Chapter 12 Logistics and Global Distribution
12.1 Logistics
 Military term used by business
 Planning for, implementing, controlling the flow and storage of raw
materials, inventory and finished goods from point of origin to point of
consumption.
 Should be efficient and cost-effective
 “Right” products reach the right place in the right quantity at the right
time and at the right price to satisfy demand
Supply Chain Fig. 12.1
Tier 1
Retailers
Tier 2
dls
Wholesaler
Tier 2
Tier 1
Customer
Tier 2
Sales
Agent
Tier 1
Tier 2
Raw
Materials
M
Suppliers
Processors
Manufacturers
Canadian
Company
’
Distributor
Retailers
Customer
Supply chain - crosses more international boundaries / more complicated
 Nickel mined in Sudbury by Inco
 Made into steel in China by a tier 2 processor
 Manufactured into vehicle frames by Presstran, a tier 1 manufacturer
 Assembled into cars by Ford Canada
 Sold through dealerships to customers
Importance of Logistics
Four basic components of logistics:
 Sourcing: Find dependable suppliers for required materials
o Source internationally if cheaper, not available locally, technology
not available in home country, or best components are in foreign
country
 Warehousing and Storage: Storage of goods and movement along
stages of transit from source to company to final consumer.
o Four functions:
 receiving goods into warehouse
 transferring goods to location in the warehouse
 select necessary goods for customer or manufacturing process
 loading goods for shipment or to production line
 Physical Distribution: Actions required to move and transfer
ownership of goods from producer to consumer
o Intermodal refers to the use of more than one shipping mode
(trucks, rail, marine, air, pipeline, digital)
 Information Management: Management of the movement of
information
 Many companies use electronic data interchange (EDI)
 EDI allows business computers to communicate with each other in
integrated networks to accelerate transmission of data
 EDI has both advantages and disadvantages – see pg. 374
12.2 Distribution and Modes of Transportation
Decisions are affected by;
 Topography
 Climate and Weather
 Cost
 Infrastructure/availability
- Modes see stats pg 382
- Canadian exports: 70% by boat; 25% air
- Canadian imports: 40% by boat; 30% road


Numerous factors impact which type of transportation to use:

Topography

Climate

Cost of various methods

Type of product being shipped

Final destination
Generally, there are four main modes of transportation:

Road (short and medium distances, for small or medium cargo)

Rail (good for bulk materials, or for really long distances)

Sea (necessary for overseas trade and cheaper than air)

Air (faster, most expensive, good for perishables or remote areas)
12.3 Export Planning
Intermediaries - help import and export goods
 Freight Fowarders: Services may include negotiating rates for
shipping, crating, marketing, and storing; may gather several small
shipments to achieve lower overall rates
 Customs Brokers: Specialize in clearing goods through customs in a
country by assisting with classification, valuation and duty
assessment; may arrange for warehousing and transportation after
clearing customs
 Logistics Companies: Provide services from door of exporter to the
door of the importer.
Export and Import Documentation
 Examples of export documents listed on pg 389
 Commercial invoice – required for customs; is the “bill”
 Export packing list – list of items but NOT prices
 Certificate of origin – where the product/components are from
 Certificate of inspection – quality check (free from defects)