Developed by Cool Pictures & MultiMedia PresentationsCopyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved. Logistics and Supply Chain Management Chapter 17

Developed by Cool Pictures & MultiMedia PresentationsCopyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved. A Definition of International Logistics “…designing and managing of a system that controls the flow of materials into, through, and out of the international corporation” In taking a systems approach to linkages among logistics components, firms can incorporate efficiencies through system design and management techniques –JIT - just-in-time –EDI - electronic data interchange –ESI - early supplier involvement –ECR - efficient customer response systems

Developed by Cool Pictures & MultiMedia PresentationsCopyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved. The Phases of International Logistics Materials management –Timely movement of raw materials, parts, and supplies through the firm Physical distribution –Movement of the firm’s product to its customers

Developed by Cool Pictures & MultiMedia PresentationsCopyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved. The Systems Concept The extensive and complex materials-flow activities within and outside of the firm must be considered in the context of their interaction. Total-cost concept –Minimizing overall logistics costs by identifying activity-based costs that impact after-tax profits. Trade-off concept –Recognize that logistics activities involve trade-off in areas such as time-saved in delivery versus the increased costs of expedited delivery systems.

Developed by Cool Pictures & MultiMedia PresentationsCopyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved. Supply-Chain Management An integration of the three system concepts. Value-added activities connect the company’s supply side with the demand side. Efficient supply chain design increases customer satisfaction and saves money –reduces inventory holding costs –increases inventory turnover cycles –reduces operating costs –reduces order handling and mailing costs –makes firm more price competitive

Developed by Cool Pictures & MultiMedia PresentationsCopyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved. The Impact of International Logistics Logistical costs are 10% to 30% of the total landed cost of an international order. Factors necessary for the use of logistics as a competitive tool: –Close collaboration with suppliers and customers. –Technologically advanced information processing and communication exchange capabilities. –An integrated business infrastructure.

Developed by Cool Pictures & MultiMedia PresentationsCopyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved. New Dimensions of International Logistics Basic differences –Distance –Currency variation and exchange rate differences –Varying entry regulations –Different transportation modes Country-specific differences –Transportation systems and intermediaries vary. –Reliability of carriers may be different. –Computation of freight rates may be different.

Developed by Cool Pictures & MultiMedia PresentationsCopyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved. International Transportation Issues Transportation infrastructure –Roads,rail lines, airports, seaports, pipelines Availability of transportation modes –Overland shipping, ocean shipping, air shipping Choice of modes –Transit time, predictability, cost, noneconomic factors Noneconomic Factors –Government involvement, the UNCTAD and the 40/40/20 concept

Developed by Cool Pictures & MultiMedia PresentationsCopyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved. International Shipment Documentation Bill of Lading –acknowledges receipt of goods Shipper’s export declaration –states proper authorization for export under general or special validated export license Packing list of contents Dock and warehouse receipts Collection documents –commercial (consular) invoice –certificate of origin –import and foreign exchange licenses

Developed by Cool Pictures & MultiMedia PresentationsCopyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved. International Inventory Issues Inventory carrying costs can be up to 25% of the value of an inventory. Just-in-Time policies minimize inventory volume by making it available when needed. Inventories assist in the movement of products. Factors in deciding on the level of inventory to maintain: –Order cycle time –Desired level of customer service –Use of Inventory as a strategic tool

Developed by Cool Pictures & MultiMedia PresentationsCopyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved. Order Cycle Time The total time that passes between the placement of an order and the receipt of the merchandise. –Length of the total order cycle Longer cycle in international marketing than domestic –Consistency of the order cycle More complicated delivery mode reduces consistency Altering cycle times –Change transportation methods –Change inventory locations –Change ordering process

Developed by Cool Pictures & MultiMedia PresentationsCopyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved. International Storage Issues The storage facilities location decision –Availability –Adequacy –Physical Conditions Optimizing the logistics system –Rank products by warehousing needs “A” products stocked in all distribution center “B” products stored only in selected locations “C” products with low demand stocked only at headquarters

Developed by Cool Pictures & MultiMedia PresentationsCopyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved. International Packaging Issues Packaging for domestic shipping may NOT be adequate for international shipping. Goods should arrive in a safe, undamaged, maintainable, and presentable condition. Packaging should minimize the stress of intermodal movement and storage. Protected from climatic conditions. Weight based on delivery mode. Follow customer instructions for labeling, packaging, and routing.

Developed by Cool Pictures & MultiMedia PresentationsCopyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved. Management of International Logistics Centralized logistics management –Headquarters retains decision-making power and control, coordinates all logistics. Decentralized logistics management –The “decentralized full profit center model” allows the organization to respond to local market conditions. Possibility for loss of coordination. Contract logistics –Growing preference to outsource logistics function to “third party” specialists such as FedEx or UPS. The supply chain and the Internet

Developed by Cool Pictures & MultiMedia PresentationsCopyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved. Logistics and the Environment Reverse Distribution –“a system responding to environmental concerns that ensures a firm can retrieve a product from the market for subsequent use, recycling, or disposal”