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Global DistributionGlobal Distribution
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Global Logistics and DistributionGlobal Logistics and Distribution
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IntroductionIntroduction
Global logistics and distribution haveGlobal logistics and distribution have
played a critical role in the growth andplayed a critical role in the growth and
development of world trade and in thedevelopment of world trade and in the
integration of manufacturing on aintegration of manufacturing on a
worldwide scale.worldwide scale.
The use of appropriate distribution channelsThe use of appropriate distribution channels
in international markets increases thein international markets increases the
chances of success dramatically.chances of success dramatically.
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IntroductionIntroduction
As firms start operating on a global basis, logisticsAs firms start operating on a global basis, logistics
managers need to manage shipping of rawmanagers need to manage shipping of raw
materials, components, and supplies amongmaterials, components, and supplies among
various manufacturing sites at the mostvarious manufacturing sites at the mosteconomical and reliable rates.economical and reliable rates.
The development of intermodal transportation andThe development of intermodal transportation and
electronic tracking technology has resulted in aelectronic tracking technology has resulted in a
quantum jump in the efficiency of the logisticquantum jump in the efficiency of the logistic
methods employed by firms worldwide.methods employed by firms worldwide.
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1. Definition of Global Logistics1. Definition of Global Logistics
Global logisticsGlobal log
istics is defined as the design andis defined as the design andmanagement of a system that directs and controlsmanagement of a system that directs and controlsthe flows of materials into, through and out of thethe flows of materials into, through and out of thefirm across national boundaries to achieve itsfirm across national boundaries to achieve its
corporate objectives at a minimum total cost.corporate objectives at a minimum total cost. Materials managementMaterials managem
ent refers to to the inflow ofrefers to to the inflow ofraw material, parts, and supplies through the firm.raw material, parts, and supplies through the firm.
Physical distributionPhysi
cal distribution refers to the movement of therefers to the movement of the
firms finished products to its customers,firms finished products to its customers,consisting of transportation, warehousing,consisting of transportation, warehousing,inventory, customer service/order entry, andinventory, customer service/order entry, andadministrationadministration
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Managing Global LogisticsManaging Global Logistics
The following factors contribute to the increasedThe following factors contribute to the increased
complexity and cost of global logistics:complexity and cost of global logistics:
DistanceDistance
Exchange rate fluctuationsExchange rate fluctuations
Foreign intermediariesForeign intermediaries
RegulationRegulation
SecuritySecurity
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Managing Global LogisticsManaging Global Logistics
Modes of TransportationModes of Transportation
Value-to-Volume RatioValue-to-Volume Ratio
PerishabilityPerishability
Cost of TransportationCost of Transportation
Ocean ShippingOcean Shipping
Liner ServiceLiner Service
Bulk ShippingBulk ShippingAir FreightAir Freight
Intermodal TransportationIntermodal Transportation
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Managing Global LogisticsManaging Global Logistics
Warehousing and Inventory ManagementWarehousing and Inventory Management
Hedging Against Inflation and Exchange RateHedging Against Inflation and Exchange Rate
FluctuationsFluctuations
Benefiting from Tax DifferencesBenefiting from Tax Differences
Logistic Integration and RationalizationLogistic Integration and Rationalization
E-Commerce and LogisticsE-Commerce and Logistics
Third-Party Logistic (3PL) ManagementThird-Party Logistic (3PL) Management
The largest 3PL sector is the value-addedThe largest 3PL sector is the value-added
warehousing and distribution industry.warehousing and distribution industry.
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3. Free Trade Zones3. Free Trade Zones
Logistical Revolution with the InternetLogistical Revolution with the Internet
The trend toward third-party logistics is aThe trend toward third-party logistics is a
result of the Internet and the intranet as wellresult of the Internet and the intranet as well
as concentrating on core competencies.as concentrating on core competencies. A free trade zone (FTZ)A free trade zone (FTZ) is an area that is locatedis an area that is located
within a nation (say, the United States), but iswithin a nation (say, the United States), but is
considered outside of the customs territory of theconsidered outside of the customs territory of thenation.nation.
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Free Trade ZonesFree Trade Zones
FTZs provide many cash flow and operatingFTZs provide many cash flow and operating
benefits to zone users and includebenefits to zone users and include
Duty deferral and eliminationDuty deferral and elimination
2. Lower tariff rates2. Lower tariff rates
3. Lower tariff incidence3. Lower tariff incidence
4. Exchange rate hedging4. Exchange rate hedging
5. Import quota not applicable5. Import quota not applicable
6. Made in U.S.A. designation6. Made in U.S.A. designation
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4. Maquiladora Operation4. Maquiladora Operation
The maquiladora industryThe maquiladora industry, also known as the, also known as the in-in-
bond or twin-plant programbond or twin-plant program, is essentially a, is essentially a
special Mexican version of a free trade zone andspecial Mexican version of a free trade zone and
was started in 1965.was started in 1965. Mexico allows duty-free imports of machineryMexico allows duty-free imports of machinery
and equipment for manufacturing as well asand equipment for manufacturing as well as
components for further processing and assembly,components for further processing and assembly,
as long as 80 percent of the plants output isas long as 80 percent of the plants output is
exported.exported.
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Home-Country Middlemen
1.1. Manufacturers Retail StoresManufacturers Retail Stores
2.2. Global RetailersGlobal Retailers
3.3. Export Management CompaniesExport Management Companies
4.4. Trading CompaniesTrading Companies
5.5. Export Trading CompaniesExport Trading Companies6.6. Complementary MarketersComplementary Marketers
7.7. Manufacturers Export AgentManufacturers Export Agent
Home-country middlemen, or domestic middlemen, providemarketing services from a domestic base and find foreignmarkets for products for local manufacturers
Home-country middlemen, or domestic middlemen, providemarketing services from a domestic base and find foreignmarkets for products for local manufacturers
Frequently used types of domestic intermediaries include:Frequently used types of domestic intermediaries include:
8. Home-Country Brokers9. Buying Offices
10. Selling Groups
11. Webb-Pomerene Export Associations
12. Foreign Sales Corporation
13. Export Merchants
14. Export Jobbers
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Foreign-Country Middlemen
1.1. Manufacturers RepresentativesManufacturers Representatives
2.2. DistributorsDistributors
3.3. Foreign-Country BrokersForeign-Country Brokers
4.4. Managing Agents and CompradorsManaging Agents and Compradors
5.5. DealersDealers
6.6. Import Jobbers, Wholesalers, andImport Jobbers, Wholesalers, andRetailersRetailers
Some of the more important foreign-country middlemen, who
find markets for foreign manufacturers include:
Some of the more important foreign-country middlemen, who
find markets for foreign manufacturers include:
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Six Cs of Channel Strategy
1.1. CostCost
2.2. Capital RequirementsCapital Requirements
3.3. ControlControl
4.4. CoverageCoverage
5.5. CharacterCharacter
6.6. ContinuityContinuity
Factors Affecting Choice of Channels
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Locating Middlemen
1.1. Commercially published directoriesCommercially published directories
2.2. Foreign consulatesForeign consulates
3.3. Chamber-of-commerce groups located abroadChamber-of-commerce groups located abroad4.4. Other manufacturers producing similar butOther manufacturers producing similar but
noncompetitive goodsnoncompetitive goods
5.5. Middlemen associationsMiddlemen associations
6.6. Business publicationsBusiness publications7.7. Management consultantsManagement consultants
8.8. U.S. Department of CommerceU.S. Department of Commerce
Firms seeking overseas representation should compile a list of middlemenfrom such sources as the following:
Firms seeking overseas representation should compile a list of middlemenfrom such sources as the following:
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Selecting Middlemen
1.1. Screening based onScreening based on
the following criteria:the following criteria:
(a) reputation(a) reputation
(b) creditworthiness(b) creditworthiness
(c) markets served(c) markets served
(d) products carried(d) products carried
(e) number of stores(e) number of stores(f) store size(f) store size
In selecting middlemen, the following steps should be used.In selecting middlemen, the following steps should be used.
2. The Agreement that
details terms of the
contract and the
functions to beperformed on behalf of
the foreign
manufacturer
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Motivating Middlemen
Motivational techniques may be groupedMotivational techniques may be groupedintointo
five categories:five categories:
(1) financial rewards(1) financial rewards
(2) psychological rewards(2) psychological rewards
(3) communications(3) communications
(4) company support, and(4) company support, and(5) corporate rapport(5) corporate rapport
There is a clear correlation between the middlemans motivation and sales
volume
There is a clear correlation between the middlemans motivation and sales
volume
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