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Global Distribution and Logistics
Chapter 15 Global Distribution and Logistics
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In International Distribution
The firm sells to its customers: directly through its own sales force. indirectly through independent intermediaries. indirectly through an outside distribution system with regional or global coverage.
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Channel Configurations
Manufacturer Manufacturer Originator Agent Agent Agent Wholesaler Wholesaler Industrial Distributor Agent Retailer Agent Retailer Industrial Distributor Retailer Retailer Consumer Industrial User Consumer / Industrial User Consumer Products Industrial Products Services
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Channel Design Considerations
Company objectives Determined by company objectives for market share and profitability. Customer characteristics What do they need, why, when, and how? Distribution culture The structural linkages and functional characteristics of existing channels. Competition What channels does the competition use?
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Channel Design Considerations
Character The nature of the product impacts the design of the channel. Capital Describes the financial requirements for setting up a channel system. Cost is the expenditure incurred in maintaining a channel once it is established.
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Channel Design Considerations
Coverage The number of areas in which a product is represented and the quality of that representation. Types of coverage Intensive Selective Exclusive
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Channel Design Considerations
Control The use of intermediaries, product type, and the marketer’s use of power will determine the amount of market control. Continuity Responsibility of the marketer and is expressed through market commitment. Communication Provides the exchange of information that is essential to the functioning of the channel. Social, cultural, technological, time and geographical distances may cause problems.
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Intermediaries Types of intermediary relationship Distributorship
Agency Type of exporting function Indirect exporting Direct exporting Integrated distribution
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Screening Intermediaries
Performance Professionalism
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Channel Management Coordinating two independent entities with shared goals. The relationship needs to be managed for the long term. Factors complicating channel management Ownership Geographic, cultural, and economic distance Different rules of law
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Gray Markets (Parallel Importation)
Arguments for: The right to “free trade.” Consumers benefit from lower prices. Discount distributors have found a profitable market niche. Arguments against: Gray marketers take unfair advantage of trademark owner’s marketing and promotion. Parallel imports deceive consumers by not meeting product standards or expectations of after-sale service.
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The Solution to the Gray Market Problem?
A contractual relationship that ties businesses together.
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International Logistics
designing and managing of a system that controls the flow of materials into, through, and out of the international corporation (e.g., JIT, EDI,ESI etc.).
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The Phases of Int. 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
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Total-cost concept Trade-off concept
Minimizing overall logistics costs by identifying activity-based costs. 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.
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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
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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.
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Dimensions of 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.
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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 Government involvement, the UNCTAD and the 40/40/20 concept
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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 invoice certificate of origin import and foreign exchange licenses
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International Inventory Issues
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
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Order Cycle Time The total time that passes between the placement of an order and the receipt of the merchandise. Altering cycle times Change transportation methods Change inventory locations Change ordering process
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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
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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.
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Logistics and Environments
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.
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