Global Logistics

Chapter 1: Introduction New market are opening up and existing market are expanding worldwide A global financial network has developed that allows multi-national enterprises to expand their operation Manufacturers have increased new material and component acquisition from other countries (i.e., global sourcing)

The world economy is becoming more interdependent

To support non-domestic markets a company must have a distribution system or network that satisfies the particular requirement of those market

Chapter 1: Introduction To support non-domestic markets a company must have a distribution system that satisfied the particular requirement of those markets Distribution Systems in Developing Countries

Distribution Systems in Developed Countries

Africa, South America or Asia Inadequate transportation and storage facilities a large labor force of mainly unskilled workers An absence of distribution support systems

Japan, Canada, United States and most Western Europe have good transportation systems Have high-technology warehousing Skilled labor force

Chapter 2: International Distribution Channel Strategies

Factors that influence a companys decision to enter international markets;

1. 2. 3. 4.

Market potential Geographic diversification Excess production capacity Products near the end of their cycle in the domestic market could generate growth in the international market 5. Source of new product and ideas 6. Foreign competition in the domestic market

Chapter 3: Managing Global Logistics Key Questions for Analysis, Planning and Control 1. Environmental analysis
What are the unique characteristics of each national market? What characteristics does each market have in common with other national markets?

2. Planning

Who should make logistics decisions? What are the customer service needs of the target market?

3. Structure

How do we structure our logistics organization to optimally achieve our objectives?

4. Plan implementation

How do we develop effective operational logistics plans?

5. Control of the logistics program

How do we measure and monitor plan performance?

Chapter 3: Managing Global Logistics Key Issues in Global Logistics Decision Making 1. Cost-Service Trade Off Analysis The ability to proper identify, evaluate and implement the optimal cost-service mix is always important to the firm and its customer Some particularly important cost and service considerations concern the use of integrated logistics systems to effectively and rapidly manage order completeness, shipping accuracy and shipment condition

Chapter 3: Managing Global Logistics

2. Guidelines in Developing a Global Logistics Strategy In developing a global logistics strategy, some general guidelines apply a) Logistics planning should be integrated into the companys strategic planning process b) Logistics department need to be guided by a clear vision and must measure output regularly c) Import-export management should try to ensure integrated management of all elements of the logistics supply chain from origin to destination d) Opportunities to integrate domestic and international operations should be pursued to leverage total company volumes with globally oriented carriers

Chapter 3: Managing Global Logistics

3. Organizing for Global Logistics Should you centralize or decentralize Logistics Globally? Many companies operating in the global marketplace centralize a large number of logistics activities while decentralizing others Example: management of customer service tends to work best when it is under local control in the foreign market On the other hand, material flows into the organization are often centralized, because technology can quickly overcome spatial distances

4. Financial Aspect of Global Logistics

A firm participating in global logistics faces a financial environment quite different from that of a strictly domestic firm

It has concerns about currency exchange rates, costs of capital, the effect of inflation on logistics decision and operations, tax structures and others
Working Capital require financing for inventory, credit, investment in buildings and equipment, and accommodation of merchandise adjustment that may be necessary Inventories are an important aspect of global logistics. Higher level of inventory are needed to service foreign markets because of longer transit times, greater variability in transit times, port delays, customs delays and other factors It is important to use the proper inventory accounting procedure because of the impact of inflation on company profits.

Chapter 3: Managing Global Logistics

5. The Global Marketplace Uncontrollable Elements

Political and legal systems of the foreign markets Economic condition Degree of competition in each market Level of distribution technology available or accessible Geographic structure of the foreign market Social and cultural norms of the various target markets

Chapter 3: Managing Global Logistics

Key Issues in Global Logistics Decision Making

5. The Global Marketplace Controllable Elements Customer service Inventory Packaging Transportation Warehousing and storage

Chapter 3: Managing Global Logistics

Customer Service Strategies CS levels may be higher in international markets

Example: the order cycle time in Japan is generally shorter than in the US (geographical differences, the physical facilities of many retailers and financial consideration permit in Japan to be delivered in 24 hours or less)
For that reason, many international firms operate owned facilities in foreign markets in order to compete effectively on a customer service basis The cost of providing a specified level of customer service often varies between countries A company must examine the service requirements of customers in each foreign market and develop a logistics package that best serves each area

Chapter 3: Managing Global Logistics

Inventory Strategies Inventory control is particularly important to an international company and requires awareness of the many differences between international and domestic Depending on the length of transit and delays that can occur in international product movements, a firm may have to supply its distributor with higher than normal levels of inventory

Chapter 3: Managing Global Logistics

Packaging and Containerization International shipments require greater protection than domestic shipment, especially when they are not containerized Other issues to consider include the handling of products, climate, potential for pilferage, communication and language differences, freight rates and customs duties The greater number of handlings of international goods increases the possibility of damage Logistics executives can help to ensure that goods arrive safely at their international destinations through the proper planning, implementation and control of packaging decisions

Chapter 3: Managing Global Logistics

The Usage of Containers Advantages

Disadvantages

Costs due to loss or damage

Labor costs in freight handling

Easily stored and transported Available in a variety of sizes

ports/ terminals with container facilities may not be available in certain parts of the world Large capital expenditure