1. Logistics and supply chain management
CHAPTER 16
Logistics and supply chain management
Visit for the latest in business news stories.
Copyright © John Wiley & Sons

2. Chapter 16 Learning Objectives
Understand the escalating importance of logistics and supply-chain management
Learn about materials management and physical distribution
Learn why international logistics is more complex than domestic logistics
See how the transportation infrastructure in host countries often dictates a manager’s options
Learn why international inventory management is crucial for success
Learn about interactions between different logistics components
Decide who should be in charge of logistics
Appreciate how information and data exchange are pivotal for supply-chain management
Understand the vulnerability and support of logistics
See and consider the linkages between logistics and sustainability
Chapter 16 Learning Objectives 2
Chapter 16
Czinkota: International Business, 8e

3. International Logistics
International Logistics – The design and management of a system that controls the forward and reverse flow of materials, services, and information into, through, and out of the international corporation 3
Chapter 16
Czinkota: International Business, 8e

4. International Logistics
Materials Management – The timely movement of raw materials, parts, and supplies into and through the firm
Physical Distribution – The movement of the firm’s finished product to its customers
Supply Chain Concepts:
Systems Concept
Total Cost Concept
Trade-off Concept 4
Chapter 16
Czinkota: International Business, 8e

5. Supply Chain Management
A series of value-adding activities connects a company’s supply side with its demand side
Extended enterprise occurs when companies consider the entire supply chain to be a single organization
The Impact of International Logistics
Make up 10 to 30 percent of the total landed cost of an international order
Advances in technology and communication can improve logistics systems
The fundamentals of a country’s logistics system remain the best predictor of cost and efficiency 5
Chapter 16
Czinkota: International Business, 8e

6. Transportation Infrastructure
Around the globe, major infrastructure variations are often encountered
Some countries have excellent inbound and outbound transportation systems but weak internal transportation links
New routes of commerce have opened up
Logistics platform is determined by a location’s ease and convenience of market reach under favorable circumstances
The logistics managers must learn about existing and planned infrastructure
Extreme variations exist in the frequency of transportation services 6
Chapter 16
Czinkota: International Business, 8e

7. Global Transport Knowledge Partnership
Global Transport Knowledge Partnership (GTKP) is an innovative partnership of global organizations, local policy makers, experts, and interested users working to make effective use of international transport knowledge.
gTKP's mission is to support sustainable and efficient transport in developing and transition countries by providing free access to information, expertise, and free technical advice. gTKP currently offers access to sector experts and best practice knowledge in 8 themes in road transport. Themes include environment and climate change, finance and economics, governance, road safety, rural transport, social development, trade and transport, and urban mobility.
Source: 7
Chapter 16
Czinkota: International Business, 8e

8. Focus on Entrepreneurship: Late, Lost, and Damaged Goods
“Winners” of the Roberts Express “Shipments from Hell” contest describe shipments that were lost, broken, or even burned. The contest is judged by representatives from Industry Week and Transportation and Distribution. The stories behind the “Shipments from Hell” illustrate that a host of bizarre circumstances can turn an ordinary shipment into a comedy of errors. 8
Chapter 16
Czinkota: International Business, 8e

9. Ocean Shipping Types of service vessels
Liner service offers regularly scheduled passage on established routes
Bulk service provides contractual services for individual voyages or for prolonged periods of time
Tramp service is available for irregular routes and is scheduled only on demand
Type of cargo a vessel can carry
Conventional (break bulk) vessels – For oversized/unusual cargo
Container ships – Standardized containers
Roll-on-roll-off (RORO) ships – Oceangoing ferries
Lighter Aboard Ship (LASH) – Barges stored on the ship and lowered at the point of destination to operate on inland waterways
Limited by what the port can accommodate 9
Chapter 16
Czinkota: International Business, 8e

10. Air Shipping Airfreight is available to and from most countries
It is often a matter of national prestige to operate a national airline
About 20 percent of the worlds manufactured exports by weight travel by air
Items tend to be high value or high weight to volume ratio (density)
Airlines continue to make major efforts to increase the volume of air freight 10
Chapter 16
Czinkota: International Business, 8e

11. Selecting a Mode of Transport
Period between departure and arrival of carrier is longer for ocean than for air
Perishable products require shorter transit times
Significant reliability issues
Vagarities of nature may impose delays
Tracking becomes important
Priced on the basis of both cost and value
The manager must decide when the higher cost of airfreight can be justified
Preferential policies by government
International quota systems of transportation
Transit Time
Predictability
Cost of Transportation
Noneconomic Factors 11
Chapter 16
Czinkota: International Business, 8e

12. Focus on E-Business: Product Tracking
Transportation service providers have realized that for their corporate clients, a greater sense of control translates into calculations of predictability, reliability, and competitiveness. In a case of business innovation spilling over into the policy world, governments and regulatory agencies have started to take notice of developments in product tracking technology. 12
Chapter 16
Czinkota: International Business, 8e

13. Export Documentation
Export declaration – A shipping document detailing the type, destination, shipping, timing, and value of an export shipment
Bill of Lading – A contract between the exporter and the carrier indicating that the carrier has accepted responsibility for the goods in return for payment
Straight bill of lading – Nonnegotiable, used in prepaid transactions
Shipper’s order bill of lading – Negotiable, can be bought, sold, or traded while goods are in transit, and is used for letter of credit transactions
Commercial Invoice – A bill for the goods staging basic information
Freight forwarders specialize in handling documentation 13
Chapter 16
Czinkota: International Business, 8e

14. Other Export Documents
Consular Invoices
Export Licenses
Certificates of Origin
Inspection Certificates
Dock/ Warehouse Receipts
Certificates of Origin
Insurance Certificates
Destination Control Statements
Export Declarations
Export Packaging Lists 14
Chapter 16
Czinkota: International Business, 8e

15. Terms of Shipment and Sale
Incoterms – Internationally accepted standard definitions for the terms of sale set by the International Chamber of Commerce in 1936
EXW (ex-works) – Prices apply only at the point of origin
FCA (free carrier) – Seller is responsible for loading goods into the means of transportation and buyer is responsible for all subsequent expenses
FAS (free alongside ship) – The exporter quotes a price including delivery of goods alongside a vessel at the port
FOB (free on board) – Applies only to vessel shipments, where price covers all expenses up to delivery of goods
CFR (cost and freight) – Price includes cost of transportation to named port
CIF (cost, insurance, and freight) – Price includes all charges to point of debarkation
CPT (carriage paid to) – The price quoted for shipments not involving waterway transport
DDP (delivered duty paid) – Prices includes import duties and inland transportation to buyer’s premises
DDU (delivered duty unpaid) – Only customs duty and taxes paid by buyer 15
Chapter 16
Czinkota: International Business, 8e

16. International Inventory Issues
General Inventory Issues
Inventory – Materials on hand for use in the production or finished goods
Inventory carrying costs – The expense of maintaining inventories
Just-in-time Inventory – Materials scheduled to arrive when needed
Order Cycle Time – The amount of time between the placement of an order and receipt of merchandise
Length of the total order cycle
EDI – Electronic data interchange can streamline processing and administration as well as reduce costs
Order filling time can increase due to lack of familiarity
Transportation time is longer due to distances involved
Consistency – Delivery times may vary more internationally 16
Chapter 16
Czinkota: International Business, 8e

17. International Inventory Issues
Customer Service Levels
The responsiveness that inventory policies permit for any given situation
The international service level should be based on expectations encountered in each market
Strategically placed depots can boost responsiveness
Inventory as a Strategic Tool
Can help deal with currency valuation changes
Can be a hedge against inflation 17
Chapter 16
Czinkota: International Business, 8e

18. International Packaging Issues
Packaging that is adequate for domestic shipping may be inadequate for international transportation
Responsibility of the shipper
Environmental conditions such as climate must also be considered
Weight of packaging affects cost of shipping
Customer instructions must also be followed
May have to use double packaging if promotional value of packaging is to be maintained
Intermodal containers help resolve many packaging issues 18
Chapter 16
Czinkota: International Business, 8e

19. International Storage Issues
Storage Facilities
Location decision – How many distribution centers to have and where to locate them
Warehouse decisions must be carefully analyzed
The logistician should analyze international product sales and then rank order products according to warehousing needs
Special Trade Zones:
Foreign Trade Zones
Export Processing Zones
Special Economic Zones 19
Chapter 16
Czinkota: International Business, 8e

20. Management of International Logistics
Centralized Logistics Management – Headquarters staff retains decision-making power over logistics
Decentralized Logistics Management – Makes local managers responsive but decreases global coordination
Outsourcing Logistics Services
Collaborating with transportation firms, private warehouse, and other specialists
One-stop logistics allows shippers to buy all the transportation modes and functional services from a single carrier 20
Chapter 16
Czinkota: International Business, 8e

21. The Supply Chain and the Internet
Can now conduct more global comparisons among suppliers
Can learn more about the structure of the supplier network
Establishing e-commerce means the company should be prepared for 24-hour service
Some companies build their own international distribution network using the company web site 21
Chapter 16
Czinkota: International Business, 8e

22. Logistics and Security
Due to terrorism and security concerns everything takes longer
Modern transportation systems have proved to be critical to terrorist activities
Logistics systems can be the targets of attacks
New safeguards for international shipments affect the ability of firms to efficiently plan their international shipments 22
Chapter 16
Czinkota: International Business, 8e

23. Wallenius Wilhelmsen Logistics Security
In response to the increased threat of terrorism throughout the world, Wallenius Wilhelmsen Logistics has implemented protective security measures to create a secure work environment, to safeguard customers' cargo, and to protect owners' investments.
Wallenius Wilhelmsen Logistics' security policy is based on the following overriding principles:
Awareness
Prevention
Response
Consequence Management
Source: 23
Chapter 16
Czinkota: International Business, 8e

24. Focus on Politics: Logistics and National Security
The Department of Homeland Security (DHS) is designed to coordinate U.S. efforts in the war against terror. Some of the DHS agencies affect international shippers, including the Customs Service, Coast Guard, and Transportation Security Administration. For international importers and exporters it means that more documentation and notification time are added to the process. 24
Chapter 16
Czinkota: International Business, 8e

25. Logistics and the Environment
Must consider environmental laws, expectations, and self-imposed goals while planning logistics
Reverse distribution systems – Ensures that the firm can retrieve a product from the market for subsequent use, recycling, or disposal
Managers are often faced with the trade-offs between environmental concerns and logistical efficiency
Environmental practices are those that bring about fewer shipments, less handling, and more direct movement 25
Chapter 16
Czinkota: International Business, 8e

26. Focus on Business: Reverse Logistics, or Turning “Trash into Cash”
Reverse logistics concerns the handling and disposition of returned products and use of related materials and information. This costs U.S. companies more than $35 billion annually. With the rising costs of oil and other commodities, companies are beginning to see used products less as trash and more as the sum of their raw materials, energy, and labor. 26
Chapter 16
Czinkota: International Business, 8e

27. Reverse Logistics during the Holidays
According to a survey commissioned by eBay, nearly 60 percent of Americans receive unwanted gifts during the holidays. More and more companies acknowledge that reverse logistics is a critical part of the supply chain. Without a comprehensive return system, retailers can lose millions in revenue.
Two recent studies show returned merchandise costs the consumer electronics industry $10 billion annually, while personal computer returns amount to $1.5 billion per year.
Many companies are seeking new ways to develop or enhance their return systems. For example, companies such as Eastman Kodak and Hewlett-Packard have implemented successful reuse and recycling programs of returned items.
Source: 27
Chapter 16
Czinkota: International Business, 8e