechanism between supply chain partners is always related to negotiation protocol. Thecontract net protocol (CNP) which is proposed by Smith can be used in the cooperation process between

290 L. Lu, G. Wang / Computers & Industrial Engineering 54 (2008) 288–300

agents. A contract net protocol defines the basic messages in accordance with three consecutive phases, whichare inviting, bidding, and awarding, and how each message is to be processed. Jiao, You, and Arun (2006)applied CNP collaborative negotiation in the multi-agent system for global manufacturing supply chaincoordination.

These structure and cooperation rules can be further developed in network economy based supply chainmanagement in order to build a seamless connection between supply chains and the network. A multi-agentframework of supply chain organizing combined with the network economy structure will be the main concernof our following discussion.

2. The topological structure of network economy

Network economy system has a complex topological structure as each output element is influenced by var-ious input elements so that special path and flow relationships will be built. The extensive and complex inter-actions between nodes form a nonlinear system which makes it less impossible to carry out specific analyses.Here, in order to simplify the problem and accentuate the main characteristics, we treat the network economysystem as an equivalent topological structural network system with N input channels and N output channels.If the actual numbers of input and output channels are not equal to each other, suppositional channels shouldbe added in order to square the system.

Fig. 1 shows the typical N inputs–N outputs network system which has been mentioned in Xue and Feng(2005). In this network, N input elements (Ei1,Ei2, . . . ,Eik, . . . ,EiN) will be transformed into N output elements(Eo1,Eo2, . . . ,Eok, . . . ,EoN) via the function of network structure. There are N2 topological relationshipsbetween N input elements and N output elements.

In network economy, there always exist multi-layer entities taking the form of supplier, manufacturer,wholesaler, distributor, retailer, and customer. Considering this situation, a multi-layer network structurecan be established by adding multi-layer nodes to the structure. So, here we expand Fig. 1 to Fig. 2. Fig. 2shows the M-layer N input–output channels network structure. On the assumption that each layer has iden-tical structure, N input elements (Ei1,Ei2, . . . ,Eik, . . . ,EiN) go through the M-layer network, and then becomeN output elements (Eo1,Eo2, . . . ,Eok, . . . ,EoN) by the complex function of the whole network system. The linkbetween each couple of nodes may perform a specific function, such as investing, manufacturing, transportingor marketing by the participants of network economy. For this enlarged network structure, there are NM topo-logical relationships between N input elements and N output elements.

Network economy can be seen as a complete open system, so it communicates with the environment fromtime to time. All the resources from the environment, such as labor force, material, capital, information and soon are the input elements of network economy. The output elements can be product, service, information,technology and so on. The relationship between input and output elements can be represented as the followingmatrix.

The set of input element is:

EI ¼ Ei1 Ei2 � � � Eik � � � EiN½ �: ð2-1Þ

The set of output element is:

Ei1

EiN

Eo1

Ei2

Eik

Eo2

Eok

EoN

Fig. 1. N inputs–outputs topological network structure.

Ei1

Ei2

Eik

EiN

Eok

Eo1

Eo2

EoN

Layer 1 Layer2 Layer 3 Layer MLayer M-1Layer M-2

Fig. 2. M-layer N inputs–outputs topological network structure.


EO ¼ Eo1 Eo2 � � � Eok � � � EoN½ �: ð2-2Þ

The N · N matrix Ai (2-3) describes the interactive effect between the nodes of Layeri and Layeri+1, we maycall it interactive coefficient matrix. In the matrix, aðiÞjk (i = 1,2, . . . ,M � 1; j, k = 1,2, . . . ,N) represents theinteractive coefficient between the jth element in Layeri and the kth element in Layeri+1. If there is no relation-ship between two elements, the interactive coefficient will be treated as zero. Moreover, for the purpose ofsquaring the interactive coefficient matrix, suppositional nodes should be added to the network, and theirinteractive coefficients can be simply set as ‘‘0’’ or ‘‘1’’ in accordance with specific situations.

Ai ¼

aðiÞ11 aðiÞ12 � � � aðiÞ1N

aðiÞ21 aðiÞ22 � � � aðiÞ2N

� � � � � � � � � � � �aðiÞk1 aðiÞk2 � � � aðiÞkN

� � � � � � � � � � � �aðiÞN1 aðiÞN2 � � � aðiÞNN

26666666664

37777777775

ði ¼ 1; 2; . . . ;M � 1Þ: ð2-3Þ

Then we get the equation which depicts the relationship between input set and output set, when the inputelements go through the M-layer network from Layer1 to LayerM:

Eo1 Eo2 � � � Eok � � � EoN½ � ¼ Ei1 Ei2 � � � Eik � � � EiN½ �

að1Þ11 að1Þ12 � � � að1Þ1N

að1Þ21 að1Þ22 � � � að1Þ2N

� � � � � � � � � � � �að1Þk1 að1Þk2 � � � að1ÞkN

� � � � � � � � � � � �að1ÞN1 að1ÞN2 � � � að1ÞNN

26666666664

37777777775

� � �

aðM�1Þ11 aðM�1Þ

12 � � � aðM�1Þ1N

aðM�1Þ21 aðM�1Þ

21 � � � aðM�1Þ2N

� � � � � � � � � � � �aðM�1Þ

k1 aðM�1Þk1 � � � aðM�1Þ

kN

� � � � � � � � � � � �aðM�1Þ

N1 aðM�1ÞN2 � � � aðM�1Þ

NN

26666666664

37777777775

ð2-4Þ

or,

EO ¼ EI

YM�1

i¼1

Ai: ð2-5Þ

Furthermore, we can define A ¼QM�1

i¼1 Ai as the overall interactive coefficient matrix of the network whichreflects the overall effect of network economy.

That is to say,

EO ¼ EIA: ð2-6Þ


From the above analysis, we can learn that the interactive effect of network economy is so complex that itwill be a tough work to carry out the complete study of the whole system. So what we should do is concen-trating on a special part of the network and then expanding to a wider range step by step. For the followingpart, we will study the supply chain network in the network economy and establish a relatively efficient orga-nizational pattern for it.

3. A network economy based multi-agent supply chain framework

Under the environment of traditional economy, supply chain management always focuses on reducingoperational costs. By utilizing the method of procurement, manufacturing, inventory and transportation con-trol tools, inventories and order-to-cash cycles can be kept on a relatively low level. Meanwhile, special atten-tion has been paid to relationship development and maintenance with customers and suppliers. Althoughthese can still work, they may not be enough to keep up with the step of flourishing network economy.

In network economy, the functions of information and cooperation have been highlighted. The Internetchanges the way in which supply chains are managed, planned and controlled. The information, decisionsand processes that form supply chain management are moving to the web, breaking old paradigms ofinter-company boundaries. Information technology not only facilitates the mutual communication, but alsopromotes the transformation of business environment and customer demand modes. Customers are lookingbeyond cost as the sole arbiter of value. They are demanding innovation and personalization of not onlythe products but of the associated service and delivery. Accordingly, the conception of Virtual Customermethod has been developed by the Center for Innovation in Product Development in MIT (Dahan & Hauser,2002). This method lets customers join with production development teams as full participants in a dynamicweb-based exchange. By applying traditional marketing methods in novel ways to web-based method, productdevelopers can identify customer preferences more quickly and easily. Meanwhile, customers can get the prod-ucts they want more rapidly with relatively low costs. In this trend, it is of great importance to build a cus-tomer-oriented quick response supply chain. The proposed approach of supply chain framework innetwork economy involves readjusting the supply chain for a customer demand pulled purpose, and integrat-ing the non-value added processes by the function of information.

3.1. Supply chains in network economy

New features of supply chains in network economy have been triggered by the rise of the Internet. Manycrucial management decisions and processes will take place on the common ground of the Internet rather thanwithin the physical and technical boundaries of a single company. A new electronic supply chain informationexchange will encompass hubs, auctions and exchanges containing a wealth of not only information but valueto customers and suppliers alike (Anderson & Lee, 2000). Internet platform enables companies to offer quickresponse to customers’ requirements with more accurate information and more suitable communication skill.Thereby, consumers’ requirements will be fulfilled when still keeping a lower supply chain inventories.

The Web-based collaborative planning tools allow companies to exchange forecast and product statusinformation with their customers on orders, shipments and promotions, and help them to manage their prod-ucts through the entire life cycle. This capability will result in substantial reductions in lead times and forecastavailability, improved inventory turns and increased customer satisfaction. The Internet offers the supplychain enormous potential and entirely new methods for streamlined coordination between business partners,including third- and fourth-party logistic (3PL, 4PL) providers. Companies that want to succeed in the net-work economy need to enhance communications with their partners and providers.

For a manufacturing-centered supply chain, the idealistic model should be a three-layered structure onlyinvolving suppliers, manufacturers and customers. The non-value added transferring process should be cutoff to the most extent in order to achieve perfect efficiency. In the complex structure of network economy,by making the most of information flow and cooperation mechanism with the backup of 3PL and 4PL pro-viders, a conceptual supply chain model can be abstracted from the network system.

Fig. 3 shows the conceptual model of supply chains abstracted from the network economy structure. All themiddle structures, such as wholesaler, distributor and retailer have been replaced by backup system of 3PL

Ei1

Ei2

Eik

EiN

Eok

Eo1

Eo2

EoN

Supplier Manufacturer Wholesaler Customer Retailer

Information

Supplier Manufacturer

Cooperation3PL/4PL

Backup

Customer

Fig. 3. Conceptual model of supply chains in network economy.


and 4PL providers. The 3PL or 4PL providers will integrate the information and resource for the manufac-turer. This approach will enable the manufacturer to identify the end-customers’ demand directly and embracea more efficient marketing and delivering channel. Our network economy based multi-agent supply chainframework will be based on this conceptual model.

3.2. Multi-agent supply chain framework

Based on the aforementioned conceptual model of supply chain in network economy, we put forward thisspecific multi-agent supply chain framework. It is simplified to display the information transfer processesinside the manufacturer and on the boundaries of customer, manufacturer and supplier. As a customerdemand-driven supply chain system, the information flow starts from the customer incoming orders. Fig. 4provides the architecture of multi-agent supply chain framework. Our approach extends the ideas of severalprevious works (Fung & Chen, 2005; Jiao et al., 2006) which also have put forward multi-agent based supplychain frameworks.

The proposed multi-agent supply chain framework comprises of four categories of agents: (a) customer-centric (b) product-centric (c) supplier-centric and (d) logistic-centric. The customer-centric agents areresponsible for dealing with customer information management. The product-centric agents are responsiblefor utilizing the customer information in a meaningful way to product what the customer needs in the righttime. The supplier-centric agents are responsible for choosing better suppliers for acquiring raw material orcomponents. The logistic-centric agents are responsible for dispatching materials and products for themanufacturer. Each agent performs one or more supply chain functions independently, and each coordinatesits action with other agents. Their functionalities are described as below.

3.2.1. Customer-centric agents

Customer Interface Agent. It provides an intelligent interface for the customers to input their personalorders. It is responsible for acquiring orders from customers, negotiating prices or due dates and handlingcustomer requests for order modification or cancellation.

Order Management Agent. It processes order information coming from Customer Interface Agent. It isresponsible for gathering all the incoming orders and eliciting relevant information regarding customerchoices, preferences and specifications. Customer preferences and profiles are stored in the Customer ProfileDatabase for further analysis to detect trends and develop customer relationship.

3.2.2. Product-centric agents

Production Planning Agent. It takes the orders from the Order Management Agent and then, according tothe product due dates, manufacturing capacity, inventory level and material availability, generates productionplans.

Inventory Management Agent. It handles the inventory-related tasks, such as keeping track of materials,work-in-process and finished products inventory records to meet production requirements, determining

Fig. 4. Multi-agent supply chain framework.


the reordering point, and responding to the inventory availability queries from Production PlanningAgent.

Manufacturing Management Agent. It executes the manufacturing processes to satisfy orders for produc-tion. It collects manufacturing capacity and situation information from workshops and communicates withthe Production Planning Agent to smooth the production plan, and then, allocates the production tasks tothe related workshops.

Procurement Management Agent. It gives detailed material sourcing plan according to the production plan.It analyses the whole production plan and decomposes the material requirements into specific categories inorder to communicate the outgoing orders information with certain suppliers.

3.2.3. Supplier-centric agents

Supplier Interface Agent. It provides an intelligent interface for the suppliers to bid for the outgoing ordersof material requirements. It is responsible for inviting supplier biddings to fulfill the material requirements andproclaiming the award of bid.

Supplier Management Agent. It gives out supplier bidding rules and analyses the supplier bidding infor-mation from the Supplier Interface Agent. It is responsible for managing supplier information and choosingthe most suitable and reliable suppliers based on material requirements in the production process. Therelated suppliers’ information is stored in the Supplier Profile Database as cases to facilitate future procure-ment process.


3.2.4. Logistic-centric agents

Logistic Management Agent. It handles the logistic information from Inventory Management Agent, Man-ufacturing Management Agent and Procurement Management Agent. It is responsible for coordinating thelogistic process in enterprise domain to achieve the best possible results in terms of on-time delivery, cost min-imization, and so forth.

Logistic Interface Agent. It exchanges logistic and transportation information with 3PL or 4PL providers.Then the substance flow will take place by the assistance of 3PL or 4PL providers on the base of supply chainoptimization.

The following part describes the interactions among these agents. For example, Manufacturer receives anincoming order from its customer through the Customer Interface Agent. The incoming order flows to theOrder Management Agent. The Order Management Agent coordinates all the actual incoming orders andsends the requirement data to Production Planning Agent. The Production Planning Agent collects capacityand availability information from Inventory Management Agent, Manufacturing Management Agent andProcurement Management Agent. According to this information and customer requirement modes, the Pro-duction Planning Agent arranges production plan. There are two possible situations. If the finished productsinventory can meet the customer’s requirement, the order is filled by shipping the products from inventory. Ifthe finished products inventory cannot meet the requirement, a corresponding schedule for making the prod-ucts should be carried out. The production plan goes to Inventory Management Agent, Manufacturing Man-agement Agent and Procurement Management Agent. The Procurement Management Agent specifies theproduction plan into different categories of material sources and generates the outgoing orders. The Procure-ment Management Agent first reaches to the Supplier Profile Database, if there are suitable suppliers based onthe previous trading information, the outgoing orders can be send directly to the suppliers by Supplier Man-agement Agent. If there are not suitable suppliers in the database, a round of bidding should be carried out.The suppliers bid on the platform of Supplier Interface Agent, and the bidding information subsequently goesto the Supplier Management Agent. The Supplier Management Agent takes the bidding information to choosesuitable suppliers. Then the Supplier Interface Agent proclaims the award of bid, and the outgoing orders willbe sent to the aiming suppliers. The Logistic Management Agent gathers the material flow information insidethe manufacturer entity to facilitate the inside logistic and generate outside logistic information. The outsidelogistic information goes to the Logistic Interface Agent, and finally to the 3PL or 4PL providers. The 3PL or4PL providers can deliver the raw materials from the suppliers and the finished products to the customers in amore efficient method which will integrate the resource and optimize the whole supply chain performance.

Furthermore, we can perceive the set of aforementioned agents as the Manufacturer Super Agent which isan enlarged system and performs multi-tasks. Similarly, the customer, supplier and 3PL/4PL provider can alsobe independent super agents which embrace their own sub-agents. Through the above procedure, an order canbe fulfilled by the multi-agent supply chain system.

3.3. Cooperation mechanism

In network economy, cooperation between supply chain partners plays an important role in the moredynamic, interactive and distributed supply chain. The cooperation mechanism of multi-agent supply chaincan be related to Contract Net Protocol which is widely used in multi-agent systems (Jiao et al., 2006; Lou,Zhou, Chen, & Ai, 2004). Based on Contract Net Protocol which is a cooperative bidding mechanism, supplychain partners will co-accomplish the tasks of planning, negotiation, manufacturing, dispatching and so forth.The bidding process can be conducted on the platform of Internet.

Fig. 5 shows the cooperative bidding mechanism of multi-agent supply chain. Number 1 to 8 represents thecommunication sequence between supply chain partners. Cooperation can be triggered by advertising ordersof manufacturer.

1. Manufacturer advertises its outgoing orders through the Supplier Interface Agent to all the potentialsuppliers.

2. After receiving the advertising orders, the potential suppliers make the decision of bidding.3. If the supplier decides to bid, it will plan the application of bid.

Fig. 5. Cooperation mechanism of multi-agent supply chain.


4. The supplier bids on the platform of Supplier Interface Agent.5. After receiving the applications of bid, the manufacturer will give a comprehensive evaluation of the sup-

pliers through its Supplier Management Agent in consideration of quality, price, due date, service and soon, then choose the most suitable suppliers according to the evaluation results.

6. Manufacturer proclaims the award of bid through its Supplier Interface Agent and gives necessary repliesto the not-chosen suppliers.

7. The supplier who has won the bid carries out manufacturing to fulfill the incoming orders.8. The supplier delivers its finished products to the manufacturer.

Accordingly, the supplier will also advertise its outgoing material orders to supplier’s supplier in order tocarry out manufacturing. This cycle will go on and on until the end of supply chain. Thus, the full sequence ofcooperation process can be completed.

4. Case study

For the following part, we suppose a mobile phone company in Finland with a global supply chain whichhas also been mentioned by Jiao, You, and Arun (2004, 2006), but in a different viewing point. With the devel-opment of network economy, the company resorts to a global manufacturing strategy with focus on the keytechnologies and core competency while outsourcing major component manufacturing activities such as themanufacturing of peripherals, memory chips and LCD panels. Fig. 6 generally shows the main part of its sup-ply chain in network economy.

In this supply chain network, customers and suppliers spread worldwide. The mobile phone company playsthe role of manufacturer. Its direct suppliers which are labeled Supplier I provide resources as software, PCB,LCD, cover and peripheral. Its suppliers’ suppliers which are labeled Supplier II provide sub-resources as chip,board, interface and charger, battery to corresponding Supplier I, respectively.

We will analyze the operation of this specific supply chain network by the means of multi-agent supplychain framework and also give a description of network economy effect.

Assume a customer order from Wenzhou China. The customer places his order through the CustomerInterface Agent of the mobile phone company. Through interaction, the customer can configure variousordering parameters such as product features, price and delivery date. The order information then goesto the Order Management Agent. In order to expedite the delivery, the Order Management Agent decides

Fig. 6. Mobile phone company supply chain network.


to allocate the final assembly of this order to Xiamen plant in China. The software design and PCB assem-bly operations are still held in Finland. Then based on the resource and capacity information from theInventory, Manufacturing and Procurement Management Agent, the Production Planning Agent initiatesthe production plan. For the Xiamen plant, after the Procurement Agent receives the production plan, itdecomposes the production plan into three material requirements: LCD, Cover and Peripheral. The mate-rial requirements will be broadcasted to the potential suppliers who will bid on the platform of SupplierInterface Agent. The awarding decision is made by Supplier Management Agent. The final supply chainstructure can be seen in Fig. 7.

In order to suit this specific supply chain structure into general network economy structure, we can addsuppositional participant nodes to the system. Fig. 8 shows the network economy structure of this specific sup-ply chain. Suppositional nodes are added to facilitate the balance and matrix description of the network. If thedirect suppliers in the layer of Supplier I do not have downstream suppliers in the layer of Supplier II, theyshould be link to some suppositional nodes with the interactive coefficient evaluated as 1.

Based on the above assumption, we can establish the relationship between input elements and output ele-ments as below:

EO ¼ EIA1A2A3; ð4-1ÞEI ¼ Ei1 Ei2 Ei3 Ei4 Ei5 Ei6 Ei7 Ei8½ �; ð4-2ÞEO ¼ Eo1 Eo2 Eo3 Eo4 Eo5 Eo6 Eo7 Eo8½ �: ð4-3Þ

Fig. 7. Supply chain network structure for specific customer order.

Fig. 8. Network economy structure of specific supply chain.


A1 ¼

1 0 0 0 0 0 0 0

0 að1Þ22 0 0 0 0 0 0

0 að1Þ32 0 0 0 0 0 0

0 að1Þ42 0 0 0 0 0 0

0 0 0 0 1 0 0 0

0 0 0 0 0 1 0 0

0 0 0 0 0 0 að1Þ77 0

0 0 0 0 0 0 að1Þ87 0

2666666666666664

3777777777777775

; A2 ¼

að2Þ11 0 0 0 0 0 0 0

að2Þ21 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0

að2Þ51 0 0 0 0 0 0 0

að2Þ61 0 0 0 0 0 0 0

að2Þ71 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0

2666666666666664

3777777777777775

; ð4-4; 4-5Þ

A3 ¼

að3Þ11 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0

2666666666666664

3777777777777775

; A ¼ A1A2A3 ¼

að2Þ11 að3Þ11 0 � � � 0

að1Þ22 að2Þ21 að3Þ11 0 � � � 0

að1Þ32 að2Þ21 að3Þ11 0 � � � 0

að1Þ42 að2Þ21 að3Þ11 0 � � � 0

að2Þ51 að3Þ11 0 � � � 0

að2Þ61 að3Þ11 0 � � � 0

að1Þ77 að2Þ71 að3Þ11 0 � � � 0

að1Þ87 að2Þ71 að3Þ11 0 � � � 0

266666666666666664

377777777777777775

: ð4-6; 4-7Þ

The overall interactive coefficient matrix of the supply chain network will be (4-7).So, the relationship between EO and EI is,

EO ¼ EI

að2Þ11 að3Þ11 0 0 0 0 0 0 0

að1Þ22 að2Þ21 að3Þ11 0 0 0 0 0 0 0

að1Þ32 að2Þ21 að3Þ11 0 0 0 0 0 0 0

að1Þ42 að2Þ21 að3Þ11 0 0 0 0 0 0 0

að2Þ51 að3Þ11 0 0 0 0 0 0 0

að2Þ61 að3Þ11 0 0 0 0 0 0 0

að1Þ77 að2Þ71 að3Þ11 0 0 0 0 0 0 0

að1Þ87 að2Þ71 að3Þ11 0 0 0 0 0 0 0

266666666666666664

377777777777777775

: ð4-8Þ

Through the above modeling procedure, a specific supply chain structure can be transformed into the networkeconomy format in which the relationship between input and output elements can be clarified. By analyzingthe values of input elements and output elements, we can acquire a general idea of the value amplification


effect of the network. Better comprehension of the system function will assist in the realization of reducingcosts and integrating capabilities. For example, if the value amplification effect of certain path in the networkis extremely high, much concern should be paid on the issue of reducing costs. On the other hand, if we knowthe interactive coefficient matrix of certain supply chain structures, we can forecast the potential costs or val-ues of the output elements, and accordingly choose the suitable supply chain structure for some specialpurpose.

The overall multi-agent supply chain framework can be built upon Java Agent DEvelopment (JADE) Plat-form (http://jade.tilab.com/). Agents work collectively to achieve the common goal by communicating andcooperating toward a better process.

5. Conclusions and recommendations

The accelerated development of information technology has enabled the expansion of communication at aglobal level. This trend has put us in a new era of network economy which is significantly different from tra-ditional economic outlook. In this paper, we suggest that network economy is a new economic system which isenhanced by the trend of globalization and information technology. It emphasizes the massive connectivitybetween business entities, and realizes the flows of information, capital and materials with the assistance ofelectronic commerce and intermediary services.

Network economy system has a complex topological structure as each output element is influenced by var-ious input elements so that special path and flow relationships will be built. In order to simplify the problemand accentuate the main characteristics, we treat the network economy system as an equivalent topologicalstructural network system with N input channels and N output channels. An expression of the relationshipbetween input elements and output elements has been introduced based on this topological structural.

Special attention has been paid to supply chain operation in network economy. We resort to a multi-agentapproach to study the framework of the supply chain in network economy. The information transfer processand the cooperation between agents are two key issues in this framework. In order to make the image of thisnetwork economy based multi-agent supply chain framework clearer, we cite a simple case to illustrate thesupply chain operation and network economy structure.

Since this paper has just provided a framework for the concerning area, there is further research to do inour future work on network economy and multi-agent supply chain. We will carry out deeper analyses of net-work economy effects; build a more rigorous mathematic model to represent the network; give quantitativemeasurements of network economy and develop the multi-agent supply chain model considering supply chainuncertainty and risk in the open environment of network economy. We also aim to transform the conceptualmodel into a production oriented model.

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a study on multi-agent supply chain framework based on network economy

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