1. Global Distribution and Logistics
Chapter 15
Global Distribution and Logistics

2. 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.

3. 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

4. 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?

5. 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.

6. 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

7. 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.

8. Intermediaries Types of intermediary relationship Distributorship
Agency
Type of exporting function
Indirect exporting
Direct exporting
Integrated distribution

9. Screening Intermediaries
Performance
Professionalism

10. 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

11. 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.

12. The Solution to the Gray Market Problem?
A contractual relationship that ties businesses together.

13. 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.).

14. 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

15. 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.

16. 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

17. 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.

18. 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.

19. 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

20. 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

21. 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

22. 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

23. 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

24. 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.

25. 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.