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Copyright 2001 by Harcourt, Inc.. All rights reserved. Requests for permissions to make copies of any part of the work should be mailed to the following

address: Permissions Department, Harcourt, Inc., 6277 Sea Harbor Drive, Orlando, Florida 32887-6777.

INTERNATIONAL MARKETING 6eINTERNATIONAL MARKETING 6e

LogisticsLogistics

Chapter 19Chapter 19

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Copyright 2001 by Harcourt, Inc. All rights reserved.Copyright 2001 by Harcourt, Inc. All rights reserved. 1919--22

A Definition of International LogisticsA Definition of International Logistics

designing and managing of a system thatdesigning and managing of a system thatcontrols the flow of materials into, through,controls the flow of materials into, through,

and out of the international corporationand out of the international corporation

In taking a systems approach to linkagesIn taking a systems approach to linkages

among logistics components, firms canamong logistics components, firms canincorporate efficiencies through systemincorporate efficiencies through system

design and management techniquesdesign and management techniques

JITJIT-- justjust--inin--timetime

EDIEDI-- electronicdata interchangeelectronicdata interchange

ESIESI-- earlysupplierinvolvementearlysupplierinvolvement

ECRECR-- efficientcustomerresponsesystemsefficientcustomerresponsesystems

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The Phases of International LogisticsThe Phases of International Logistics

Materials managementMaterials management TimelymovementofrawTimelymovementofraw

materials,parts, andmaterials,parts, and

suppliesthroughthefirmsuppliesthroughthefirm

Physical distributionPhysical distribution

MovementofthefirmsMovementofthefirms

producttoitscustomersproducttoitscustomers

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The Systems ConceptThe Systems Concept

The extensive and complex materialsThe extensive and complex materials--flowflowactivities within and outside of the firm mustactivities within and outside of the firm must

be considered in the context of theirbe considered in the context of their

interaction.interaction.

TotalTotal--cost conceptcost concept Minimizingoveralllogisticscosts byidentifyingMinimizingoveralllogisticscosts byidentifying

activityactivity--basedcoststhatimpactafterbasedcoststhatimpactafter--taxprofitstaxprofits

TradeTrade--off conceptoff concept

Recognizethatlogistics activitiesinvolvetradeRecognizethatlogistics activitiesinvolvetrade--

offsin areassuch astimeoffsin areassuch astime--savedin deliverysavedin delivery

versustheincreasedcostsofexpedited deliveryversustheincreasedcostsofexpedited delivery

systems.systems.

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SupplySupply--Chain ManagementChain Management

An integration of the three system conceptsAn integration of the three system conceptsValueValue--added activities connect theadded activities connect the

companys supply side with the demand sidecompanys supply side with the demand side

Efficient supply chain design increasesEfficient supply chain design increases

customer satisfaction and saves moneycustomer satisfaction and saves money

reducesinventoryholdingcostsreducesinventoryholdingcosts

increasesinventoryturnovercyclesincreasesinventoryturnovercycles

reducesoperatingcostsreducesoperatingcosts

reducesorderhandling andmailingcostsreducesorderhandling andmailingcosts

makesfirmmorepricecompetitivemakesfirmmorepricecompetitive

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International Supply Chain OverviewInternational Supply Chain Overview

SuppliersSuppliers CorporationCorporation CustomersCustomers

OrderOrder

ProcessingProcessing

OrderOrder

PlacementPlacement

OrderOrder

ProcessingProcessing

OrderOrder

PlacementPlacement

TransTrans--

portationportation

TransTrans--

portationportation

StorageStorage

TransTrans--

portationportation

TransTrans--

portationportation

StorageStorage

CustomerCustomer

ServiceService

PhysicalPhysical

DistributionDistribution

ManagementManagement

InventoryInventory


InventoryInventory


MaterialsMaterials


PhysicalPhysical

DistributionDistribution


InventoryInventory

ManagementManagementStorageStorage

InboundInbound

MaterialsMaterials

ThroughThrough--

flowflow

OutboundOutbound

MaterialsMaterials

SupplierSupplier--FirmFirm

InterfaceInterface

CustomerCustomer--FirmFirm

InterfaceInterface

Domestic/ImportDomestic/Import

SourcingSourcing

Domestic/ImportDomestic/Import

SourcingSourcing

Forward and Reverse Flows of Information and, Products, and FundsForward and Reverse Flows of Information and, Products, and Funds

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The Impact of International LogisticsThe Impact of International Logistics

Logistical costs are 10% to 30%Logistical costs are 10% to 30%of the total landed cost of anof the total landed cost of an

international order.international order.

Factors necessary for the useFactors necessary for the use

of logistics as a competitive tool:of logistics as a competitive tool: Closecollaboration withsuppliers andcustomersClosecollaboration withsuppliers andcustomers

TechnologicallyadvancedinformationprocessingTechnologicallyadvancedinformationprocessing

andcommunicationexchangecapabilitiesandcommunicationexchangecapabilities

Anintegrated businessinfrastructureAnintegrated businessinfrastructure

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New Dimensions of International LogisticsNew Dimensions of International Logistics

The basic differencesThe basic differences PhysicaldistancePhysicaldistance

Currencyvariation andexchangerate differencesCurrencyvariation andexchangerate differences

BorderBorder--crossingregulations and documentationcrossingregulations and documentation

Transportationmodes areintermodalTransportationmodes areintermodal

CountryCountry--specific differencesspecific differences

Transportationsystems andintermediariesvaryTransportationsystems andintermediariesvary

Reliabilityofcarriersmaybe differentReliabilityofcarriersmaybe different

Computationoffreightratesmaybe differentComputationoffreightratesmaybe different

Packagingandlabelingrequirements differPackagingandlabelingrequirements differ

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Domestic/International Logistics DifferencesDomestic/International Logistics Differences

Intimate knowledge of the domestic marketIntimate knowledge of the domestic marketLack of familiarity of foreign marketsLack of familiarity of foreign markets

Basic differencesBasic differences

DistanceDistance

Currencyvariation andexchangerate differencesCurrencyvariation andexchangerate differences

VaryingentryregulationsVaryingentryregulations

DifferenttransportationmodesDifferenttransportationmodes

Country

Country--specific differencesspecific differences

Transportationsystems andintermediariesvary.Transportationsystems andintermediariesvary.

Reliabilityofcarriersmaybe different.Reliabilityofcarriersmaybe different.

Computationoffreightratesmaybe different.Computationoffreightratesmaybe different.

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InternationalTransportation IssuesInternationalTransportation Issues

Transportation infrastructureTransportation infrastructure Roads,Roads, raillines, airports,seaports,pipelinesraillines, airports,seaports,pipelines

Availability of transportation modesAvailability of transportation modes

Overlandshipping,oceanOverlandshipping,ocean

shipping, airshippingshipping, airshipping

Choice of modesChoice of modes

Transittime,predictability,Transittime,predictability,

cost,noneconomicfactorscost,noneconomicfactors

Noneconomic FactorsNoneconomic Factors

Governmentinvolvement,Governmentinvolvement,

the UNCTAD andthe UNCTAD and

the40/40/20conceptthe40/40/20concept

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Availability of ModesAvailability of Modes

land bridges andland bridges andsea bridges result insea bridges result in

intermodal shipmentintermodal shipment

Ocean shippingOcean shipping

Overland shippingOverland shipping

Air shippingAir shipping

AirfreightAirfreight

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Ocean ShippingOcean Shipping

Three types of vesselsThree types of vessels Liner (Passenger)serviceLiner (Passenger)service

BulkserviceBulkservice

TrampserviceTrampservice

Types of cargo vesselsTypes of cargo vessels ContainershipsContainerships

RollRoll--onon--rollroll--off (RORO)off (RORO)

LASH(lighter aboardship)LASH(lighter aboardship)

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Choice of modesChoice of modes

The choice of a logistics platformThe choice of a logistics platform Determined bya locationsease/convenienceofDetermined bya locationsease/convenienceof

marketreachunderfavorablecircumstances andismarketreachunderfavorablecircumstances andis

a keycomponentofa firmscompetitiveposition.a keycomponentofa firmscompetitiveposition.

Considerations in the choice of mode isConsiderations in the choice of mode isimportant if value of the cargo affect by theimportant if value of the cargo affect by the

speed and certainty of its arrival timespeed and certainty of its arrival time

Transittime (inventoryreplenishment,perishableTransittime (inventoryreplenishment,perishable

Predictability& reliabilityPredictability& reliability-- weatherweather CostandvalueofdeliveryservicetoshipperCostandvalueofdeliveryservicetoshipper

Noneconomicfactorssuch asthe UNCTAD andNoneconomicfactorssuch asthe UNCTAD and

the40/40/20 divisionoftransportationconceptthe40/40/20 divisionoftransportationconcept

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International Inventory IssuesInternational Inventory Issues

Inventory carrying costs can be up to 25% ofInventory carrying costs can be up to 25% ofthe value of an inventorythe value of an inventory

JustJust--inin--Time policies minimize inventoryTime policies minimize inventory

volume by making it available when needed.volume by making it available when needed.

Inventories assist in the movement ofInventories assist in the movement ofproducts.products.

Factors in deciding on theFactors in deciding on the

level of inventory to maintain:level of inventory to maintain:

OrdercycletimeOrdercycletime

DesiredlevelofcustomerserviceDesiredlevelofcustomerservice

Useof Inventoryas a strategictoolUseof Inventoryas a strategictool

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Order Cycle TimeOrder Cycle Time

The total time that passes between theThe total time that passes between theplacement of an order and the receipt of theplacement of an order and the receipt of the

merchandise.merchandise.

LengthofthetotalordercycleLengthofthetotalordercycle

Longercycleininternationalmarketingthan domesticLongercycleininternationalmarketingthan domestic ConsistencyoftheordercycleConsistencyoftheordercycle

Morecomplicated deliverymodereducesconsistencyMorecomplicated deliverymodereducesconsistency

Altering cycle timesAltering cycle times

ChangetransportationmethodsChangetransportationmethods ChangeinventorylocationsChangeinventorylocations

ChangeorderingprocessChangeorderingprocess

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International Shipment DocumentationInternational Shipment Documentation

Bill of LadingBill of Lading acknowledgesreceiptofgoodsacknowledgesreceiptofgoods

Shippers export declarationShippers export declaration

statesproperauthorizationforexportunderstatesproperauthorizationforexportunder

generalorspecialvalidatedexportlicensegeneralorspecialvalidatedexportlicense

Packing list of contentsPacking list of contents

Dock and warehouse receiptsDock and warehouse receipts

Collection documents

Collection documents commercial(consular)invoicecommercial(consular)invoice

certificateoforigincertificateoforigin

importandforeignexchangelicensesimportandforeignexchangelicenses

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Use of Inventory as a Strategic ToolUse of Inventory as a Strategic Tool

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International Storage IssuesInternational Storage Issues

The storage facilities location decisionThe storage facilities location decision AvailabilityAvailability

AdequacyAdequacy

PhysicalPhysical

ConditionsConditionsOptimizing theOptimizing the

logistics systemlogistics system

Rankproducts bywarehousingneedsRankproducts bywarehousingneeds

Aproductsstockedin alldistributioncenterAproductsstockedin alldistributioncenter BproductsstoredonlyinselectedlocationsBproductsstoredonlyinselectedlocations

Cproducts withlow demandstockedonlyatCproducts withlow demandstockedonlyat

headquartersheadquarters

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International Packaging IssuesInternational Packaging Issues

Protection ofContentsProtection ofContentsEnvironmental ConditionsEnvironmental Conditions

Package Design forStoragePackage Design forStorage

WeightWeight

Customers InstructionsCustomers Instructions

Handling FacilitiesHandling Facilities

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International Packaging IssuesInternational Packaging Issues

Packaging for domestic shipping may NOTPackaging for domestic shipping may NOTbe adequate for international shipping.be adequate for international shipping.

Goods should arrive in a safe, undamaged,Goods should arrive in a safe, undamaged,

maintainable, and presentable condition.maintainable, and presentable condition.

Packaging should minimize the stressPackaging should minimize the stressof intermodal movement and storage.of intermodal movement and storage.

Protected from climatic conditions.Protected from climatic conditions.

Weight based on delivery mode.Weight based on delivery mode.Follow customer instructionsFollow customer instructions

for labeling, packaging,for labeling, packaging,

and routing.and routing.

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Foreign Trade ZonesForeign Trade Zones

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Issue: The MaquiladorasIssue: The Maquiladoras

plants in Mexico that make goods and partsplants in Mexico that make goods and partsor process food for export back to the U.S.or process food for export back to the U.S.

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Management of International LogisticsManagement of International Logistics

Centralized logistics managementCentralized logistics management Headquartersretains decisionHeadquartersretains decision--makingpowerandmakingpowerand

control,coordinates alllogistics.control,coordinates alllogistics.

Decentralized logistics managementDecentralized logistics management

ThedecentralizedfullprofitcentermodelallowsThedecentralizedfullprofitcentermodelallowstheorganizationtorespondtolocalmarkettheorganizationtorespondtolocalmarket

conditions.Possibilityforlossofcoordination.conditions.Possibilityforlossofcoordination.

Contract logisticsContract logistics

GrowingpreferencetooutsourcelogisticsfunctionGrowingpreferencetooutsourcelogisticsfunctiontothirdpartyspecialistssuch as FedExorUPS.tothirdpartyspecialistssuch as FedExorUPS.

The supply chain and the InternetThe supply chain and the Internet

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Terms of SaleTerms of Sale

Items to which the buyer and seller must agree:Items to which the buyer and seller must agree:

Whatisnotincludedintheprice?Whatisnotincludedintheprice?

Whenthesellersresponsibilityends?Whenthesellersresponsibilityends?

Whenthe buyersresponsibilitybegins?Whenthe buyersresponsibilitybegins?

IncotermsIncoterms international definitionsfortermsofsale bytheinternational definitionsfortermsofsale bythe

InternationalChamberofCommerce (ICC)InternationalChamberofCommerce (ICC)

ExEx--Works (EXW)Works (EXW)

pricequotesthatapplyonlyatthepointoforigin;pricequotesthatapplyonlyatthepointoforigin;theselleragreestoplacethegoods atthe disposaltheselleragreestoplacethegoods atthe disposal

ofthe buyeratthespecifiedplaceonthe dateorofthe buyeratthespecifiedplaceonthe dateor

withinthefixedperiod withinthefixedperiod

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1919--2626

Logistics and the EnvironmentLogistics and the Environment

Reverse DistributionReverse Distribution a systemrespondingtoenvironmentalconcernsa systemrespondingtoenvironmentalconcerns

thatensures a firmcanretrieve a productfromthethatensures a firmcanretrieve a productfromthe

marketforsubsequentuse,recycling,ordisposalmarketforsubsequentuse,recycling,ordisposal

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