Forwarding Agent Selection Throughout Gl

Please cite: Altuntaş, C., Öztürkoğlu, Y.
For arding Agent Sele tion Throughout Glo al Freight For arder
Networks: A Fuzzy TOPSIS Analysis, in Proceedings of XI. International Logistics and Supply Chain Congress,
Melikşah Uni ersity, Kayseri, Turkey, 7-9 November, 2013, pp. 37-48.

FORWARDING AGENT SELECTION THROUGHOUT GLOBAL FREIGHT
FORWARDER NETWORKS: A FUZZY TOPSIS ANALYSIS
Ceren Altuntaş1, Yücel Öztürkoğlu2
Abstract – The freight forwarders are important intermediaries for the facilitation of transportation services
in an effective and efficient manner. They may become 3PLs by extending their services to other logistics
activities as well but generally their main service is the successful organization of transportation orders both for
full and consolidated cargoes. Being the service provider for global supply chains, freight forwarders also
require a strong partner network all around the world in order to sustain their successful services. Several
forwarder networks like IFLN or WCA have been established with the aim to institutionalize this requirement.
However, the forwarders still seek other partners in the countries that they provide services to or from. In this
study, the partner selection of these freight forwarders is evaluated through fuzzy TOPSIS analysis. The
forwarders’ partner selection criteria and the requirements that they seek are collected through unstructured
interviews. The various stages of the fuzzy TOPSIS method are represented and the methodology is introduced for
real case problems.

Keywords – Freight forwarder, Forwarder networks, Fuzzy TOPSIS,

1.INTRODUCTION
Logistics outsourcing is a widely studied topic in the related literature due to its large share in the global
logistics industry and strong impact on overall logistics efficiency. Freight forwarding can be considered as a
dimension or a function of logistics outsourcing which deals specifically with the transportation of freight.
Although it is a traditional logistics service, consolidated transportation preserves its importance among other
logistics services because of its final impact on the overall logistics cost and service quality. Consequently, freight
forwarders maintain their positions as important intermediaries within the global logistics channels.
Throughout the development of globalization process and the transformation of the logistics outsourcing
trends, some of the freight forwarding companies grew in size and market share and became large international
third party logistics service providers (3PLs). This resulted in a collaboration requirement for the remaining small
and medium sized freight forwarding companies in order to achieve a large scale resource portfolio and sustain
their market position [1]. The collaboration requirement already lies in the definition of 3PLs as logistics alliances
between business partners who collaboratively design and tailor logistics services for the benefit of long term
business relationships in the networks that they act (Bagchi and Virum, 1996). This network perspective is
fundamental in global logistics systems where many actors exchange resources or execute different acts in order
to seize common benefits.
This study, makes an attempt to focus on the horizontal relationships and cooperation within logistics
networks. In order to achieve this aim, freight forwarders and freight forwarder networks are selected in a more
narrow sense. The important criteria in network partner selection for freight forwarders are explored and an

1

Ceren Altuntaş, Yaşar University, Vocational School, İzmir, Turkey ceren.altuntas@yasar.edu.tr

Yücel Öztürkoğlu, Yaşar University, Faculty of Economics and Administrative Sciences, Department of International
Logistics Management, Bornova, Izmir, Turkey, yucel.ozturkoglu@yasar.edu.tr
2

1

Please cite: Altuntaş, C., Öztürkoğlu, Y.
For arding Agent Sele tion Throughout Glo al Freight For arder
Networks: A Fuzzy TOPSIS Analysis, in Proceedings of XI. International Logistics and Supply Chain Congress,
Melikşah Uni ersity, Kayseri, Turkey, 7-9 November, 2013, pp. 37-48.
exemplary multi-criteria decision-making (MCDM) methodology is exhibited. The study tries to fill a void by
presenting an exemplary partner selection process in freight forwarder networks as an example of horizontal
cooperation in logistics which is a less explored area of research in the literature [3].
Under the direction of this objective, the following section exhibits a review of the literature on freight
forwarders, freight forwarder networks and horizontal cooperation in such organizations. The methodology

section provides the systemic steps followed throughout the exploration of freight forwarder criteria for network
partner selection. In order to evaluate and select the best partner alternative technique for order of preference by
similarity to ideal solution (TOPSIS) methodology is implemented. The methodology is combined with fuzzy
logic in order to eliminate the vagueness of human judgments in evaluating the criteria. The paper is finalized
with conclusions, limitations and suggestions for future research.

2.LITERATURE REVIEW
Freight forwarders (FF) are defined by [4] as companies that serve both to shippers and carriers by organizing
and coordinating the transportation of goods. Besides transportation services they can also offer warehousing,
insurance, fumigation, lashing and other related operations. According to an early definition, their main function
lays under less-than-a-truck-load (LTL) or less-than-a-container-load (LCL) shipments. They receive such, socalled partial shipments and issue a bill of lading (B/L) to the real shipper. They consolidate all the partial
shipments they receive at specific terminals and send the full loads through main carriers. At the arrival station,
the full loads are deconsolidated into part loads and they are delivered to their receivers. For the completion of
this service the shipper or the receiver, depending on the transportation terms, pays a through rate that covers all
expenses from the point of origin to the point of destination [5]. In order to fulfill the consolidation act, freight
forwarders require public or private terminals or warehouses which is the main factor that facilitated the evolution
of these intermediaries [6]. In addition to this main consolidation service, freight forwarders also provide full
container or truck shipments at better rates when compared with direct shipments; they pay freight charges and
provide extensions in due dates; they trace and expedite shipments or they recommend alternative routes for
existing shipments [7]. They are the landward customers of seaports that offer freight movement services and

advise to their customers [8].
To be able to provide all these services globally, freight forwarders require an extensive network of partners at
the locations that they serve. This is a natural organizational structure for large freight forwarders that possess a
wide international existence. These companies have their own branches all over the world and they work with
subsidiaries located under the same corporate umbrella. Despite segregated performance measures, the overall
profit is common and belongs to the central organization at the end of the day.
However, for small-sized local freight forwarders the situation is quite different. They need to build up
partnerships with other companies operating at the locations that they send shipments to, in order to find a
receiving agency. This is because the final receiver of the cargo requires certain bundle of services at the point of
destination. A horizontal collaboration is required between the shipping freight forwarder and the receiving
freight forwarder either for a single transaction or for a certain time period. This creates the problem of partner
selection among the alternatives that the decision maker has never met most of the time. Trust, service quality,
payment guarantee are all questions that rise throughout this selection problem.
In order to eliminate this problem, a different organizational structure has developed in the freight forwarding
industry. Freight forwarders unite under sectorial networks which are managed by a single company and they
utilize these networks in order to find service partners. The managing company does not need to be a freight
forwarder company but it should have expertise in the nature of the business. The member companies connect to
the network through a contract and an annual fee and by connecting they agree to obey certain trade rules within
the network. Some examples to these freight forwarder networks operating in the industry are IFLN, WCA,
Pacific Shipping, Combined Logistics Network, Asian Groupage Service, Planet Logistics Network and MacNels.

This formation is an example for inter-organizational relations in the transportation business where many
intermediaries perform various acts. [9] classifies inter-organizational relations under four main groups which are
2

Please cite: Altuntaş, C., Öztürkoğlu, Y.
For arding Agent Sele tion Throughout Glo al Freight For arder
Networks: A Fuzzy TOPSIS Analysis, in Proceedings of XI. International Logistics and Supply Chain Congress,
Melikşah Uni ersity, Kayseri, Turkey, 7-9 November, 2013, pp. 37-48.
dyadic linkages, organization sets, actions sets and networks. A network may appear in the form of a virtual
organization where multiple enterprises aim to combine their resources to achieve a larger scale of organizational
goals [10]. The network organization has less number of layers when compared with traditional organizations and
it is managed according to market mechanisms rather than bureaucratic and formal administrative procedures
[11]. [12] explains the rise of this organizational structure to (1) advanced communication and information
technology and (2) institutional restructuring in the form of deregulation, privatization and weakened social
contract between the employee and the employer. The groupage (LCL or LTL) system employed by the freight
forwarding companies is similarly, an inter-organizational network that enables an interchange of resources
between companies in order to reach equilibrium between demand and available services and satisfy the final
customer [13].
In freight forwarder networks, members located in different countries aim to combine the resources and
competencies in order to achieve mutual benefits. The members of these international freight forwarder networks

earn their profit from the difference between the price of the transportation service that they quote to the shipper
and the cost of the total service [1]. That’s why the price of the services they buy for resale is very important for
their financial performance like [14] suggest. It is also important to share the generated profit in a beneficial way
for all partners in the network in order to sustain a long-term collaboration [13], but this is dependent on finding
the right partner to work with. This study makes an attempt to explore these criteria and exhibit an exemplary
methodology to evaluate possible partners for horizontal collaboration in freight forwarder networks.

3.METHODOLOGY
3.1. Interview
In order to explore the partner selection criteria of freight forwarders within network organizations,
unstructured interviews were carried on with selected freight forwarders in Turkey. The sampling methodology
employed in this process is purposive sampling that depends on the researcher’s expertise in terms of sample
choice. Within this expertise framework, the samples that have specific expertise or experience related with the
subject are chosen purposively in order to reflect the population as exactly as possible [15]. Following this
methodology, five small-sized local freight forwarding companies operating in Turkey were selected for
interviewing and they were contacted by the researchers via e-mail correspondence for telephone interview
appointments. The interview dates were fixed and the researchers contacted the samples according to the
previously set schedules.
During the interview sessions, they were requested to refer shortly to the operational processes of the freight
forwarder network that they are a member of and then they were expected to itemize the criteria that they use in

order to select partners from these networks. The interviews were recorded by the researchers and transcript for
analysis. The operations of these networks were summarized firstly. Afterwards, the criteria listed by the
respondents were decoded; multiple referrals were eliminated in order to develop a filtered list.
Freight forwarders networks are generally established by an entrepreneur who has either worked for the
industry before or has expert knowledge about the business. This managing company contacts with members and
potential members from all over the world regarding the offerings of the network. When a freight forwarder wants
to become a member, the company has to pay an annual membership fee and additional fees for each branch that
it has at different locations. By joining the network, the company agrees to obey certain rules related with
payment terms, mutual liabilities and service quality. If any member company does not obey these rules, the
counter partner has the right to contact with the managing company and request them to solve the conflict. The
managing company organizes annual meetings in different locations of the world every year and the members are
obliged to join these meetings. In these gatherings, traditional conferences related with that year’s trade figures
and financial performance evaluations take place. Additionally, previously scheduled face-to-face meetings
between member freight forwarding companies are organized. All these activities are carried on in order to foster
cooperation and increase business.

3

Please cite: Altuntaş, C., Öztürkoğlu, Y.
For arding Agent Sele tion Throughout Glo al Freight For arder

Networks: A Fuzzy TOPSIS Analysis, in Proceedings of XI. International Logistics and Supply Chain Congress,
Melikşah Uni ersity, Kayseri, Turkey, 7-9 November, 2013, pp. 37-48.
Regarding the criteria to select the best partners in different countries of the world various items were
mentioned by the respondents. Trust, payment performance, coverage area and response time were among the
most frequently cited ones. The responses were in accordance with [3] findings regarding items that foster
horizontal collaboration in logistics industry such as reliability of the partner or the fair allocation mechanisms for
benefits. The list of the criteria and their short explanations are exhibited on Table 13.
TABLE 1.
The Criteria for Partner Selection in Freight Forwarder Networks
Criteria
1. Wide network

Explanation
The opportunity to work with the same partner in close or similar
countries as well.
2.Trust
Trust for rate quotations at the point of destination and trust for on time
payments.
3.Interest in Turkish market
Some forwarders are interested only in Chinese or US market. It is

important for the partner to have interest in shipments in to and out of
Turkey. Otherwise the partner does not pay enough attention to the
service quality of these transactions.
4.No other partners in Turkey Multiple network partners in the same country causes quotation
conflicts or shifting of traffic from partner to partner which is not
wanted.
5.The title of representation in The participation of top management or other decision makers to the
meetings
annual network meetings is important for the duration and stability of
the business relationships between partners.
6.Fast response
Fast response to rate or service requests to querries regarding shipments
is highly necessary under strong competition.
7.Market knowledge
It is important for the employees of the partner to have a good
knowledge of the market in order to quote competitive rates and inform
the partners about developments in the general environment.
8.Good level of English
These networks have members from all over the world but the common
language in logistics industry is English. So a good level of both oral

and written English is strongly required for effective communications.
9.Accessibility
Ability to reach contacts out of working hours is a plus. This is highly
required due to time differences between regions.
10.Payment performance
Partners generally apply certain credit terms to each other and they are
expected to pay on their due dates.
11.Stability in membership
Staying in the network for a long time and renewal of membership
every year is a plus.
12.Reciprocity principle
This is both a plus and a minus. Demanding business just because
giving business to a member should not be forced too much. All
partners have businesses distributed to many other partners and
sometimes the nature of a certain relationships should not be changed
just for paying back to a partner.
13.Ethics
Ethical behavior in terms of quotations, respect to existing business,
obeying the intermediary relations, avoiding direct contact with final
3

The items on the list are not prioritized depending on the importance or frequency of referral. There is not a specific sequence.

4

Please cite: Altuntaş, C., Öztürkoğlu, Y.
For arding Agent Sele tion Throughout Glo al Freight For arder
Networks: A Fuzzy TOPSIS Analysis, in Proceedings of XI. International Logistics and Supply Chain Congress,
Melikşah Uni ersity, Kayseri, Turkey, 7-9 November, 2013, pp. 37-48.
customers for eliminating partners are essential.

3.2. Fuzzy TOPSIS Example for Partner Selection in Freight Forwarder Networks
MCDM technique was initially introduced by [16] and then it was extended to present a unique technique,
called the technique for order of preference by similarity to ideal solution (TOPSIS). Reference [17] realized that
decision makers usually are more confident making linguistic judgments than crisp value judgments. He extended
TOPSIS to fuzzy environments; this extended version used fuzzy linguistic value (represented by fuzzy number)
as a substitute for the directly given crisp value in grade assessment.
The algorithm for Fuzzy TOPSIS is as follows [18];
Step1. Confirm the evaluation criteria and alternatives of the decision-making problem.
Step2. Use pair-wise comparison to get the degree of importance of all criteria and evaluate all of the
alternatives under each criterion, then ask decision makers to assign the alternatives an appropriate fuzzy number.
The linguistic variables developed by [19] given in Table 2 and Table 3.
TABLE 2.
Linguistic Variables for the Importance Weight of Each Criterion
Very low (VL)

(0, 0.1,0.3)

Low (L)

(0.1,0.3,0.5)

Medium (M)

(0.3,0.5,0.7)

High (H)

(0.5,0.7,0.9)

Very high (VH)

(0.7,0.9,1.0)
TABLE 3.

Linguistic Variables for the Ratings
Very poor (VP)

(0, 0,3)

Poor (P)

(0,3,5)

Fair (F)

(2,5,8)

Good (G)

(5,7,10)

Very good (VG)

(7,10,10)

Step3.Construct the fuzzy decision matrix
A set of numbers,’ with n criterion and m choices, fuzzy matrix and weighted vector is expressed:
5

Please cite: Altuntaş, C., Öztürkoğlu, Y.
For arding Agent Sele tion Throughout Glo al Freight For arder
Networks: A Fuzzy TOPSIS Analysis, in Proceedings of XI. International Logistics and Supply Chain Congress,
Melikşah Uni ersity, Kayseri, Turkey, 7-9 November, 2013, pp. 37-48.

C1

C2

A1  x11

A2  x21
D
  

Am  xm1

 Cn
x12
x22


xm 2

 x1n 
 x2 n 
  

 xmn 

Step4. Construct Normalized Decision Matrix
Normalize the decision matrix in order to make each criterion value is limited between 0 and 1, so that each
criterion is comparable. The initial data with respect to each criterion will be normalized by dividing the sum of
criterion values. For fuzzy data denoted by triangular fuzzy number as (aij,bij, cij);
Normalized fuzzy decision matrix denoted with R and formulated as;

R  [ rij ] mxn value rij which is within [0,1].
B is expressed as set of benefit criteria and measured with;
 a ij bij cij 
rij   * , * , *  ,
c c c 
 j j j

jB;

If jB then c j  max c ij
*

i

Step5. Construct the weighted normalized decision matrix
If V  [ vij ] mxn i=1,2,…,m, j= 1,2,…,n
then the weighted decision matrix is; vij  rij (.) w j
Step6. Determine the fuzzy ideal and the negative solutions
If the positive ideal fuzzy solution (A * ) and the negative ideal fuzzy solution (A  ) then;
A*  ( v1* , v*2 ,..., v*n )

A  ( v1 ,v2 ,..., vn )

Step7.Calculate the separation measures for each alternative
The distances between each alternative A * and A  are respectively:

d i*   d ( vij , v*j ) ,
n

j 1

i=1,2,…,m

d i   d (vij , vj ) , i=1,2,…,m
n

j 1

Step8. Calculate the relative closeness to the ideal solution

Ci 

d i

, i=1,2,…,m
d i*  d i
Step9. Rank the alternatives and give the last decision based on the Ci values.
3.3. Numerical Example/ Case Study
In this section, we present a numerical example to show how Fuzzy TOPSIS method can be applied in the
multi-criteria decision problems. We assume that there are three decision makers (D1, D2, D3) who decide to select
6

Please cite: Altuntaş, C., Öztürkoğlu, Y.
For arding Agent Sele tion Throughout Glo al Freight For arder
Networks: A Fuzzy TOPSIS Analysis, in Proceedings of XI. International Logistics and Supply Chain Congress,
Melikşah Uni ersity, Kayseri, Turkey, 7-9 November, 2013, pp. 37-48.
the best forwarders’ partner for their logistics company and there are five different forwarder partner alternatives
(A1, A2, A3, A4). To decide the forwarder partner selection criteria, unstructured interviews were made with five
different logistics companies. Based on the interviews, the selection criteria are trust (C1), wide network (C2), fast
response (C3), accessibility (C4) and ethics (C5). These are randomly selected for representation of the method.
Proposed fuzzy TOPSIS method is applied to solve the multi criteria problem.
The decision makers use the linguistic variables developed by [19] as shown on Table 2 and Table 3 for each
criterion. The triangular fuzzy numbers to express importance of each criterion are used. The linguistic terms
range from ‘‘very low” to ‘‘very high”. Each decision maker rates each criterion’s weight with respect to
linguistic term. The result is shown on Table 4.
TABLE 4.
Assesment Weights for Each Criteria in Linguistic Term

C1
C2
C3
C4
C5

DM1

DM2

DM3

H
H
VH
M
VH

H
VH
H
VH
H

VH
VH
M
M
VH

Same as previous step, each decision maker rates alternatives with respect to linguistic terms as shown on
Table 5.
TABLE 5.
Assesment Grades Given by Decision Makers for Each Alternative

C1

C2

C3

C4

A1
A2
A3
A4
A1
A2
A3
A4
A1
A2
A3
A4
A1
A2
A3
A4

DM1
G
VG
G
F
P
F
VG
F
VG
F
G
P
G
F
G
F

DM2
G
G
G
G
F
G
G
G
G
F
F
G
G
F
G
G

DM3
VG
G
F
G
F
G
VG
P
VG
G
VG
G
VG
G
VG
G
7

Please cite: Altuntaş, C., Öztürkoğlu, Y.
For arding Agent Sele tion Throughout Glo al Freight For arder
Networks: A Fuzzy TOPSIS Analysis, in Proceedings of XI. International Logistics and Supply Chain Congress,
Melikşah Uni ersity, Kayseri, Turkey, 7-9 November, 2013, pp. 37-48.
A1
A2
A3
A4

C5

G
G
VG
F

G
F
VG
G

G
G
VG
F

Then we construct the fuzzy decision matrix and weighted vector busing on Step3. In order to determine
objective weights by the fuzzy measure, the decision matrix needs to be normalized for each criterion to obtain the
best forwarders’ partner value of each criterion. Normalized fuzzy decision matrix and the weighted normalized
decision matrix are given in Table 6 and Table 7.
TABLE 6.
Normalized Fuzzy Decision Matrix
C1
(0.57,0.80, 1)
(0.57,0.80, 1)
(0.40,0.63, 0,93)
(0.40,0.63, 0,93)

A1
A2
A3
A4

C2
(0.13,0.43, 0,70)
(0.40,0.63, 0,93)
(0.63,0.90, 1)
(0.23,0.50, 0,77)

C3
(0.63,0.90, 1)
(0.30,0.57, 0,87)
(0.47,0.73, 0,93)
(0.40,0.63, 0,93)

C4
(0.57,0.80, 1)
(0.30,0.57, 0,87)
(0.57,0.80, 0,1)
(0.40,0.63, 0,93)

C5
(0.50,0.70, 1)
(0.40,0.63, 0,93)
(0.70,1, 1)
(0.30,0.57, 0,87)

TABLE 7.
Weighted Normalized Decision Matrix

Weights

C1
(0.57,0.77, 0,93)

C2
(0.63,0.83, 0,97)

C3
(0.50,0.70, 0,87)

C4
(0.43,0.63, 0,80)

C5
(0.63,0.83, 0,97)

And then, we calculate the positive ideal solution and the negative ideal solution for each alternative.
Following this step, closeness coefficient (CI) is calculates and the best alternative is determined. According to
the measures, we rank the alternatives. The ranking orders of the four candidates with different weights are given
on Table 8. According to these results, the order of rating among those alternatives is; A3> A2 > A1 > A4, The best
alternative would be A3.
TABLE 8.
Closeness Coefficient Table

A1
A2
A3
A4

S+
1,086
0,818
0,524
1,216

S0,665
0,748
1,100
0,238

CI*
0,380
0,478
0,677
0,163

RANK
3
2
1
4

4.CONCLUSION

8

Please cite: Altuntaş, C., Öztürkoğlu, Y.
For arding Agent Sele tion Throughout Glo al Freight For arder
Networks: A Fuzzy TOPSIS Analysis, in Proceedings of XI. International Logistics and Supply Chain Congress,
Melikşah Uni ersity, Kayseri, Turkey, 7-9 November, 2013, pp. 37-48.
This study deals with the problem of horizontal cooperation within freight forwarder networks and
specifically partner selection in such environments. The methodology represented in the paper explores the freight
forwarders’ criteria for partner selection and exhibits the steps to be followed in order to evaluate these criteria.
The problem has been described as a multi-criteria decision making method under uncertainty, prompting the
need for the method to handle imprecise judgments from decision makers . Fuzzy logic is considered ideal to deal
with this type of problems. Thus, fuzzy TOPSIS is applied to select the best forwarder partners at a specific port
or country. The method is easy to compute and the results are easily interpreted, because it directly gives the
definite value to the decision makers and helps them to evaluate the final results.
The study has its limitations though. The qualitative research held in order to explore selection criteria was
held in Turkey and the network evaluations of Turkish freight forwarders are bound with Turkish transportation
and logistics industry. However, freight forwarding can be considered as an international business where global
norms are highly accepted so a suggestion may be to conduct a real-life application of this study to an existing
freight forwarder network that is composed of companies from different countries. The results may yield the
network-specific evaluation criteria and their evaluations.
In terms of further suggestions, future studies can apply the proposed method to other areas of decisionmaking or the computation of weights of other objects. The methodology can be combined with other horizontal
cooperation areas that are valid between freight forwarders or the scope may be extended to other logistics service
providers (LSPs) in order to contribute the literature for horizontal cooperation in logistics.

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9

Please cite: Altuntaş, C., Öztürkoğlu, Y.
For arding Agent Sele tion Throughout Glo al Freight For arder
Networks: A Fuzzy TOPSIS Analysis, in Proceedings of XI. International Logistics and Supply Chain Congress,
Melikşah Uni ersity, Kayseri, Turkey, 7-9 November, 2013, pp. 37-48.

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