celestinokuchena ipfm0395 final pl505

8/10/2019 Celestinokuchena IPFM0395 Final PL505

1/45

Institute of Professional Financial Managers

Celestino Kuchena

IPFM0395

Certified Professional Procurement and Logistics Manager

Thesis on Strategic Gloal Sourcing!PL505"

Final sumission

#0$$

1


2/45

Contents

Contents...........................................................................................................................................2

1.0 Introduction................................................................................................................................3

2.0 Global logistics in perspective...................................................................................................4

3.0 Global sourcing and supply.......................................................................................................6

4.0 Developments in European logistics strategies.........................................................................

!.0 "ogistics in C#ina....................................................................................................................10

6.0 "ogistics in $merica................................................................................................................12

%.0 Internet trading.........................................................................................................................14

.0 In&ormation systems and in&ormation tec#nology in international mar'ets and suppliers......1!

(.0 )ac'aging.................................................................................................................................16

10.0 $viation logistics *anagement..............................................................................................1

11.0 International logistics.............................................................................................................1(

12.0 International innovations in logistics and supply c#ains.......................................................22

13.0 *aritime logistics..................................................................................................................2!

14.0 +ransport logistics and economics.........................................................................................26

1!.0 $nalysis tools &or transport logistics......................................................................................2

16.0 ,alue c#ain management.......................................................................................................2(

1%.0 -rganisational logistics..........................................................................................................31

1.0 urvey/ design and management o& International upply and "ogistics...............................33

1(.0 Import and eport..................................................................................................................3!

20.0 orecasting.............................................................................................................................3(

21.0 Conclusion.............................................................................................................................40

22.0 ibliograp#y..........................................................................................................................44

2


3/45

$%0 Introduction

"ogistics is t#e structural design planning/ per&ormance and control o& all transportation/

#andling/ storing and pac'aging procedures. +#ese activities &acilitate t#e &lo o& products &rom

t#e supplier to t#e customer/ including t#e related &lo o& in&ormation. +#is is a very important

part o& an international company because o& geograp#ical barriers. "ogistics o& an international

company includes movement o& ra materials/ coordinating &los into and out o& di&&erent

countries.

It also includes c#oices o& transportation/ and cost o& t#e transportation/ pac'aging t#e product

&or s#ipment/ storing t#e product/ and managing t#e entire process. usiness success is

increasingly lin'ed to managing international logistics. Groing lo5cost country sourcing and

rising sales to international customers are triggering companies to see' ne ays to manage t#e

costs/ compleities/ and uncertainties o& moving goods across borders.

C#anges in t#e business environment due to globaliation and s#ort product li&e cycles #ave

increased t#e intensity o& competition in many mar'ets. Companies collaborate closely it#

t#eir suppliers and customers using supply c#ain management concepts to optimie t#e inter5

organisation &los o& material/ in&ormation and capital t#roug# t#e netor'.

3


4/45

+#e implementation and e&&icient operation o& transport management solutions leads to reduced

costs and over#eads/ controlling materials and inventory. +#is improves customer service and

raises pro&it margins.

#%0 Gloal logistics in &ers&ecti'e

-rganisations are leaning toards global logistics because o& a groing demand in ne products

and &oreign products. $ convergence o& mar'et demands and t#e removal o& trade barriers

beteen several countries #ave made it possible &or corporations to vie t#e orld as a global

village. +#is gives organisations an array o& suppliers and customers to trade it#. y &ocusing

on &eer products and eliminating duplicated &unctions in t#e product designs/ t#ey create

standard processes in t#eir &actories.

+#is means t#at sta&& can be moved &rom one region to anot#er it# no re7uirement &or

additional training since t#ey ill already be &amiliar it# t#e processes. 8ain 91((: cited

problems in t#e global &ield as di&&erences in demand in t#e di&&erent regions and a re;ection o&

&oreign goods by customers possibly due to t#eir customs. +#e global environment also means

t#at organisations #ave more competition. ubstantial resources may be re7uired to compete

it# t#e increased number o& competitors in t#e &ield.

#%$ (ational &ers&ecti'e

4


5/45

-rganisations can become multinational corporations by maintaining signi&icant operations in

multiple countries but #aving a management base in t#e #ome country. ony Corporation/ a

8apanese company is an eample o& suc# organisations. +ele&onica 9a panis# electronics

company: eliminated t#e geograp#ic divisions beteen its *adrid #ead7uarters and its

idespread companies.

It based its organisational #ierarc#y on business lines li'e cellular p#ones/ internet services and

media operations. +#e #ome country


6/45

Et#nocentric managers believe t#at t#e practices o& t#e #ome country are superior and s#ould be

adopted by t#e #ost country investments. In contrast/ some t#in' t#at t#e #ost country


7/45

It is critical to ac7uire products o& t#e rig#t 7uality &rom a supplier it# t#e rig#t reputation and

e&&iciency. +#e rig#t supplier must #ave more t#an ;ust t#e rig#t e7uipment and 7uality. +#ere

are barriers to ac#ieving incremental cost savings in global logistics. Bising &uel costs lead to

#ig#er transportation costs and t#is is &urt#er compounded by transport mode congestion.

Currency problems may also reduce c#ances o& &urt#er cost savings. imbabe &aced severe

currency issues &rom around 1((( to 200. usiness transactions could not be completed it#

any certainty. +#ese and ot#er geopolitical uncertainties li'e ta legislations in t#e countries

corporations mig#t is# to trade in are c#allenges t#ey #ave to consider.

3%# Gloal su&&l)

In as muc# as countries endeavour to procure &rom international mar'ets/ t#ey also see' to sell in

t#ose mar'ets. $ variety o& strategies can be employed by corporations in t#is 7uest.

-rganisations it# limited international eperience ill &ind it iser to sell or consign its goods

to an international specialist or local company in t#e region. $ corporation may use a local

distribution netor' to penetrate a region.

EE+ =od 32 $ntivirus/ a leading global security so&tare distributor entered imbabe using

Integrated Digital ecurity solutions as its distributor in imbabe. Companies may also ma'e a

;oint venture/ as as t#e case beteen +os#iba and iemens on t#e manu&acture o& computer

c#ips. out#corp ines Europe "imited/ a ma;or $ustralian ine producer and distributor

7


8/45

negotiated it# a nited Fingdom 9"en#am torage: &or it to provide a complete mainland

Europe distribution service. +#is localisation leads to a greater mar'et aareness and sensitivity.

Companies may become multinational corporations or transnational corporations as discussed

earlier but developing local operations is not it#out strain. +#e imbabean government

embar'ed on a policy o& indigenisation. +#is re7uired t#at &oreign oned corporations cede up

to !1 percent o& t#eir s#ares to imbabeans. In addition to political #urdles/ ta las may also

be pro#ibitory in some nations.

$longside t#ese issues are currency matters. C#ina is currently embroiled in a dispute it# t#e

nited tates o& $merica &or allegedly undervaluing its currency. +#is #as led to a proposal &or

more taes on C#inese imports. Decision5ma'ers cannot ignore t#e in&luence o& location &actors

suc# as government regulations/ policy and in&rastructural conditions.

*%0 +e'elo&ments in ,uro&ean logistics strategies

+#e European Economic Community 9EEC: as &ormed in 1(!% as European nations soug#t o

reassert t#eir economic dominance over $merica and 8apan. +#ey eliminated inter5country

tari&&s and introduced agricultural support programs. +#is as &olloed by t#e &ormation o& t#e

European ree +rade $ssociation in 1(60. In 1(!/ t#e EEC 9no 'non as t#e European

Commission 9EC:: outlined t#e necessary steps to ac#ieve a single common mar'et alloing &ree

8


9/45

movement o& labour/ capital and goods. +#e present day Europe is a dynamic mar'et place it#

transportation in&rastructural congestion. +#is negatively in&luences service reliability.

In addition to t#is/ t#ere are strict regulations concerning pac'aging o& products/ recycling and

disposal o& astes. Fevin et al 91((3: realised t#at dispersed operations and regions #ave been

integrated t#roug# common logistic systems/ #ic# are streamlined to improve e&&ectiveness.

+#is integration #as #oever created management compleity c#allenges. +o counter t#is/

organisations #ave rationalised t#eir operations and instituted logistics management initiatives

t#at #ave led to inventory reductions.

Bationalisation o& supply c#ains #as caused a decrease in t#e number o& &acilities used by a &irm.

Coupled to t#e use o& common processes/ t#is #as led to a decrease in t#e costs o& inventory/

are#ousing and materials. +#ere are no more are#ouses serving more t#an one country in

t#e Euro one. *any corporations #ave applied a total supply c#ain approac# to recon&igure

t#eir logistics operation. +#ey ac7uired inventory and transportation analysis tools to aid in

planning.

It #as become imperative &or European t#ird party logistics services to be more proactive in

meeting t#e s#ippers< ne re7uirements and &leibility in reacting to t#e c#anging mar'et

demands. +rade in Europe #as been promoted by t#e #armonisation o& tec#nical standards/

removal o& trade barriers and introduction o& a single administrative document. +#e success o&

9


10/45

logistics strategies ill depend on increased environmental consideration since t#e consumers

are no severely sensitive to environmental issues.

+ec#nological advancements leading to #ig#er value products and e&&icient in&ormation

communication systems are ot#er &actors t#at ill greatly en#ance success. Europe #as been

e&&ectively made a single one by t#e introduction o& t#e Euro as a currency and t#e elimination

o& &iscal barriers. *ollen'op& et al. 9200%: concluded/ &rom t#eir analysis o& several Italian

manu&acturers/ t#at t#e e&&ective management o& product returns ill necessarily be part o&

European &irms< corporate social responsibility in t#e near &uture.

5%0 Logistics in China

C#ina


11/45

costs o& #iring and training eperienced logistics sta&&. In spite o& t#ese c#allenges/ attention to

ta structuring options can #elp identi&y/ address and minimise ta lea'ages en#ancing returns to

investors. +#ere eist industry &ocused ta incentives in C#ina t#at &oreign organisations can

bene&it &rom.

"ogistics in C#ina is #indered by operational ine&&iciencies. +#e mar'et is &ragmented in terms

o& t#e number o& operators and t#eir geograp#ical remit. Coordination beteen transportation/

storage and stoc' control &unctions are re7uired at national level &or organisations to gain

competitive advantages. -perational ine&&iciencies are aggravated by t#e transportation

bottlenec's due to regulatory concerns and local barriers to entry. +#e C#inese government is

trying to recti&y t#e regulatory issues by simpli&ying t#e necessary licensing procedures.

Competition &rom &oreign investors #as driven t#e domestic corporations to improve t#eir

operations. +#e distribution o& goods is t#e greatest c#allenge to C#ina


12/45

-%0 Logistics in .merica

+#e nited tates o& $merica 9$: #as a #uge/ integrated and industrialised economy. +#is is

a result o& a large uni&ied mar'et/ a supportive politico5legal system and vast natural resources

9c#ie&ly coal/ oil and timber:. +#e $merican cultural landscape greatly values entrepreneurs#ip

and a commitment to investment in #uman and material capital. $ central &eature o& t#e

economy is t#e &reedom a&&orded to t#e private sector to ma'e t#e ma;ority o& economic

decisions t#at determine t#e direction and scale o& #at $ produces.

+#e largest companies in $merica #ave been rus#ing o&&s#ore &or many years and international

sales account &or more t#an 60 percent o& t#eir total sales. +#ey soug#t to ta'e advantage o&

more rapid grot# in C#ina/ rail and India. Companies li'e Dell/ $pple and elett5)ac'ard

#ave long supply c#ains etending around t#e orld and manu&acture relatively little in $merica.

+#e &ocus o& organisations in coordinating logistic activities it# t#eir suppliers and customers

as primarily on t#e ?&orardA &lo o& materials and goods. +#eir goal as to improve t#e &lo

o& t#ose products &rom t#e ra material supplier to &inal consumers.

$s less and less e&&iciency could be etracted &rom managing t#e &orard &los it# time/

companies soug#t ot#er avenues &or potential supply c#ain improvement. Companies in $

#ave no &ocused t#eir e&&orts on t#e ?reverseA &lo o& goods &rom customers. +#e immediate

e&&ect o& t#is move is a signi&icant reduction in costs. )roducts are returned because t#ey are

de&ective/ as part o& t#e establis#ed return policy/ or contract terms. Begardless o& t#e reason/

12


13/45

returns represent a noteort#y cost t#roug# administrative processes and p#ysical logistics o&

#andling t#e return.

elett5)ac'ard identi&ied t#at !05%0 percent o& noteboo's could be re&urbis#ed in5#ouse rat#er

t#an sending t#em to a t#ird5party manu&acturer. +#ey estimate t#at t#is could save up to 14!

t#ousand $merican dollars per mont# and decrease &lo time in t#e reverse logistics netor'

9Guide et al./ 200!:. #ile European countries #ave implemented aggressive environmental and

end5o&5product5li&e regulations &or manu&acturers/ t#e $ government #as gradually increases

t#e stringency o& environmental regulations since t#e 1(%0s 9Cli&t/ 2003:.

$n eample is t#e 1(%! adoption o& t#e corporate average &uel5economy standards &or

automobile manu&acturers< &leets 9iller and ann/ 2006:. +#e $merican logistics systems are

being driven toards leaner and greener practices because o& t#e pressure o& activists using terms

li'e ?sustainabilityA/ ?eco5&riendlyA and ?carbon5neutralA.

/%0 Internet trading

+#is is a met#od o& trading commodities and services electronically by utilising in&ormation

tec#nology to bring toget#er buyers and sellers. +#e electronic media creates a virtual mar'et

place #ere people can transact. +#e improvement in tec#nology #as made t#e need &or a

p#ysical location to be less important as remote transactions can be concluded on t#e internet. It

created a 'noledge base t#at could be tapped into anytime.

13


14/45

Electronic trading ma'es transactions easier to complete by alloing instant access to suppliers

any#ere in t#e orld. +#is creates a transparent mar'et #ere products and terms are readily

available. It automates procurement it# standard procedures t#ereby reducing t#e time needed

&or transactions and cost. Customers can no buy &rom suppliers #o may be geograp#ically

remote to t#em. +#ey can purc#ase directly &rom manu&acturers or primary suppliers or use t#e

increasing number o& specialised eb retailers.

Dell/ an electronic giant/ #as decreased customer response times by providing rapid online5

responses. +#e drabac' is t#at people li'e to s#op around and ac7uire t#e product immediately

it#out t#e delivery c#arges. +#is/ nonet#eless/ applies to some goods or services not all. +#e

large number o& buyers and sellers available at once increase li7uidity and improve e&&iciency o&

t#e mar'et.

+#oug# t#e cost o& entry into t#e industry #as not been eliminated/ in&ormation as a barrier to

trade #as been greatly reduced. +#e need to manage a great deal o& in&ormation #as led to t#e

development o& in&ormation systems.

%0 Information s)stems and information technolog) in international mar1ets and su&&liers

op#isticated/ ne in&ormation tec#nologies #ave been a catalyst &or many ma'ing many

mar'ets truly global. In&ormation tec#nology 9I+: plays an important role in t#e coordination o&

researc# and development/ production/ and mar'eting activities across borders 9Boc#e/ 1((2:.

14


15/45

+#e implementation o& I+ on t#e global scale is associated it# problems &ar more comple t#an

t#ose encountered in systems across domestic divisions 9Ives and 8arvenpaa/ 1((1:.

Investments in global I+ s#ould t#en be ;usti&ied i& t#ey are associated it# en#anced

per&ormance. +#e ability o& a company to implement cross5border mar'eting strategies may

depend on t#e &irm


16/45

9%0 Pac1aging

)ac'aging logistics covers t#e design o& a product/ its pac'age and pac'ing/ as ell as t#e

adaptation and control o& t#e distribution/ administration/ and in&ormation systems. +#is covers

t#e processes t#roug#out t#e c#ain &rom ra product t#roug# various processing stages to t#e

distribution to t#e end5user and on recycling and recovery. ot# pac'aging and logistics &orm

important parts o& pac'aging logistics t#roug# sa&e delivery.

+#is see's to contribute to a sustainable society by integrating product or pac'aging

development/ innovation and supply c#ain management in economic/ tec#nologic/ and

environmental li&e cycle perspectives. -ptimal product pac'aging is a critical &actor in logistics/

it#out it/ many logistic processes could not be per&ormed at all or could be carried out only at

great additional costs. +#e &unction o& t#e pac'aging is not ;ust to protect but etends to

provision o& in&ormation about t#e contents as ell as enabling and &acilitating ot#er logistics

processes5including transport and #andling.

9%$ (o logistics 2ithout &ac1aging

+#e di&&erent &unctions o& pac'aging5t#at is protection/ storage/ transport/ in&ormation and

#andling are an outstanding eample o& t#e interdependencies t#at eist in logistics. $s a result/

t#e pac'aging may be regarded as a part o& t#e entire logistics systems. In pac'aging design/ a

compromise t#at addresses all &unctional areas must be &ound. +#e correct design o& pac'aging

16


17/45

may be regarded can #elp loer overall logistics costs and raise t#e level o& supply and service

delivery.

)ac'aging also #as to &ul&il production/ mar'eting and usage &unctions. +#roug# t#e c#oice o&

suitable pac'aging/ it is possible to produce directly &rom t#e pac'aging or into t#e pac'aging

it#out intermediary processing procedures. It may also be a means to di&&erentiate t#e product

&rom ot#er similar in t#e mar'et. In lig#t o& environmental considerations/ it is essential &or

pac'aging design to ma'e it possible &or a customer to recycle t#e pac'aging or &acilitate its use

&or ot#er purposes.

+#e pac'aging s#ould be stac'able and meet t#e demands o& storage e7uipment. +#is goes #and

in #and it# t#e &act t#at t#e pac'aging &orm and sie s#ould permit t#e optimal usage o& t#e

transport space it# t#e loest possible pac'aging eig#t. +#is &orm must also &acilitate t#e

employment o& tec#nical aids suc# as &or'li&ts/ storage and retrieval systems.

$0%0 .'iation logistics Management

,arious lin's in t#e supply c#ain are in tension as t#ey struggle to maimie pro&it. +#e

commercial supply c#ain is under pressure &rom vigorous airline cost5cutting and lo tra&&ic

demand. +#ese lin's are trying to cut costs yet epand t#eir reac#/ alt#oug# not alays in ays

t#at are best &or t#e overall system. $ggressive outsourcing bids #ave reduced *aintenance/

Bepair and -ver#aul 9*B-: margins/ especially on t#e air&rame side.

17


18/45

,isibility into loer tier suppliers is less t#an clear/ and t#e top suppliers on ne aircra&t

programs are &leing t#eir muscles to t#e detriment/ some say/ o& airlines and *B- suppliers.

*B-s/ #oever/ #ave room to gro and opportunities to cut costs and improve per&ormance by

&orming close alliances it# t#e airlines. +op suppliers may #ave to c#ange t#eir tac'. ,ieed

as a ne class o& monopolists/ t#e big component -riginal E7uipment *anu&acturers 9-E*s:

are driving up t#e cost o& repair and over#aul.

imple cost reductions s#ould not be t#e sole part o& an organisation


19/45

negotiated aay t#e rig#ts to components intellectual property 9I): in ec#ange &or &avourable

up&ront terms.

It is toug#er &or airlines and *B-s to &ind t#e tec#nical data to over#aul a component ma'ing

t#e process muc# more comple t#an it as be&ore. -&&s#ore mar'eting is one ay &or *B-s to

cut costs t#roug# t#e adoption o& lean initiatives/ including etensive process mapping and aste

reduction. +#is ould increase e&&iciency and t#roug#put.

$$%0 International logistics

$ strong motivation &or t#e con&iguration o& an international manu&acturing netor' #as been t#e

access to lo costs production inputs alt#oug# t#e bene&it o& centralied production in lo5cost

countries is o&ten associated it# disadvantages o& increased logistics costs (Kersten, Blecker

and Flamig, 2008). urt#ermore/ investment decisions o& multinational companies are a&&ected

by international ta rate di&&erentials. Eploiting suc# di&&erences by means o& cross5country

pro&it s#i&ting can decrease global ta liability. inally/ companies #ave to ta'e into account t#at

investment decisions are typically made long be&ore actual demand is 'non.

upply c#ains must be designed robustly to un'non operating conditions in order to avoid lost

sales or ecess capacity. Generally/ s#ipping costs are #ig#er &or a process5&ocused supply c#ain

netor' t#an a mar'et5&ocused con&iguration/ as t#e common components need to be s#ipped

across plants. ene&its associated it# a mar'et strategy are reduced s#ipping costs and #ig#er

19


20/45

responsiveness to mar'ets due to 7uic'er deliveries/ #ereas process5&ocused netor's bene&it

&rom economies o& scale due to consolidated production.

)rocess5&ocused netor's allo &irms to ris'5pool t#e uncertain demand &or t#e subassembly o&

all products and mar'ets. In t#is regard/ t#e mar'et area structure describes a dedicated netor'

con&iguration it#out any ris'5pooling opportunities. +#is is t#e most general among

international car manu&acturers suc# as ,ol'sagen/ C#rysler and General *otors/ #ic#

operate in an industry eposed to #ig# mar'et uncertainty. Especially in t#e European nion/

taation becomes increasingly important since convergence o& ot#er &actors is etremely #ig#.

Due to an en#anced integration o& national mar'ets/ disparities o& economic and production

conditions disappear and di&&erences in corporate ta rates become even more distinct.

Eploitation o& t#ese eogenous mar'et imper&ections via production s#i&ting to lo5ta

countries t#us represents a viable alternative to multinational enterprises in order to decrease

t#eir ta liability.

$ crucial component o& global supply c#ain planning is t#e e&&icient design o& its multi5plant

netor'. $ common &eature o& t#e Hnetor' &lo models< is t#at/ given t#e strategic nature o&

t#e netor' design problem/ t#e decision &rameor' is deterministic alt#oug# t#e main &actors

suc# as customer demands or ec#ange rates are uncertain. ence/ t#ey do not incorporate t#e

value o& operational &leibility under uncertainty/ #ic# provides a &irm it# a pro&itable

20


21/45

response to c#anging environmental conditions by creating real options #ose value increases

it# t#e level o& uncertainty.

In t#e absence o& taes/ demand ould alays be satis&ied by t#e less epensive alternative t#at

is supplying components &rom t#e production plant located it#in t#e same country due to loer

transport costs. In t#e presence o& taes/ a non5#omogenous domain is created in #ic# pro&its

realied in one country not #ave t#e same value in anot#er because o& di&&erent may ta rates. $n

arbitrary use o& trans&er pricing and transport cost allocation enables multinational enterprises to

s#i&t pro&its realied in t#e #ig#5ta country to t#e lo5ta country #en relying on component

&los t#at pass national borders.

+#us/ cross5border trade &los/ even t#oug# more epensive/ mig#t be capable o& e&&ectively

eploiting t#e ta rate di&&erential #ile simultaneously minimiing transportation costs

compared to t#e netor' con&iguration o& component centraliation in t#e lo5cost country.

$#%0 International inno'ations in logistics and su&&l) chains

Companies going global are eperiencing unepected transportation costs/ #ig#er inventory

investment/ and longer and cycle times. $t t#e same time/ t#eir local clients are demanding

loer prices/ more uni7ue eecution/ and improved responsiveness. $s a result companies are

see'ing ays to ma'e t#eir international logistics processes more reliable/ com&ortable/ &leible

and less epensive.

21


22/45

$#%$ Challenges in international logistics

$n increase in global sourcing and selling raises transactional partners and problems to be

managed. udgets/ #oever/ do not allo logistics departments to continue t#roing people at

t#ese issues. +#e current manual5intensive process o& global logistics is becoming unsustainable.

Companies adopting automation are starting to eperience cost and speed advantages over t#eir

competitors.

$#%# Ph)sical distriution challenges

Companies see' to improve international logistics processes because o& longer lead times/

greater supply c#ain uncertainty/ and increased business ris'. +#e greatest impediment to

logistics per&ormance is t#e lac' o& visibility and metrics &or managing overseas vendors and

logistics providers.

$#%3 Cost challenges

In domestic supply c#ains/ &reig#t costs can be easily attributed and t#e impact o& truc' &uel

surc#arges can be understood at carton level. #ereas/ internationally/ t#e average ocean &reig#t

spend per mont# is di&&icult to calculate. Companies &ind t#at inade7uate transportation spend

22


23/45

visibility is leading to unanticipated budget discrepancies/ unepectedly lo pro&it margins and/

in some cases/ #ig#er rat#er t#an loer total cost #en sourcing &rom lo cost countries.

$#%* est &ractices in international logistics

+op per&ormers are succeeding in using international logistics trans&ormation to drive

7uanti&iable business bene&its &or t#eir corporations/ including cost and speed advantages. +#ese

companies are able to invest less capital in international logistics yet provide better service to

t#eir customers. +#ey are arming t#eir sta&& it# up5to5date tec#nology and integration &riendly

logistics partners to support today


24/45

signi&icantly reduced in&ormation tec#nology costs. International logistics is all about managing

a netor' o& t#ird party providers. +#e &oundation &or controlling t#is process is visibility.

,isibility does not stop at identi&ying a s#ipment delay or inventory issue. Bat#er/ an alert is t#e

&irst step in a structured noti&ication/ resolution/ and root cause analysis process. $ number o&

international logistics leaders are &ocusing on etracting more value &rom t#eir inventory. In

some cases/ t#is may mean creating better in5transit visibility so t#ey can redirect inventory

around port congestion or ot#er bottlenec's or to #ig#er demand points. In ot#er instances t#e

&ocus is on optimiing #ere and #o muc# inventory to #old in t#e &irst place.

it#out a solid &oundation o& trade compliance and documentation/ purc#asing ill ma'e t#e

rong sourcing decisions/ goods ill be delayed at customs/ and t#e business ill be put at ris'

o& regulatory in&ractions. +rade agreement management and integration it# bro'er partners to

avoid data 'eying errors and costs are among t#e 'ey trade compliance initiatives &or best

practices.

$3%0 Maritime logistics

Government and industry initiatives #ave been introduced to improve t#e security o& t#e supply

c#ain segment dealing it# s#ipping containers t#at travel across t#e aterays o& t#e orld. $

security attac' on an $merican port ould cost t#e economy ?several orders o& magnitudeA 9in

billions o& dollars: more t#an t#e price to prevent suc# an attac' (Edmonson, 2003). +#e same

aut#or goes on to rite t#at as a result o& t#e sie and scope o& maritime s#ipping/ an attac' on a

24


25/45

maritime supply c#ain ould ta'e a long time to resolve t#e security issues #ile sloing or

stopping s#ipping interests around t#e orld.

upply c#ain security initiatives to prevent security attac's include Consumer ecurity Initiative

9CI: mart and ecure +rade lanes 9+: $utomated +argeting ystems 9$+: and Customs5

+rade partners#ip $gainst +errorism9C5+)$+:. CI entails prevention o& problems by ensuring

security at source. +#is program sets up t#e ec#ange o& customs o&&icers beteen countries so

t#at outbound s#ipments to a country ill be inspected by t#at country


26/45

$*%0 Trans&ort logistics and economics

+ransport economics is a branc# o& economics t#at deals it# t#e allocation o& resources it#in

t#e transport sector. )eople and goods &lo over netor's at certain speeds/ demands pea' and

advanced tic'et purc#ase is o&ten induced by loer &ares. +#e netor's t#emselves may or may

not be competitive. $lt#oug# transport systems &ollo t#e same supply and demand t#eory as

ot#er industries/ t#e complications o& netor' e&&ects and c#oices beteen similar goods 9car and

bus travel: ma'e estimating t#e demand &or transportation &acilities di&&icult.

+ransport netor's #ave positive and negative eternalities on non5users. )ositive eternalities

include t#e ability to provide emergency services/ increases in land value and agglomeration

bene&its #ereas negative impacts may include pollution 9air/ lig#t and lig#t: sa&ety standards

community severance and congestion. +#e contribution o& transport systems to potentially

#aardous climate c#ange is a signi&icant negative eternality/ #ic# is di&&icult to evaluate

7uantitatively.

Congestion is considered a negative eternality by economists ("mall and ome#$%&ane#, '8).

+ransport netor's and services can ta'e on any combination o& regulatedJderegulated and

publicJprivate provision. or eample/ bus services in ritain outside "ondon are provided by

bot# t#e public and private sectors in a deregulated economic environment/ #ereas bus services

it#in "ondon are provided by t#e private sector in a regulated economic environment.

26


27/45

it#in t#e domestic supply c#ain/ deconsolidated and palletied road transport may act as a

direct competitor to intermodal &reig#t movements. Domestic intermodal supply c#ain comes

about because it is potentially c#eaper to move goods via a c#ain o& di&&erent modes rat#er t#an

selecting t#e c#eapest single mode.

$5%0 .nal)sis tools for trans&ort logistics

$ssignment models allo t#e simulation o& demand5supply interaction. +#e models commonly

adopted in practical applications &ollo an e7uilibrium approac# #ere it is assumed t#at

mutually consistent &los and costs ell describe t#e state o& t#e system relevant &or analysis and

design (antarella and ascetta, 200'). Dynamic process models include an eplicit simulation

o& user cost and c#oice updating processes underlying system evolution over time.

In deterministic process models/ a simple approac# based on eponential smoot#ing/ is &olloed

to model bot# user cost and c#oice updating processes. In transport models/ t#e basic idea is t#at

t#e individual


28/45

+#e use o& advanced discrete c#oice models ill give good estimation o& t#e parameters o& t#e

utility &unction and correct prediction o& c#oices. +#e system dynamics approac# #as been

largely used in transport/ especially in aggregate contets o& long5term/ &or economic scenarios

o& travel &orecasting or t#e modelling o& t#e interaction beteen transport and land use (*&&as

and Bell, '+). $ simulation system o& a simpli&ied representation o& t#e =e Kor'

metropolitan area as used to capture t#e be#aviour o& a set o& volunteers playing t#e role o&

truc'ing companies/ #ic# tried to maimise t#eir pro&its in a contet o& mar'et competition.

+#ese models indicated t#at t#e truc'ing companies< per&ormance is positively related to t#e

amount o& &reig#t to be transported and negatively related to t#e number o& centroids in t#e

mar'et and t#e number o& competitors in t#e mar'et. or to o& t#ese models/ one &or total

pro&it and t#e ot#er &or total number o& stops/ relatively good agreement beteen t#e estimated

and t#eoretical values o& t#e model parameters as realised.

+#is suggests t#at t#e approac# is able to capture/ at least in part/ some o& t#e &undamental

dynamics o& t#e urban &reig#t transportation process and t#at t#is approac# #as great potential.

+#ese tra&&ic simulation models are based upon t#e identi&ication o& eperimental tra&&ic las/

#ic# come &rom observations o& t#e real tra&&ic.

28


29/45

$-%0 4alue chain management

+#e value c#ain analysis is a concept &rom business management t#at as &irst described and

popularised by *ic#ael )orter (orter, '-). $ value c#ain is a c#ain o& activities &or an

organisation operating in a speci&ic industry. +#e business unit is t#e appropriate level &or

construction o& t#e value c#ain not t#e divisional or corporate level. )roducts pass t#roug# all

activities o& t#e c#ain in order/ and at eac# activity/ t#e product gains some value.

+#e c#ain o& activities gives t#e products more added value t#an t#e sum o& t#e independent

activities< value. +#e primary activities include inbound logistics/ production/ outbound

logistics/ mar'eting and sales. upportive activities include administration/ #uman resource

management and procurement. Costs and value drivers must be identi&ied &or eac# activity. +#e

value c#ain &rameor' 7uic'ly made its ay to t#e &ore&ront o& management t#oug#t as a

poer&ul analysis tool &or strategic planning.

+#e value c#ain concept #as been etended beyond individual organisation. It can apply to

#ole supply c#ains and distribution netor's. +#e delivery o& a mi o& products and services to

t#e end5customer ill mobilise di&&erent economic &actors/ eac# managing its on value. +#e

value c#ain #as been employed in t#e development sector as a means o& identi&ying poverty

reduction strategies by upgrading t#e value c#ain (Mitcell, oles and Keane, 200).

29


30/45

$lt#oug# commonly associated it# eport5oriented trade/ development practitioners #ave

begun to #ig#lig#t t#e importance o& developing national and intra5regional c#ains in addition to

international ones.

$/%0 rganisational logistics

*anagers are acutely interested in organiational structure because it directly re&lects

responsibility/ title/ compensation/ and poer. *any managers #ave t#e perception t#at grouping

responsibility &or all logistical activity into a single organiational unit ill automatically

stimulate e&&ective integration. +#is perception is rong because it emp#asies structure over

managerial practice. ormal organiation structure alone is not su&&icient to guarantee integrated

logistical per&ormance.

ome o& t#e most #ig#ly integrated logistical operations eist it#out organiational

accountability to a single eecutive. -t#er enterprises t#at #ave #ig#ly &ormalied logistics

reporting arrangements also ac#ieve superior results. Generaliation regarding #o logistics

organiations s#ould ideally be structured is premature at t#is point o& sub;ect development.

"ogistical organisation structures vary signi&icantly depending on t#e speci&ic mission/ type o&

business/ and available #uman resources.

+#e goal in creating logistical sensitivity is to stimulate all managers it#in an enterprise to

t#in' and act in terms o& integrated capabilities and economies. Companies need to develop

organisational capabilities to support streamlined/ end5to5end processes t#at are integrated across

&unctional boundaries #ere all participants are crystal clear regarding t#eir c#anging roles and

30


31/45

responsibilities. $&ter attaining t#ese capabilities/ t#e organisation can eecute it# operational

precision and predictability to maimise margins #ile remaining &leible to react to c#ange.

it#out t#e corporate ill and vision to set t#e agenda and #elp ensure t#e entire organisation is

aare o& its strategic importance/ initiatives to ac#ieve a step c#ange in business capability are

liable to &ail. +#e best ay to #elp ensure success is to &irst align t#e organisation it# a

roadmap t#at details t#e incremental p#ases o& capability development. +#is roadmap s#ould

support t#e company


32/45

igure 1%.1L -pportunities &or leveraging #uman capital (ess and erkin, ')

igure 1%.1illustrates t#e primary relations#ips among an organiationMs resources 9#uman/

in&ormation/ p#ysical/ and &inancial:/ its core value5creating activities/ and its organiational

structure/ systems/ processes/ and culture

$%0 Sur'e)6 design and management of International Su&&l) and Logistics

"ogistical management includes t#e design and administration o& systems to control t#e &lo o&

material/ or'5in process/ and &inis#ed inventory to support business unit strategy. "ogistics is

32


33/45

t#e designing and managing o& a system to control t#e &lo o& material t#roug#out a corporation.

upply c#ain management o& an international company includes movement o& ra materials/

coordinating &los into/ and out o& di&&erent countries/ c#oices o& transportation/ t#eir costs/

pac'aging products &or s#ipment/ product storage/ and managing t#e #ole process. upply

c#ains ride on logistic netor's and in&ormation tec#nologies.

*aritime trade #as eisted since time immemorial/ #arbours and aterays #ave &louris#ed in

strategic locations attracting trade and commerce. Global trade is dependent mostly on sea

routes t#an air routes because o& loer costs. $ir s#ipments are underta'en &or lig#teig#t

cargo/ peris#able cargo/ and priority s#ipments or in ot#er conditions #ere s#ipping could not

be possible. International logistics is t#e 'ind o& operation and management process/ #ic# ta'es

completing t#e ec#ange among international elements o& production as a goal.

It also provides logistics services suc# as pac'aging and strategic transportation. Begarding t#e

activity sub;ect o& international trade as t#e #ole collection and t#e one o& international logistics

as t#e subset/ t#e e&&ect o& establis#ing one


34/45

$%$ +esign &rinci&les

+#e international logistics electronic business must be standardised it# t#e ability to cross

di&&erent plat&orms. +#e design is also based upon t#e lo cost o& electronic business toget#er

it# opening and security o& t#e electronic commerce system. +#e overall procedure o&

international logistics can be divided into various stagesL material collections 9in&ormation on

logistics routes:/ planning 9ris' and &easibility analysis:/ organisation and mobilisation o&

resources/ and per&ormance measurements.

$ type o& international logistics electronic commerce #as layers in logicL environmental/ bottom/

applications/ and epression and connection layers. +#e environmental layer encompasses

in&ormation collection and &eedbac' systems #ile t#e bottom layer o&&ers tec#nical support &or

electronic commerce systems o& t#e #ole supply c#ain. +#e application layer o&&ers basic tools

&or enterprises/ including production planning tools/ 7uality control systems and business

administration systems. +#e connection layer is t#e inter&ace to ot#er systems including

in&ormation ec#ange arrangements #ile t#e epression layer avails supply c#ain tools.

$9%0 Im&ort and e7&ort

$9%$ Im&ort

-rganisations #ave epanded t#eir direct sourcing activities to allo t#em to build private label

assortments and ta'e advantage o& c#eaper sources &or t#eir products. +#e early Htrailblaers< set

34


35/45

up overseas buying o&&ices to reduce t#e gap beteen buyer and supplier and &ind loer costs

and better 7uality products. igni&icant business bene&its ere delivered in t#e &orm o& improved

gross margins and increased sales/ #ile at t#e same time providing eceptional value &or money

to consumers t#roug# t#eir on brands.

$s companies &ocus on grot# and satis&ying demand/ it #as proved di&&icult &or organisations to

allocate sustained strategic e&&ort and resources to optimise t#e comple processes re7uired to

manage ever increasing volumes o& imported products sourced directly &rom overseas &actories.

+o gain and maintain control o& global sourcing processes re7uires consistent/ accurate and

timely in&ormation. *ore o&ten t#an not/ organisations #ave no &orecast collaboration it#

carriers beyond t#e current purc#ase orders. +#is couples it# poor visibility o& upcoming

demand c#anges and promotions leading to #ig# on5time delivery ris'.

$9%# (e2 ca&ailities for integrated gloal sourcing and im&ort logistics o&eration

$t t#e outset/ global collaboration #as obvious natural c#allenges including geograp#ic disparity/

language di&&erences/ time ones and communication protocols. Collaboration becomes

&undamental #en t#e need is to be &ar more dynamic and responsive. It means or'ing it#

eperts in ot#er &unctional areas to #elp ensure t#at upstream decisions are optimised &or

donstream eecution and vice versa. Di&&erent processes used by di&&erent groups to or' on

t#e same tas' may be t#e biggest #indrance to ac#ieving integration.

35


36/45

+#e costs o& process variance go up eponentially #en trying to ac#ieve #oriontal integration.

upply c#ain leaders s#ould t#ere&ore loo' to eac# &unction &or 'ey processes t#at provide

opportunities &or coordination. +#ese include product development/ merc#andising/ and &inance

processes. *odern private label value c#ains must integrate t#eir core systems/ data and

processes into an etended enterprise.

+#is means t#at eternal partners/ suppliers/ t#ird party logistics providers/ and customers are

'eyed in to t#e responsive and data5enabled supply c#ain operations. +#is enables t#e supply

c#ain to better use s#ipping routes and inventory stores/ better align delivery to customer

demand. It ma'es t#e supply c#ain respond more e&&ectively to c#anges and dynamics it#in t#e

inventory &ul&ilment cycle.

$9%3 ,7&ort

"ac' o& local resources/ small sie o& #ome mar'et and many ot#er reasons #as resulted in

&unctional centres being maintained in various countries. Issues associated it# international

transportation o& &inis#ed goods are essentially t#e same as t#ose t#at apply to transportation in

domestic trade. =evert#eless/ under international operations/ goods can be out o& eporterMs

control &or longer period/ more documentation is re7uired/ pac'aging may be more costly and

s#ipping insurance is more costly. +#e transportation alternatives include ocean s#ipping and

36


37/45

containeriation as ell as air&reig#t. +#e basic activities involved in t#e &lo o& goods/ li'e

transportation/ are#ousing and #olding o& inventories/ s#ould be integrated in a systems

approac#.

+#e systems approac# ould recognie t#e trade5o&&s/ suc# t#at sometimes more epensive

air&reig#t may be opted &or/ instead o& less epensive ocean s#ipping/ because o& savings in

are#ouse and inventory costs. In t#e &ield o& eports/ it s#ould be noted t#at transport systems

in developing countries are generally not as e&&icient as in t#e industrially advanced countries.

+ransportation is o&ten considered t#e most important single determinant o& plant location.

irms in international trade also try to reduce amount o& unnecessary product pac'aging/ since

pac'ing material can account &or almost 40 per cent o& t#e eig#t o& t#e products s#ipped.

$ company can reduce inland transportation c#arges by locating its distribution &acilities

ad;acent to container ports or airports. +#e burden o& documentation can be eased t#roug#

computeriation. Eport management involves mar'eting in overseas mar'et. ence/ t#e

discussions on t#e inter&ace o& logistics it# mar'eting #olds good &or t#e relevance o& logistics

in eport management.

#0%0 Forecasting

orecasting is t#e process o& ma'ing statements about situations #ose actual outcomes #ave not

yet been observed. Bis' and uncertainty are central to &orecasting and it is generally considered

good practice to indicate t#e degree o& uncertainty to t#e &orecasts. orecasting can be used in

upply C#ain *anagement to ma'e sure t#at t#e rig#t product is at t#e rig#t place at t#e rig#t

37


38/45

time. $ccurate &orecasting ill #elp retailers reduce ecess inventory and t#ere&ore increase

pro&it margin.

$ccurate &orecasting ill also #elp t#em meet consumer demand. o1ra and Meindl (200')

laid don t#e &orecasting met#ods commonly used. Nualitative met#ods rely on t#e manager


39/45

#$%0 Conclusion

)eople in t#e ar East/ Europe and =ort# $merica are all netor'ing at t#e same time. +#ere is

a large di&&erence in t#e time ones. Every element must #ave a &irm understanding o& t#e plans

and strategies. +#e di&&erent cultures t#at s#ould or' toget#er #ave very diverse

compre#ensions o& t#e business topics. Collaborative e&&orts must minimise t#e compleities

arising &rom t#e dissimilar vies o& strategies.

+#e various global areas or' eac# it# a goal to meet its on needs but at t#e same time/ t#ey

re7uire a s#aring o& products and in&ormation to succeed. -utsourcing and strategic relocation o&

manu&acturing and supply bases to loer cost countries can #elp enterprises lessen costs o&

goods sold. istory also proves t#at t#e savings &rom t#ese sourcing initiatives can 7uic'ly

evaporate it#out e&&ective tec#nology plat&orms and systems capable o& managing longer and

comple supply c#ains.

*easurable improvements in bottom5line pro&itability can be obtained by investing in and

deploying today


40/45

In order to minimie t#e cost o& returns/ &irms must consider t#e reverse &los #en designing

t#e &orard logistics netor' and even in t#e product design itsel&. $ mar'eting structure

con&iguration is optimal &or manu&acturers #en transportation cost savings t#roug# local

sourcing outeig# possible ta savings t#roug# pro&it5s#i&ting activities. Ceteris paribus/ #ig#er

mar'et prices/ loer capacity and production costs &or assembly render an o&&s#ore con&iguration

optimal.

In global outsourcing/ it is better to c#oose suppliers o&&ering better value rat#er t#an loest cost.

+#e e&&iciency it# #ic# a company runs its procurement and s#ipping operations can greatly

impact t#eir business bottom line so companies are assiduously searc#ing &or met#ods to

improve t#eir transportation practices. -utsourcing is t#e &inal option &or logistics management.

#en t#is #appens/ transportation &irms concentrate on logistics/ and t#e company can

concentrate on its production. +#ere are many cost savings using t#is type o& program/ #oever

t#at lac' o& control can negatively a&&ect many companies. International logistics re7uires many

di&&erent options and re7uirements to be met in order &or a company to operate internationally.

ItMs li'e a big pule t#at must be put toget#er/ in order &or all t#e goals to be met. -nce t#e

logistics plan is in place/ organisations must constantly loo' &or improvements in order to

maimie pro&its and goals. +#e modern day competitive environment #as encouraged &irms to

re&ormulate t#eir corporate strategies it# contet to supply c#ain management. +#is also

40


41/45

provides trans&ormation o& operations o& t#e organiation toards t#e ac#ievement o& t#e

business goals o& t#e organiation.

Global orientation is o&ten &avoured by many &irms &or #anding t#e compleities o& relations#ips

around t#e supply c#ain management #en it comes to maintaining relations#ips it# customers

and suppliers &rom di&&erent geograp#ic locations. +#ere is an urgent need &or stri'ing a balance

beteen t#e costs o& coordination beteen multiplicities o& customers it# t#e need to generate

customer value.

+#e complete process o& optimiation o& plans and procedures paves t#e ay &or creating an

everlasting and sustainable competitive advantage &or t#e organiation t#roug#out a supply c#ain

despite t#e ris's associated it# unbounded c#allenges. +#ere is a need &or t#e integration o&

business processes o& t#e organiation it# its tec#nological systems &or en#ancing speed/

organiational responsiveness and &leibility in t#e netor's o& customers and suppliers.

41


42/45

42


43/45

##%0 iliogra&h)

'. $bbas/ F.$./ ell/ *.G.. 91((4: ystem dynamics applicability to transportation

modelling. +ransportation Besearc# $/ ,ol 2$/ nO !/ pp. 3%35400/ 1((4.

2. artlett/ C. and . G#os#al 91((:/Managing *cross Borders/ oston/ *$L arvard

usiness c#ool )ress

3. iller/ ./ and ann/ 8. 2006. )ricing &or environmental compliance in t#e auto5

industry.%nterfaces3692:/11512!

+. Cantarella G. E. and Cascetta E. 92001:.Models for traffic assignment to trans1ortation

netorks. In +ransportation ystems Engineering +#eory and *et#ods/ E. Cascetta.

Fluer $cademic )ublis#er.

. C#opra/ . and *eindl/ ).2001. upply C#ain *anagementL "trateg4, lanning and

51erations,pper saddle Biver/ =e 8erseyL )rentice all/ Incorporated/ c#apter 1

-. Cli&t/ B.2003. *etrics &or supply c#ain sustainability. lean tecnological and

en6ironmental 1olic4.,2+0$7

7. Dess/ G. G./ and )ic'en/ 8. C. 91(((:.Be4ond rod!cti6it4 9o Leading om1anies

*cie6e "!1erior erformance &4 Le6eraging teir 9!man a1ital:=e Kor'L

$*$C-*.

8. Edmonson/ B.G. 2003.Be4ond alc!lations/ 8ournal o& Commerce/ $ugust 2!

. Glic#es Cancel Electronic +rades

9#ttpLJJonline.s;.comJarticleJ1223116!%234%436!.#tml:

43


44/45

'0. Guide/ 8r/ ,. D. B./ ". =. ,an assen#ove/ 200!. elett5)ac'ard Company unloc's t#e

value potential &rom time5sensitive returns.%nterfaces3(+) 28'$23

''. Ives . and .".8arvenpaa.1((1.$pplication o& global in&ormation tec#nology. Fey issues

&or management/Management %nformation "4stems ;!arterl4,(Marc)37$+

'2. 8ain/ .1((.tandardisation o& international mar'eting strategies, e Era of %nternational "!11l4 ain "ec!rit4L orld +rade

'-. *itc#ell/ 8./ Coles/ C./ and Feane/ 8. 9200(:. pgrading along value c#ainsL "trategies

for 1o6ert4 red!ction in Latin *merica. "ondon. nited Fingdom. C-)"$/ Global5

-verseas development Institute

'7. *ollen'op&/ D./ I. Busso/ and B.ran'el.200%.+#e returns management process in supply

c#ain strategy.%nternational ?o!rnal of 14sical distri&!tion and logistics management

37(7), -8$2.

'8. )orter/ *.E. 91((6:. Wat is strateg4: arvard usiness Bevie/ =ovember5December/

615%. +#e value c#ain.

'. Boc#e/ E.*.1((2.*anaging in&ormation tec#nology in multinational corporations.

*c*illan )ublis#ing Company/ =e Kor'.44


45/45

20. mall/ F. 8ose $. Gome5Ibane.1((.@oad ricing for ongestion Management +#e

+ransition &rom +#eory to )olicy. +#e niversity o& Cali&ornia +ransportation Centre/

niversity o& Cali&ornia at er'eley. pp. 213

celestinokuchena ipfm0395 final pl505

Documents