Chapter 16 Global Logistics and Materials Management A Definition of International Logistics • International logistics - • The systems approach helps the firm explicitly recognize the linkages among the traditionally separate logistics components within and outside of the corporation. • © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. A Definition of International Logistics • The systems approach also ensures – – – – JIT EDI ESI ECR - © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. A Definition of International Logistics • Phases of international logistics – Materials management – Physical distribution - © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. A Definition of International Logistics • The growth of logistics as a field has brought to the forefront three major concepts: – Systems concept - – Total-cost concept - – Trade-off concept - © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Supply Chain Management • Supply chain management – An integration of the three system concepts. – – Includes coordination and collaboration with channel partners. – © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The Impact of International Logistics • Logistics costs comprise between 10 and 30 percent of the total landed cost of an international order. • • Factors necessary for the use of logistics as a competitive tool: – – – © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The Impact of International Logistics • New dimensions of international logistics – Basic differences between domestic and international logistics: • • • © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. International Transportation Issues • International transportation is of major concern to the international firm because transportation determines how and when goods will be received. • © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. International Transportation Issues • Transportation infrastructure – – – © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. International Transportation Issues • Availability of modes - Ocean shipping – Three types of vessels operate in ocean shipping: – Container ships are used for carrying standardized containers that facilitate the loading and unloading of cargo and intermodal transfers. – © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. International Transportation Issues • Availability of modes - Air shipping – High-value items are mostly shipped by air, particularly if they have a high density (high weight-to-volume ratio). – © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. International Transportation Issues • Choice of modes is influenced by: – Transit time • • • © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. International Transportation Issues • Choice of modes is influenced by: – Predictability • • • © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. International Transportation Issues • Choice of modes is influenced by: – Cost • – Noneconomic factors • • © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Exhibit 16.5 - Evaluating Transportation Choices © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The International Shipment • International shipments involve multiple types of carriers. • • Trading regions such as the European Union have greatly simplified their required documentation for shipments. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Exhibit 16.6 - Documentation for an International Shipment © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The International Shipment • Intermediaries which provide assistance with international shipment – International freight forwarder - – Customs broker - © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. International Inventory Issues • Inventory carrying costs can be up to 25% of the value of an inventory. • • Factors which determine the level of inventory to be maintained: – – – © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. International Inventory Issues • Order cycle time – – Two dimensions of major importance are the length of the total order cycle and the consistency of the order cycle. – Altering cycle times • • • © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. International Inventory Issues • Customer service levels – – A management-determined constraint within the logistics system. – • Inventories are used as strategic tools for dealing with currency valuation changes or hedging against inflation. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. International Storage Issues • Factors determining the location of storage facilities – – – • To optimize the logistics system, products should be ranked according to warehousing needs. – – – © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. International Storage Issues • Outsourcing - • Reasons for outsourcing – – – – © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. International Storage Issues • Foreign trade zones – Special areas used for warehousing, packaging, inspection, labeling, exhibition, assembly, fabrication, or transshipment of imports without burdening the firm with duties. – – Benefits both the government of the respective country as well as the individual firms. – © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. International Packaging Issues • Packaging – – Responsibility for appropriate packaging rests with the shipper of goods. – © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. International Packaging Issues • Packaging – – Package weight should be based on delivery mode. – – One solution to the packaging problem in international logistics has been the development of intermodal containers. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Exhibit 16.7 - Stresses in Intermodal Movement © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Management of International Logistics • Centralized logistics management - • Decentralized logistics management – – Leads to greater local management satisfaction and better adaptation to local market condition. – © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Management of International Logistics • Contract logistics – Outsourcing logistical management by employing outside logistical expertise. – – Allows marketers to take advantage of an existing network, complete with resources and experience. – © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The Supply Chain and the Internet • Global net e-commerce revenue is expected to surpass the $1 trillion dollar mark by 2012. • • Companies using e-commerce need to be prepared for 24-hour order-taking and customer service. • © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Logistics and Security • Logistics systems are vulnerable to terrorist attacks and piracy; to prevent them, governments impose security measures (screening of shipments and shippers). • Security measures: – – © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Logistics and Security • Strategies employed for reducing security costs: – – Eliminate the use of vulnerable international transportation. – © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Recycling and Reverse Logistics • The firm’s ability to develop reverse logistics is a key determinant for market acceptance and profitability. • Reverse distribution – – Is a complex customer service, inventory control, information management, cost accounting, and disposal process. – © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.