Technology for Open International Trade Electronic Trade Scenarios

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Technology forOpen International
TradeElectronic Trade Scenarios
Erasmus University P.O. Box 1738 3000 DR
Rotterdam, The Netherlands tel. [phone]
01 fax [phone] www.euridis.fbk.eur
Ronald M. Lee rlee_at_euridis.fbk.eur.nl EURIDIS Eras
mus University Research Institute for Decision
and Information Systems
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Outline
Motivation Vision Scenario Representation Scenario
Design Tool InterProcs Example
Scenario Component Architecture Future Directions
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• Broad research scope
• Analysis and Design of Inter-organizational
  Systems

Distance Collaboration (Disco)
Coordination, Harmonization Among Administrations
(Charms)
Models for Open Electronic Commerce (Moneco)
Formal Analysis of Normative Systems (Fans)
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Motivation
Globalization of Markets
New Opportunities
New Threats
Swimming in unfamiliar waters
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Obstacles
Red Tape Problem "red tape -- n (so-called
from the red tape formerly used to tie up legal
documents in England) bureaucratic procedure,
especially as characterized by mechanical
adherence to regulations, needless duplication of
records, and the compilation of an excessive
amount of extraneous information resulting in
prolonged delay or inaction"
Babel Problem An estimated 33 of business
opportunities lost due to language
problems (European Union)
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Example transaction seaport
bill_lading
Issuing Bank
Corresponding Bank
lc
bill_lading
bill_lading
Import Customs
Import Port Authority
Export Port Authority
Export Customs
lc_
customs_
manifest
release
cargo_declare
remittance_
manifest
lc_ request
exp_
discharge_permit
advice
customs_
stowage_
approval
declare
exp_
plan
eta
bill_
declare
manifest
commercial_
bill_
lading

ship_
bill_lading
details
Invoice
Exporter (Shipper)
lading
Export Forwarder
Export Shipping Line
Export Liner Agent
manifest
clearance
manifest
Import Forwarder
Importer (Consignee)
Import Liner Agent
Import Shipping Line
ship_
delivery_
despatch_
ship_
eta
ins_act
notice
order
stowage_
request
arrival_
arrival_
notify
notify
plan
manifest
ship_
instruct
bill_
lading
load_
manifest
delivery_
stowage_plan
instruct
arrival_notify
order
manifest
ins_contr_req
manifest
load_list
goods_
pre_arrival
trans_
trans_
available
ins_contract
notify
interest
manifest
stowage_plan
bill_lading
delivery_
Import Transporter
Import Stevedore
Export Stevedore
Export Transporter
Insurance
order
export
import
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Research Goal Red Tape
to relieve the bureaucracy of international trade
through advanced electronic commerce technology
(and artificial intelligence) controls
better yet, more transparent (automatic) especia
lly for small, medium size enterprises (SME's)
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Research Goal Babel

• to provide native language interfaces to trade
  scenarios and associated electronic documents
• native alphabets (Cyrillic, Chinese)
• native writing styles (Arabic, Chinese)

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Context...
our focus A2A A2B B2B
Adminisrations
Business
Consumers
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Market size ...
International trade per year (1995)
28,000,000,000,000 transaction costs 7
1,960,000,000,000 UN estimates potential
savings _at_ 25
490,000,000,000

• further potential market
• small to medium size enterprises (SME's)
• by enabling entry into international markets,
• could potentially double or triple levels of
  international trade.

Compare to estimates for (consumer oriented)
electronic commerce by year 2000
200,000,000,000 Thus, potential for ITT is more
than twice the size of currently envisioned
electronic commerce.
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Why does trade facilitation matter?

• World trade has doubled in the last 10 years...
• ...increased 16 fold in the 50 years
• Much of this is due to the considerable progress
  in reducing tariffs through successive GATT
  rounds of multilateral trade negotiations
• But as those barriers have fallen, so the
  significance, and in some cases the incidence --
  of trade procedural barriers has risen. Estimates
  of the potential global benefits from trade
  facilitation vary, but by any standards are
  significant
• 300,000,000,000 total overhead costs of
  world trade
• 7-10 of transaction values
• 1 of world GDP, or 2 or world trade
• 100,000,000,000 estimated cost savings of IT
  for trade documents
• 75,000,000,000 estimated savings by trade
  procedure improvement
• R. Crowhurst, SITPRO News, July 2000

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Vision
Plug and Play Electronic Trade Scenarios
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Open Electronic Commerce
doing business over digital networks, potentially
among parties where no prior trading relationship
exists

• need for trade procedures
• easy to install
• trustworthy, having adequate controls
• efficient, keep transaction costs minimal
• applies
• international trading
• locally, where procedures are complex and trade
  relations dynamic, e.g. within ports

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Electronic Trade Scenarios

• the mutually agreed upon set of rules and
  procedures that governs the activities of each
  party involved in a kind of business transaction.
• electronic form
• generic, reusable
• downloadable, installable from central
  libraries
• flexible -- has parameters for adapting to
  specific situations

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Our focus ...

• business-to-business ( government)
• especially, international trade transactions
• use of artificial intelligence
• -- pattern-matching (detect fraud potentials)
• -- goal-directed synthesis (of trade procedures)
• -- heuristic navigation (messenger model)

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International Collaboration

• UN/CEFACT
• Centre for the Facilitation of Procedures and
  Practices for Administration, Commerce and
  Transport
• "The worldwide facilitation of international
  transactions, through the simplification and
  harmonization of procedures and information
  flows"
• Business Analysis Working Group (BAWG)
• Codes Working Group (CDWG)
• EDIFACT Working Group (EWG)
• Legal Working Group (LWG)
• International Trade Procedures Working Group
  (ITPWG)
• Techniques and Methodologies Working Group
  (TMWG)

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History of research ...

• 1980 Candid, predicate logic of contracts
• 1983 Candid, formal semantics
• 1984 performative business documents
• 1986 illocutionary logic telecommunications
• 1988 bureaucracies as deontic systems
• 1988 electronic contracting
• 1990 documentary petri nets (Case/EDI)
• 1992 audit daemons
• 1994 procedure constraint grammars
• 1996 messenger model
• 1998 InterProcs (Java)

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Scenario Design InterProcs
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About InterProcs ...

• purpose design and prototyping of distributed
  electronic trade scenarios
• unique perspective an artificial intelligence
  approach to electronic commerce
• key advantage symbolic reasoning, heuristic
  synthesis of trade rules, procedures

• main InterProcs representations
• documentary petri nets (DPN's)
• audit daemons
• procedure constraint grammars (PCG's)
• regimes, messengers

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Current developments
Now ...
Graphical design methodolgy tools ... UML
diagrams XML schema DPN design
Prototype execution ... Viewer mode Gaming
mode Network mode
In progress...
AI extensions... Audit daemons Procedure
constraint grammars Messenger model
Production implementation... component
architectures
Wishful...
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Design methodology
UseCase Diagram (UML)
Sequence Diagram (UML)
Activity Diagram (UML)
XML Schema (SOX)
Joint Procedure (DPN)
Role Procedures (DPN)
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Modes of prototype execution

• 1. Viewer mode
• single user
• view, simulate all roles together
• executed as applet
• 2. Gaming mode
• multiple users
• each sees, executes one role only
• executed as applets
• EDI documents sent via server
• 3. Network mode
• multiple users
• each downloads role model as java application
• EDI documents sent via Internet email (POP)

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Use Case Diagram
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Sequence Diagram
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Activity Diagram
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Joint Procedure
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XML Schema (Class Diagram)
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Role Procedures
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Multi-Lingual(Italian, Dutch)
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Multi-lingual display of EDI docs
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Global Scenario Repository
Downloading Of Scenarios ...
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Example Scenario
International Documentary Credits
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Documentary Credit Operations
Payment for the goods is made not on actual
delivery of goods, but on presentation of
stipulated documents such as a commercial
invoice an insurance certificate a certificate
of origin a transport document (e.g., a bill of
lading or an airway bill) The seller receives
payment by presenting the stipulated documents to
a bank (the advising bank) that the buyer has
instructed to make payment. Uniform Customs and
Practices for Documentary Credits (ICC, 1983)
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Principle of "strict compliance"
Studies show that half of the documents presented
to satisfy letters of credit contain
discrepancies that delay -- even render void --
payment because the bank is not obligated to pay
if the documents are unsatisfactory.
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Documentary Credit Overview
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ComponentArchitectures
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UPPER CASE InterProcs -- Design, Prototyping
lower case how to integrate trade scenarios
into local application systems?
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Scenario distribution to parties...
Scen 1 Role A
Regime Role A
Scenario Transaction 1
Scen 1 Role B
Scen 1 Role A
Scen 2 Role A
Scen 2 Role A
Scenario Transaction 2
Scen N Role A
Scen 2 Role C
...
Regime Role B
Scen N Role A
Scen 1 Role B
Scenario Transaction N
Scen N Role B
Scen N Role B
Scen N Role C
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What else is needed?
B.
A.
Role Scenarios
Internal Systems
XML/EDI Documents

• A. link to EDI document definitions
• e.g. XML/EDI Schemas
• e.g. formal languages for business
  communication (FLBC's)
• B. link to internal systems
• e.g. database interfaces
• e.g. security
• e.g. concurrency control
• e.g. transaction management
• etc.

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Component architectures ...

• Goal "write once, run anywhere"
• "A component is a reusable software building
  block a pre-built piece of encapsulated
  application code that can be combined with other
  components and with handwritten code to rapidly
  produce a custom application ...thus customized
  business solutions can be assembled from a set of
  off-the-shelf business objects"

Examples Microsoft Transaction Server
(MTS) JavaBeans Enterprise JavaBeans
from Anne Tomas, "Enterprise JavaBeans --
Server Component Model for Java", by Patricia
Seybold Group, www.psgroup.com, December, 1997.
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How the pieces fit together ...

• Document Representations
• FLBC
• XML/EDI Schemas
• EDI

• Scenario Representations
• DPNs (InterProcs)
• UML (UN/TMWG)
• Open-EDI (ISO SC32)

• Inter-Business Component Architectures
• MTS
• Enterprise Java Beans

• Off-the-shelf Business
• Applications (internal)
• Baan
• SAP

Custom-developed Business Applications (internal)
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FutureDirections
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our primary deliverable
trade scenario models

• consisting of
• integrated transaction model
• role procedures
• processing rules
• EDI documents

delivered as an working prototype operating on
the Internet/Web
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this could be really big ...

• enabling international,
• business-to-business commerce,
• among small/medium size enterprises
• as easily as domestic trade

making red tape transparent
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Appendix Scenario Representation Documentary Pet
ri Nets
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Graphical Representations
Abstract State Transition Diagrams
Applied DecisionTrees

• different node types
• agency of choice
• (endogenous, exogenous)

nodes states arcs transitions
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Graphical Representations
Abstract Marked Graphs
Applied PERT Diagrams
install bath
do plumbing
do electrical
finish walls

• arcs activities, tasks (sub-states)
• nodes transitions
• total state of system set of active tasks

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Graphical Representations
Abstract Petri Nets
circle nodes places (sub-states) bar nodes
transitions tokens mark active places

• Combines
• choice, contingency (STN)
• concurrency (marked graph)

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Graphical Representations
from Buyer purchase_order
Seller decide_accept
Applied Documentary Petri Nets
accept_order
reject_order
null

• circles control nodes
• boxes document nodes
• cube physical goods
• bar action
• triangle decision node

Seller deliver_goods
Seller send_invoice
to Buyer goods
to Buyer invoice