1. International Distribution Systems

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. International Distribution Systems
I. Problems in International Distribution
1) More stringent legal restrictions
2) Goods must be transferred further
3) May be difficult to get product to the consumer (infrastructure issues)

4. Intermediaries Sources for Finding Intermediaries
Distributor inquires
Governmental agencies
Commerce Department’s Trade Opportunities Program
U.S. Exporters Yellow Pages
Private sources
Trade directories
Screening Intermediaries
Performance
Professionalism

5. Selection of Intermediaries
Agents
Foreign (Direct)
Brokers
Manufacturer’s Reps
Factors
Managing agents
Purchasing Agents
Domestic (Indirect)
Export Agents
EMCs
Webb-Pomerene
Commission agents
Distributors
Foreign (Direct)
Distributors/dealers
Import jobbers
Wholesalers/retailers
Domestic (Indirect)
Domestic wholesalers
EMCs
ETCs
Complementary marketers

6. International Distribution Systems
II. Moving the Product Overseas
1) Ocean shipping
2) Air freight
III. Types of Middlemen
1) Freight forwarders
2) Trading Companies
3) Export Management Cos.

7. Real Physical Distribution Costs Between Air and Ocean Freight - Singapore to the United States
In this example, 44,000 peripheral boards worth $7.7 million are shipped from a Singapore plant to the U.S. West Coast. Cost of capital to finance inventories is 10 percent annually; $2,109 per day to finance $7.7 million.
Transport costs $31,790 $ 127,160
(in transit 21 days) (in transit 3 days)
In-transit inventory
financing costs $ 44,289 $ 6,328
Total transportation costs $ 76,079 $ 133,487
Warehousing inventory costs (60
Singapore and U.S. $ 126,540
Warehouse rent $ 6,500
Real physical distribution costs $ 209,119 $ 133,487
15-15
Ocean Air
SOURCE: Adapted from: "Air and Adaptec'c Competitive Strategy,” International Business, September 1993, p.44.
Irwin/McGraw-Hill

8. International Distribution Systems
III. Types of Middlemen (Cont.)
4) Piggybacking
5) Domestic export middlemen
IV. Choosing a Middleman

9. International Logistics
V. International Logistics - the designing and managing of a system that controls the flow of materials into, through, and out of the international corporation.
Major decision areas:
locating plants and warehouses; choice of transportation mode; managing inventory; packaging.

10. 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

11. 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

12. International Logistics
VI. Inventory Management Considerations
- Carrying costs
- Order cycle time
- Order cycle consistency
- Difficulty in applying service rules

13. 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

14. 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