1. Chapter 16 Global Logistics and Materials Management

2. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. A Definition of International Logistics International logistics - The systems approach helps the firm explicitly recognize the linkages among the traditionally separate logistics components within and outside of the corporation.

3. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. A Definition of International Logistics The systems approach also ensures –JIT - –EDI - –ESI - –ECR -

4. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. A Definition of International Logistics Phases of international logistics –Materials management - –Physical distribution -

5. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. A Definition of International Logistics The growth of logistics as a field has brought to the forefront three major concepts: –Systems concept - –Total-cost concept - –Trade-off concept -

6. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Supply Chain Management Supply chain management –An integration of the three system concepts. – –Includes coordination and collaboration with channel partners. –

7. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The Impact of International Logistics Logistics costs comprise between 10 and 30 percent of the total landed cost of an international order. Factors necessary for the use of logistics as a competitive tool: – – –

8. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The Impact of International Logistics New dimensions of international logistics –Basic differences between domestic and international logistics:

9. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. International Transportation Issues International transportation is of major concern to the international firm because transportation determines how and when goods will be received.

10. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. International Transportation Issues Transportation infrastructure – – –

11. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. International Transportation Issues Availability of modes - Ocean shipping –Three types of vessels operate in ocean shipping: –Container ships are used for carrying standardized containers that facilitate the loading and unloading of cargo and intermodal transfers. –

12. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. International Transportation Issues Availability of modes - Air shipping –High-value items are mostly shipped by air, particularly if they have a high density (high weight-to-volume ratio). –

13. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. International Transportation Issues Choice of modes is influenced by: –Transit time

14. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. International Transportation Issues Choice of modes is influenced by: –Predictability

15. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. International Transportation Issues Choice of modes is influenced by: –Cost –Noneconomic factors

16. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Exhibit 16.5 - Evaluating Transportation Choices

17. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The International Shipment International shipments involve multiple types of carriers. Trading regions such as the European Union have greatly simplified their required documentation for shipments.

18. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Exhibit 16.6 - Documentation for an International Shipment

19. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The International Shipment Intermediaries which provide assistance with international shipment –International freight forwarder - –Customs broker -

20. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. International Inventory Issues Inventory carrying costs can be up to 25% of the value of an inventory. Factors which determine the level of inventory to be maintained: – – –

21. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. International Inventory Issues Order cycle time – –Two dimensions of major importance are the length of the total order cycle and the consistency of the order cycle. –Altering cycle times

22. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. International Inventory Issues Customer service levels – –A management-determined constraint within the logistics system. – Inventories are used as strategic tools for dealing with currency valuation changes or hedging against inflation.

23. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. International Storage Issues Factors determining the location of storage facilities – – – To optimize the logistics system, products should be ranked according to warehousing needs. – – –

24. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. International Storage Issues Outsourcing - Reasons for outsourcing – – – –

25. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. International Storage Issues Foreign trade zones –Special areas used for warehousing, packaging, inspection, labeling, exhibition, assembly, fabrication, or transshipment of imports without burdening the firm with duties. – –Benefits both the government of the respective country as well as the individual firms. –

26. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. International Packaging Issues Packaging – –Responsibility for appropriate packaging rests with the shipper of goods. –

27. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. International Packaging Issues Packaging – –Package weight should be based on delivery mode. – –One solution to the packaging problem in international logistics has been the development of intermodal containers.

28. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Exhibit 16.7 - Stresses in Intermodal Movement

29. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Management of International Logistics Centralized logistics management - Decentralized logistics management – –Leads to greater local management satisfaction and better adaptation to local market condition. –

30. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Management of International Logistics Contract logistics –Outsourcing logistical management by employing outside logistical expertise. – –Allows marketers to take advantage of an existing network, complete with resources and experience. –

31. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The Supply Chain and the Internet Global net e-commerce revenue is expected to surpass the $1 trillion dollar mark by 2012. Companies using e-commerce need to be prepared for 24-hour order-taking and customer service.

32. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Logistics and Security Logistics systems are vulnerable to terrorist attacks and piracy; to prevent them, governments impose security measures (screening of shipments and shippers). Security measures: – –

33. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Logistics and Security Strategies employed for reducing security costs: – –Eliminate the use of vulnerable international transportation. –

34. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Recycling and Reverse Logistics The firm’s ability to develop reverse logistics is a key determinant for market acceptance and profitability. Reverse distribution – –Is a complex customer service, inventory control, information management, cost accounting, and disposal process. –